Misfired 2010 Email Alerted IRS in Washington to Targeting

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IRS Building, Washington, DC

A misfired email from an IRS worker in Cincinnati three years ago alerted IRS officials in Washington to the targeting of conservative groups seeking tax-exempt status, according to an interview the worker had with congressional investigators.

The interview transcripts, reviewed by Reuters on Thursday, provide new details about Washington IRS officials' awareness of the extra scrutiny given to such groups, using terms such as "Tea Party" and "patriot" to flag applications.

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

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

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She was asked to summarize her findings in a spreadsheet and notify a small group of colleagues, including some staff in the Washington tax-exempt unit. She accidentally sent an email that month to a larger number of people in Washington.

"Everybody in D.C. 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.

Hull could not be reached for comment.

Lois Lerner, the IRS official who set off the controversy, said she first learned of the "be on the lookout list" (BOLO) of partisan terms in June 2011 and ordered that the criteria be removed immediately. The Treasury inspector general backed that up.

Washington IRS officials, including Lerner, who was put on administrative leave in response to the fracas, have stressed the lack of Washington involvement in the scrutiny.

The Treasury inspector general for tax administration, which studied the matter, has said no evidence exists that the list was created by high-level IRS officials or political officials in the Treasury or the White House.

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The inspector general's report last month said that the Cincinnati office, where IRS reviews of applications for tax-exempt status are centralized, used the BOLO list, which included "Tea Party" and "patriot" for flagging applications for extra review.

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.

But Hofacre 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.

She lashed out at Washington officials for putting the blame squarely on the staffers in Cincinnati. "It was a nuclear strike on us," she told congressional investigators.

More Interviews This Week

The interviews were among the first conducted by lawyers at the Oversight and Government Reform Committee in the House of Representatives since the scandal broke May 10. Two more interviews with other IRS employees were set for this week.

Committee Chairman Darrell Issa said they had confirmed his hunch that the scrutiny did not originate in Cincinnati. The top Democrat on the panel, Elijah Cummings, said Issa is cherry-picking quotes to confirm his theory.

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It was unclear from Hofacre how much authority Washington exerted over the applications. She told congressional investigators the Tea Party cases were handled differently: Hull wanted to see her response letters. In two cases, he handled the applications himself.

In one exchange, Hofacre said, "I had no autonomy." But in another instance she said, "They gave me leeway to work with them ... [and] weren't involved in the actual reviewing."