IRS agents in Cincinnati believe higher-ups in Washington directed tea party targeting

WASHINGTON - Two Internal Revenue Service agents working in the agency's Cincinnati office say higher-ups in Washington directed the targeting of conservative political groups when they applied for tax-exempt status, a contention that directly contradicts claims made by the agency since the scandal erupted last month.

The Cincinnati agents didn't provide proof that senior IRS officials in Washington ordered the targeting. But one of the agents said her work processing the applications was closely supervised by a Washington lawyer in the IRS division that handles applications for tax-exempt status, according to a transcript of her interview with congressional investigators.

Her interview suggests a long trail of emails that could support her claim.

The revelation could prove to be significant if investigators are able to show that Washington officials were involved in singling out tea party and other conservative groups for extra scrutiny. IRS officials have said repeatedly that the targeting was initiated by front-line agents in the Cincinnati office and was stopped once senior officials in Washington found out.

A yearlong audit by the agency's inspector general found no evidence that Washington officials ordered or authorized the targeting. However, the inspector general blamed ineffective management by senior IRS officials for allowing the targeting to continue for nearly two years during the 2010 and 2012 elections.

Since the revelations were made public last month, much of the agency's top leadership has been replaced. President Barack Obama forced acting IRS Commissioner Steven Miller to resign, replacing him with Danny Werfel, a former White House budget official who is conducting a review of the agency's operations.

Three congressional committees and the Justice Department are also investigating. Investigators for the House Oversight and Government Reform Committee and the House Ways and Means Committee have interviewed at least four IRS workers as part of their probe.

Gary Muthert, an IRS agent there, said his local supervisor told him in March 2010 to check the applications for tax-exempt status to see how many were from groups with "tea party" in their names. The supervisor's name was blacked out in the transcript.

"He told me that Washington, D.C., wanted some cases," Muthert said of his supervisor.

Muthert said he came up with fewer than 10 applications. But after checking some of the group's websites, he noticed similar groups with "patriots' or "9-12 project" in their names, so he started looking for applications that mentioned those terms too.

Over a two-month period, Muthert said he found about 40 applications that mentioned tea party, patriots or 9-12 project — the latter being groups which aspire to reinstill a post-9/11 spirit of unity in the country.

"I used `patriots' because some of the tea partiers wouldn't, they would shorten their name to TP Patriots," Muthert said. "I thought, OK, I will use `patriot.'"

Whom did you send them to? An investigator asked.

"I don't know," Muthert answered.

Muthert did not respond to requests by the AP for comment.

The IRS was screening the groups' applications because agents were trying to determine their level of political activity. IRS regulations say tax-exempt social welfare organizations may engage in some political activity but the activity may not be their primary mission. It is up to the IRS to make that determination.

Elizabeth Hofacre, also an agent in the Cincinnati office, told investigators she was in charge of processing applications from tea party groups — once they were selected by other agents — from April 2010 to October 2010. Hofacre said her supervisor in Cincinnati, whose name was blacked out in the transcript, told her to handle the applications.

Hull is a lawyer in the division that handles applications for tax-exempt status. But, Hofacre said, his interest in the cases was highly unusual.

"It was demeaning," she said. "One of the criteria is to work independently and do research and make decisions based on your experience and education, whereas on this case, I had no autonomy at all through the process."

Hofacre said Hull signed off on letters she sent to the groups asking them for additional information and then reviewed their responses. Hofacre complained that Hull was slow to sign off on the letters.

"All I remember saying and thinking is, `This is ridiculous.' Because at the same time, you are getting calls from irate taxpayers. And I see their point," Hofacre said.

Hofacre said she became so frustrated with the delays that she applied for a different job within the agency and transferred in October 2010.

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Associated Press writer Alan Fram contributed to this report.

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