The Internal Revenue Service has made big strides in processing applications from groups seeking tax-exempt status, according to a new report from the Treasury Inspector General for Tax Administration, whose 2013 report precipitated the Tea Party targeting scandal that led to the ouster of several top IRS officials.

The new TIGTA report found that the IRS has taken significant actions to improve the processing of tax-exempt applications involving political intervention.

The report follows up on a May 2013 TIGTA report, which found that ineffective IRS management resulted in the use of inappropriate criteria to identify for review organizations applying for tax-exempt status based on policy positions and names such as Tea Party and Patriot, instead of indications of political campaign intervention. The 2013 report also found that the IRS substantially delayed processing of certain applications and issued unnecessary information requests.

Among the officials who lost their jobs in the wake of the scandal was Lois Lerner, the former director of exempt organizations for the IRS, who first revealed the findings of the 2013 TIGTA report during a presentation in which she answered a planted question from an audience member. Lerner declined on Fifth Amendment grounds to answer questions from Congress about the scandal in two congressional hearings and instead a search was made of her emails. However, the hard drive of her laptop had been damaged and thousands of the messages were deemed unrecoverable by the IRS. But TIGTA told the Senate Finance Committee this week that it has managed to recover approximately 6,400 of the missing messages that have not already been provided by the IRS to congressional investigators. Last year, 30,000 of the missing emails were recovered by TIGTA, and the IRS turned over approximately 67,000 emails on its own.

The objective of the new audit was to assess the IRS’s actions in response to TIGTA's 2013 recommendations to improve the identification and processing of applications for tax-exempt status involving political campaign intervention. During the time frame leading up to and during this audit, the IRS was making other changes to the tax-exempt application process that went beyond the audit process covered in the 2013 report. The audit only focused on actions taken that were relevant to the 2013 recommendations.

"The IRS has taken significant actions in response to the recommendations made in TIGTA's 2013 report," said TIGTA Inspector General J. Russell George in a statement. "It has eliminated the selection of potential political cases based on names and policy positions, expedited the processing of Internal Revenue Code Section 501(c)(4) social welfare organization applications, and eliminated unnecessary information requests.”

The IRS also eliminated the use of Be On the Look Out (BOLO) listings, which TIGTA determined had contained inappropriate criteria regarding political advocacy cases.

In addition, TIGTA found that the IRS's Exempt Organizations function completed processing for 149 of the 160 applications for tax-exempt status that, as of December 2012, had been open for lengthy periods. To expedite processing of social welfare applications under Section 501(c)(4) of the Tax Code, the IRS developed an optional expedited self-certification process for 501(c)(4) groups. This expedited process is not available to other types of organizations, such as labor organizations and business leagues, with similar political campaign intervention limitations.

Further, the IRS has developed preapproved questions and has instituted a quality review process to provide better assurance that unnecessary information requests are not sent to applicants.

TIGTA also found that the IRS developed and provided extensive political campaign intervention training for relevant Rulings and Agreements office employees, including all Determinations Unit employees.

However, TIGTA identified additional steps the IRS should take to improve upon the timing and execution of the training.

Lastly, the Treasury Department is revising draft guidance to address how to measure the “primary activity” of social welfare organizations. Until this guidance is finalized, the IRS does not have a clearly defined test for determining whether an organization’s request for exemption as a social welfare organization should be approved. As a result, for those applicants not choosing the optional expedited process, the IRS continues to use a subjective facts-and-circumstances process.

TIGTA recommended that the IRS take action to improve the timing and execution of future training. In addition, if the optional expedited self-certification process for 501(c)(4) organizations becomes a permanent process, the IRS should consider providing this option to additional organizations with similar political campaign intervention limitations.

IRS management agreed with both recommendations. The IRS plans to improve the timing and execution of future training and consider extending the optional expedited process to other types of organizations, if it becomes a permanent process.

“In addition to the actions EO [the IRS’s Exempt Organizations function] has already taken in response to the May 2013 report, EO also initiated a large-scale overview of all of its processes and procedures in an effort to improve how all applications for tax-exempt status are handled, not just those with potential political campaign intervention activities,” wrote Sunita B. Lough, commissioner of the IRS’s Tax-Exempt and Government Entities Division, in response to the report.

An IRS spokesperson later emailed a further comment on the report to Accounting Today. “The IRS appreciates TIGTA’s acknowledgement of the significant actions we took to effectively address TIGTA’s previous recommendations, and the role of the optional expedited determination process in reducing the backlog of applications identified by TIGTA in its previous report,” said the IRS. “The IRS appreciates TIGTA’s additional recommendations and is committed to continuing to improve our processes in this area. According to the TIGTA report, as of Dec. 4, 2014, the IRS closed the vast majority of the initial applications for tax exempt status. The IRS issued determinations on 149 of the 160 initial cases, and of the remaining 11 cases, six remain in ongoing litigation and five are in the appeals or proposed adverse determination process.”

House Ways and Means Committee chairman Paul Ryan, R-Wis., whose committee oversees the IRS, also commented on the release of the report. “This report shows that only effective oversight can prevent abusive behavior like we saw in the IRS targeting scandal," Ryan said in a statement Thursday evening. "We would not have known about this scandal without the work our committees have done. But our investigation is ongoing, and we still have a lot of work to do to hold the IRS accountable.That is why the Ways and Means Committee will continue to investigate troubling behavior of the IRS, including its selective use of audits. We must do all we can to make sure this kind of abuse never happens again."

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