WASHINGTON — President Barack Obama on Thursday chose a White House budget official to lead the beleaguered Internal Revenue Service and vowed to ensure that the tax-collection agency will not single out any more groups based on their political beliefs.
Danny Werfel, who has been Obama’s point man in overseeing the sequestration budget cuts, will tackle the biggest scandal of Obama’s presidency when he takes charge of the IRS next week. Obama fired acting IRS Commissioner Steven Miller Wednesday.
“There is something profoundly un-American about targeting your political opponents,” Kentucky Republican Sen. Rand Paul told a crowd of about 100 Tea Party enthusiasts outside the Capitol Thursday.
The IRS faces a criminal investigation and at least three congressional probes in the wake of last week’s revelation that during the past three years, the agency’s examiners had targeted conservative groups for extra scrutiny after the groups applied for tax-exempt status.
The scandal dates to March 2010, as the IRS struggled to deal with a surge of new advocacy groups that sprang up in the wake of a Supreme Court decision that struck down limits on independent political spending by businesses and other outside groups.
The agency has trouble keeping track of the more than 1 million tax-exempt organizations that already exist, analysts say.
The number of applications for tax-exempt “social welfare” status nearly doubled from 2010 to 2012, according to IRS figures.
Groups applying for what is known as 501(c)4 status can engage in limited campaign activity but are not supposed to make electioneering the focus of their efforts. Unlike political campaigns, they may keep their donors secret.
Spending by these groups and other similar organizations jumped to $309 million in 2012 from $79 million in the 2008 election, according to the Center for Responsive Politics. Conservative groups accounted for about three-quarters of that total, according to the watchdog group.
As a result, the agency faced pressure from top Democrats such as Illinois Sen. Dick Durbin, New York Sens. Charles Schumer and Max Baucus, who heads the Senate’s tax-writing committee, to make sure the non-profit groups weren’t exploiting a loophole to evade taxes and keep their donors secret.
Because that activity lacked revenue-generating potential, it was seen as a low priority within an agency whose central mission is tax collection, according to tax specialists. The IRS gave the task to a field office in Cincinnati, Ohio, rather than assign it to higher-ranking staff in its Washington headquarters.
According to an internal IRS watchdog, that unit set its own criteria for checking tax-exempt groups in the absence of clear guidance from more senior officials.
At the rally on Thursday, Tea Party speakers described how the increased scrutiny prevented them from participating in the democratic process — in some cases by delaying their groups’ applications until after the 2012 elections had passed and in other cases through overly intrusive questioning by IRS agents that some Tea party groups say led them to give up their organizing efforts.
“The IRS just keeps asking questions. Our audit has been so intrusive,” said Susan McLaughlin of the Liberty Tea Party in Liberty Township, Ohio. McLaughlin said her group had been waiting for three years to win tax-exempt status.
Republicans in Congress vowed to conduct a thorough investigation.
Obama has said he did not know about the IRS’ targeting of conservative Tea Party and Patriot groups until the agency acknowledged last week that it had done so.
Obama fired Miller after an internal IRS audit released on Tuesday found that poor management — not partisan politics — had led to an “inappropriate” focus on conservative groups.
“I think we’re going to be able to figure out exactly what happened, who was involved, what went wrong, and we’re going to be able to implement steps to fix it,” Obama said at a news conference on Thursday with Turkish Prime Minister Tayyip Erdogan.
“It is just simply unacceptable for there to even be a hint of partisanship or ideology when it comes to the application of our tax laws,” Obama added.
In addition to the IRS scandal, Obama’s Republican critics have hammered the administration’s handling of the deadly militant attack last year on the U.S. mission in Benghazi, Libya. And the Justice Department has faced bipartisan criticism for seizing phone records of journalists from the Associated Press as part of a criminal probe into intelligence leaks.