Responding to a flurry of complaints from conservative groups seeking tax-exempt status, the Internal Revenue Service admitted Friday it made "mistakes" in the last few years while trying to process those requests.
Multiple tea party groups reported significant delays and excessive questioning from IRS officials while trying to obtain 501(c)(4) status.
While the groups and conservative members of Congress cried foul, the agency strongly contests the notion that groups were targeted out of political bias.
Lois Lerner, director of tax exempt organizations for the IRS, said on a conference call Friday that the IRS office in Cincinnati that handles most applications for 501(c)(4) status had seen a strong uptick in applications of 1,500 to 3,400 between 2010 and 2012.
Any applications that were incomplete, lacked consistent information, or indicated a group would be involved with some type of advocacy, were filed into a certain group for further review.
However, approximately 75 of the 300 groups that were filed for further review were simply filed because they had the names "tea party" and "patriot," Lerner said.
"They did pick the cases by names and that's absolutely inappropriate and not the way we should do things," she said, though stressing it was done as a "shortcut," not out of "political bias."
Lerner did not disclose what the remainder of the 300 groups had in common, or whether they had any political affiliations. She repeated that they ranged across a "broad spectrum" of groups and did not release any names.
"It was an error in judgment and it wasn't appropriate," Lerner said. "But that's what they did."
The AP first reported Friday's IRS admission, when Lerner answered a question about the issue at a conference in Washington. The IRS later held the conference call with reporters.
Groups applying for tax exempt status are allowed to do advocacy, so long as their primary activities are dedicated to "social welfare," according to IRS rules. When an advocacy case is filed for further review, the IRS tries to determine if the group plans on sticking by that calculus.
However, when the IRS employees were seeking to make that determination, Lerner admitted they went too far.
"Some of the letters were far too broad," she said, adding that some asked for donor lists. "When this came to my attention, we took some action to try and undo some of these things."
See a sampling of a questionnaire (provided by The American Center for Law and Justice).
When Eric Wilson, executive director for the Kentucky 9/12 Project, filed for not-for-profit status in December 2010, he was told he'd receive a response within 90 days. What he received instead was an inquiry with a total of 88 questions asking for what he describes as "far reaching information."
They wanted membership lists and detailed information about directors of the group, such as their private activities outside the organization, he said. They also requested copies of pages on their website and social media accounts, such as Facebook and Twitter.
To comply with every request, Wilson said it would have required 5,000 printed pages. "They were trying to bury us in time and money," he said.
Wilson responded with a one-page letter, saying the questionnaire was beyond normal requests and they would not comply. He started noticing posts online and through contact with like-minded conservative groups that they were receiving similar questions from the IRS.
Last month, on April 1, Wilson finally received his approval letter from the agency in a 200-word letter, simply stating they had been designated a 501(c)(4) organization with no explanation for the delay.
While Wilson described the IRS' comments today as a "victory for free speech and liberty," he still wants more questions answered and called for further review.
The issue began getting national attention, with members of Congress weighing in and legal groups fighting on behalf of the conservative groups. In March 2012, a dozen U.S. senators led by Sen. Orrin Hatch, R-Utah, and Sen. Rob Portman, R-Ohio, sent a letter to IRS Commissioner Douglas Shulman asking for more information about this situation.
The American Center for Law and Justice in Washington represented 27 of the groups and lobbied for action to be taken on the matter.
"The IRS admission and apology should have come much sooner," Jay Sekulow, Chief Counsel of the ACLJ, said. "It took the threat of legal action to get the IRS to make this admission. And while many of the organizations we represent have finally been granted tax-exempt status, we demand the IRS to immediately approve the pending applications for the remainder of our clients."
Tom Zawistowski, executive director for the Portage County TEA Party who helped lead the then-Ohio Liberty Council, also experienced difficulty for three years and worked with the ACLJ. He said Friday the apology was "appropriate."
"I think it was without doubt wrong. We knew it was wrong in the beginning," he said. "They had no right, whatsoever,...no right to deny us tax exempt status that 501(c)(4) groups routinely received."