© Associated PressLois Lerner, who led the tax-exempt organizations division of the Internal Revenue Service, has been put on administrative leave. The second IRS official removed over the recent scandal, Ms. Lerner has been accused of misleading an investigation into the division.
Carter Hull, a tax law specialist with 48 years of experience at the IRS, told investigators that Lois Lerner, the former head of the Exempt Organizations division, demanded he send some of the reviews of tea party groups to the IRS chief counsel's office in Washington. The chief counsel is one of two political appointees in the IRS.
The Internal Revenue Service has come under fire over the past several months after the agency's auditor, J. Russell George, exposed that the agency was targeting conservative groups for intrusive scrutiny. This week,The Washington Times reported that government employees also improperly accessed IRS information to look at data on a handful of political candidates and donors.
Sen. Jeff Flake, Arizona Republican, said Wednesday that the investigation into the troubled agency must be expanded.
"It is clear that misconduct at the agency was not isolated to 'rogue employees' in the tax-exempt applications division," Mr. Flake said. "This recent development suggests that political targeting was potentially more widespread."
Even as Republicans push to broaden the inquiries, Democrats are preparing to go after Mr. George, the Treasury inspector general for tax administration, whose May report first exposed the IRS targeting of conservative groups. Mr. George and Mr. Hull are scheduled to testify Thursday before the House Committee on Oversight and Government Reform.
On Wednesday, Democrats accused Mr. George of suppressing evidence that the IRS also went after liberal groups, which they say would show the agency wasn't following a political agenda when it asked intrusive questions of hundreds of groups applying for tax-exempt status.
Under questioning from Democrats on the House Small Business Committee, IRS acting Commissioner Danny Werfel said Mr. George blocked him from releasing documents that could have shown that progressive groups were also scrutinized.
Mr. Werfel said he disagreed with Mr. George but withheld the information "out of an abundance of caution."
Mr. George has said that while some progressive groups were given scrutiny, it was just a small percentage. By comparison, the auditor said, every group with "tea party," "patriot" or "9/12" in its name was subject to special scrutiny.
The back-and-forth underscores the stakes in the 2-month-old scandal, which Republicans say exposes a nasty political streak within the government, but which Democrats said only highlights the need for clearer rules about what tax-exempt groups can and cannot do in politics after they were unshackled by the 2010 Supreme Court ruling in the Citizens United case.
Mr. Hull told congressional investigators that the IRS was grappling with its response to the Supreme Court's ruling in the Citizens United case, which left the door open for interest groups to play bigger roles in political activities.
Part of the answer of the IRS was to single out some tea party-affiliated groups' applications as test cases, which Mr. Hull was handling. Some of those test cases still haven't been decided, three years after they were filed, Mr. Hull said.
"That's a very long time period," he told investigators.
Mr. Hull described his own scrutiny of applications. He said he sent a letter and thought he received sufficient information to make a determination. But he was overruled by Ms. Lerner, who said the applications should get extra scrutiny.
Ms. Lerner has refused to testify to Congress, citing her Fifth Amendment right to remain silent. But committee Republicans have said she waived that right by declaring her innocence to the committee, and they have said they will consider recalling her.
In addition to probes from Congress, the Justice Department also opened an investigation into the matter. Ms. Lerner's attorney has said she would testify if lawmakers were willing to erase any potential legal jeopardy.
In a statement Wednesday, the IRS said the chief counsel's office is consulted on decisions when applications for tax-deductible status are going to be rejected, but that is the extent of the office's responsibility.
"Otherwise, operating division personnel make the ultimate decisions on disposition of particular cases. Those decisions take into account legal advice from counsel attorneys, but they are not controlled by that advice," the agency said in its statement. "Counsel attorneys do not control cases unless and until they are docketed for litigation in the United States Tax Court."
The IRS has acknowledged asking intrusive questions of tax-exempt groups and of delaying many of their applications for far too long.
Democrats have said progressive groups also were given special scrutiny, which they said shows the IRS wasn't engaged in political targeting but rather was trying to sort through groups in the wake of the Supreme Court ruling.
Rep. Elijah E. Cummings of Maryland, the ranking Democrat on the oversight committee, released a memo Tuesday that included other excerpts of interviews with IRS employees who scoffed at charges of political targeting.
"Despite an extremely aggressive investigation involving thousands of documents and more than a dozen interviews of IRS employees, the overwhelming evidence before the committee reveals no political motivation or White House involvement in this process," Mr. Cummings said.
On Wednesday, Mr. Cummings accused the Republican chairmen of skewing the story by giving only small snapshots of the interviews.
"Rather than describing the whole truth, your letter appears yet again to create a skewed account based on partial, incomplete, and cherry-picked information while disregarding key evidence that contradicts your political narrative," he wrote in a letter to oversight committee Chairman Darrell E. Issa, California Republican.
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