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Misfired Email Suggests IRS Knew of Targeting in 2010

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A misfired email from a U.S. Internal Revenue Service employee in Cincinnati alerted a number of Washington IRS officials that extra scrutiny was being placed on conservative groups in July 2010, a year earlier than previously acknowledged, according to interviews with IRS workers by congressional investigators.

Transcripts of the interviews, reviewed by Reuters on Thursday, provided new details about Washington managers' awareness of the heightened scrutiny applied by front-line IRS agents in Cincinnati to applications for tax-exempt status from conservative groups with words like "Tea Party" in their names.

A political furor over the practice has engulfed the tax agency for nearly a month since a senior IRS official publicly apologized for it at a conference. Since then, the IRS' chief has been fired by President Barack Obama, the FBI has mounted an investigation and Congress has held numerous hearings.

The transcripts show that in July 2010, Elizabeth Hofacre, an IRS official in Cincinnati who was coordinating "emerging issues" for the agency's tax-exempt unit, was corresponding with Washington-based IRS tax attorney Carter Hull.

In April 2010 Hofacre had been put in charge of handling tax-exempt status applications from conservative groups by her Cincinnati supervisor.

She was asked to summarize her initial findings in a spreadsheet and notify a small group of colleagues, including some staff in the Washington tax-exempt unit. However, she sent her email to a larger number of people in Washington by accident.

"Everybody in DC got it by mistake," Hofacre said in the transcripts. She later clarified that she did not mean all officials but those in the IRS Exempt Organizations Rulings and Agreements unit.

The Cincinnati office, where IRS reviews of applications for tax-exempt status were centralized, used a "be-on-the-lookout" (BOLO) list that included the words "Tea Party" and "Patriot" for flagging applications for extra review.

This practice has drawn criticism. However, the Treasury Inspector General for Tax Administration, which closely studied the matter, has said no evidence exists that the list was created by high-level IRS officials, or political officials in the U.S. Treasury or the White House.

Lois Lerner, the IRS official who set off the controversy, has said that she first learned of the BOLO list in June 2011, and that she ordered the partisan criteria to be removed immediately. The Treasury inspector general backed up that statement.

Neither Hofacre, nor a second IRS worker in Cincinnati, Gary Muthert, knew who asked for the partisan names to be added to the BOLO list in the first place, the transcripts showed.

Still, Muthert said that when his supervisor in Cincinnati initially asked him to look for "Tea Party" applications, "he told me Washington, D.C. wanted some cases," according to his interview with congressional investigators.

Hofacre, however, indicated that a Cincinnati official told her to use the criteria. That official "told me what I needed to put on this particular BOLO list," Hofacre said, referring to the list for Tea Party cases only.

Hofacre lashed out at Washington officials for attributing the extra scrutiny to the staffers in Cincinnati. "It was a nuclear strike on us," she told congressional investigators.

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