IRS Chief Affirms That Agency Ended ‘Be on the Lookout’ Lists

In the latest wrinkle in the controversy over the Internal Revenue Service’s alleged targeting of conservative groups, the tax agency’s chief has written to Congress to assure lawmakers that its Exempt Organization’s division long ago discontinued use of so-called “Be on the Lookout” lists to sift through applications from nonprofits.

Earlier this month, a federal appeals court handling an ongoing case from the conservative group True the Vote zeroed in on the IRS’s use of the term “suspended” to describe the practice of flagging groups based on their names, overruling a lower court and restoring the suit against the agency.

On Aug. 18, Internal Revenue Commissioner John Koskinen sought to set the record straight in a letter to the chairman and ranking member of the Senate Finance Committee harking back several years to the multiple investigations of IRS’s allegedly biased processing of applications for tax-exempt status from groups claiming to be social welfare organizations.

“I want to be clear that no matter how you say it -- whether it's suspended, eliminated or ended -- the IRS stopped this practice long ago and is committed to never using such a list or process ever again,” Koskinen wrote, citing his own repeated testimony to Congress, his speeches and the reports from the Treasury Inspector General for Tax Administration saying the BOLO lists ended three years ago.

“The IRS and its leadership team have been, and remain, absolutely committed to avoiding any selection and further review of potential political cases based on names and policy positions,” he added. “There should be no doubt on this point, or regarding the continued, ongoing commitment by the IRS to be guided by the tax law and nothing else.”

Interim guidance from 2013 was formally incorporated into the Internal Revenue Manual in 2014 by removing any reference to the use of a BOLO list, Koskinen said. “The agency also conducted significant training for employees on the new procedures.”

TIGTA has affirmed that the IRS has implemented all the recommendations from its 2013 report that triggered a political firestorm, which lawmakers cited as a reason for cutting the agency’s budget. A subsequent investigation of former Exempt Organizations division chief Lois Lerner and other IRS managers found no basis for criminal charges.

When the appeals court revived the case on Aug. 5, True the Vote founder Catherine Engelbrecht released a statement saying, “Today's ruling is a tremendous victory for True the Vote. We are now closer than we've ever been to revealing the collusions and cover-ups used in the weaponization of the IRS against the American People.”

Paul Streckfus, editor of a newsletter on Exempt Organizations, has long argued that the IRS was unfairly blamed for politicization by a Republican Congress that dislikes the agency in principle. But his most recent commentary based on released transcripts of FBI interviews suggests that Koskinen’s reforms to the E.O division may not be sufficient.

“With all the changes since then, has someone emerged as really being in charge?” he asked earlier this month. “I think the unqualified answer is no. What we have are numerous power centers when it comes to EO administration and regulation. Commissioner John Koskinen is nominally in charge, but more as a figurehead. [Tax Exempt and Government Entities] Commissioner Sunita Lough has some clout, but she has many other responsibilities. EO Division Director Tammy Ripperda seems to be mostly in control of the Determinations function in Cincinnati. Margaret Von Lienen and her area managers handle the Examinations function with I think largely a free hand.

“The folks in the Office of Associate Chief Counsel under Vicki Judson and Janine Cook have the role of responding to EO letter ruling requests and helping draft regulations, which gives them a policy role. The folks in Division Counsel have a role in EO audits and litigation. The Office of Appeals’ role seems to be to upset the apple cart, most recently in the Crossroads GPS case. And of course the Treasury Department plays a major role in EO tax policy. Even the Tax Division of the Justice Department has a major role in EO in that they control district court litigation and appellate litigation.

“So who’s in overall control? How about Nobody? No wonder it was so hard to pin responsibility on anyone for the mismanagement of the Tea Party applications.”