The Department of Justice has closed its investigation of the scandal over applications for tax-exempt status by political groups and decided not to file criminal charges.

The scandal erupted in the spring of 2013, when Lois Lerner, then the director of the Exempt Organizations unit, admitted that her unit had used inappropriate terms such as “Tea Party” and “Patriot” to sift through applications. The admission, in response to a planted question from an audience member at an industry conference, came ahead of the release of a report by the Treasury Inspector General for Tax Administration. The admission sparked accusations by conservative groups that the Obama administration had been using the IRS to thwart fundraising efforts ahead of the 2012 campaign.

However, TIGTA also found Lerner’s unit had used so-called BOLO lists (short for “be on the lookout”) to screen out applications for “progressive” groups. Lerner and a number of other high-ranking IRS officials were ousted or retired early as a result of the scandal. Lerner also was referred for contempt-of-Congress charges for refusing to answer questions during congressional hearings, asserting her Fifth Amendment rights.

In a letter last Friday to House Ways and Means Committee chairman Paul Ryan, R-Wis., and the ranking Democrat on the committee, Rep. Sander Levin, D-Mich., Assistant Attorney General Peter J. Kadzik wrote that the FBI, TIGTA, and the DOJ’s Criminal and Civil Rights Division had “conducted an exhaustive probe.”

“Our investigation uncovered substantial evidence of mismanagement, poor judgment and institutional inertia, leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints,” Kadzik wrote. “But poor judgment is not a crime. We found no evidence that any IRS official acted based on political, discriminatory, corrupt or other inappropriate motives that would support a criminal prosecution. We also found no evidence that any official involved in the handling of tax-exempt applications or IRS leadership attempted to obstruct justice. Based on the evidence developed in this investigation and the recommendation of experienced career prosecutors and supervising attorneys at the Department, we are closing our investigation and will not seek any criminal charges.”

Ryan expressed his dismay with the DOJ’s decision. "While predictable coming from this administration, this news is still deeply disappointing,” he said in a statement Friday. “Over the past several years, Ways and Means along with other congressional committees have conducted a thorough bipartisan investigation into the IRS's targeting of organizations based on their political beliefs. Through these investigations we have uncovered serious and unprecedented actions taken by the most senior IRS official in charge of the non-profit unit, Lois Lerner, to deprive conservative organizations of their constitutional rights. The American people deserve better than this. Despite the DOJ closing its investigation, the Ways and Means Committee will continue to find answers and hold the IRS accountable for its actions."

Levin agreed with the Justice Department, however. “The Justice Department’s decision today confirms what we know based on the initial TIGTA report and our investigation – that there was no political bias, no corrupt motives, and no criminal activity whatsoever in the processing of applications by the agency’s tax-exempt division,” he said in a statement. “I was one of the first members of Congress to call for Ms. Lerner’s resignation in 2013 in response to her mismanagement and poor judgment. Since May of 2013, the IRS has spent $20 million and provided to Congress more than one million pages of documents related to this investigation.”

He pointed out that the DOJ investigation found that IRS employees targeted applications because of their desire to treat applications consistently and to avoid making incorrect decisions. The DOJ also found that IRS has used inept labels in organizing their review of applications before—specifically noting the use of coordinating keywords such as “progressive” and “ACORN.”  The Justice Department noted that this historical practice “creates a substantial barrier to establishing criminal intent, and bolsters the conclusion that IRS employees did not believe that coordinating for review applications using words like ‘Tea Party’ could potentially violate the Constitution or Tax Code, or that this method of coordinating applications for review was discriminatory or otherwise inappropriate.’ The DOJ focused on Lerner since several of her personal emails had criticized conservatives, but found that her personal views did not influence her unit’s official actions, Levin’s office noted.

The Senate Finance Committee plans to hold a hearing Tuesday on the IRS’s response to a report the committee issued in August on the scandal. The sole witness will be IRS Commissioner John Koskinen.

“The Finance Committee’s bipartisan IRS report found a number of troubling practices at the agency and made a series of responsible bipartisan recommendations meant to prevent such abuse,” said committee chairman Sen. Orrin Hatch, R-Utah, in a statement. “Now, it is time for committee members and the American people to hear answers from the IRS firsthand.  I’m hopeful that the agency will be forthright and explain what actions it has taken to make sure this never happens again at the IRS.”

“The bipartisan investigation into the IRS conducted by the Finance Committee found vast bureaucratic dysfunction,” said Sen. Ron Wyden, D-Ore., the ranking Democrat on the committee. “In the wake of our report, the IRS has made a good-faith effort to correct its mismanagement and implement the committee’s recommendations. I’m looking forward to hearing from Commissioner Koskinen on how that effort is progressing.”

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