Speaking at a meeting of the ABA Section of Taxation, Lois Lerner, who heads the Internal Revenue Service unit that oversees tax-exempt groups, said low-level workers in Cincinnati flagged the groups with "tea party" and "patriot" in their names. The groups were applying for 501(c)(4) status as “social welfare” groups, and they do not meet the standard if they are “primarily engaged” in political activity.
Internal Revenue Service officials in Washington and at least two other offices were involved with investigating conservative groups seeking tax-exempt status, making clear that the effort reached well beyond the branch in Cincinnati that was initially blamed, according to documents obtained by The Washington Post.
IRS officials at the agency’s Washington headquarters sent queries to conservative groups asking about their donors and other aspects of their operations, while officials in the El Monte and Laguna Niguel offices in California sent similar questionnaires to tea-party-affiliated groups, the documents show.
...“For the IRS to say it was some low-level group in Cincinnati is simply false,” said Cleta Mitchell, a partner in the law firm Foley & Lardner who sought to communicate with IRS headquarters about the delay in granting tax-exempt status to True the Vote.
Moreover, details of the IRS’s efforts to target conservative groups reached the highest levels of the agency in May 2012, far earlier than has been disclosed, according to Republican congressional aides briefed by the IRS and the Treasury Inspector General for Tax Administration (TIGTA) on the details of their reviews. (Source)
Its story says the IRS singled out mostly local tea party organizations for extra scrutiny even as it failed to respond to complaints that large groups like those founded by Karl Rove and former Obama administration aides violated tax-exempt guidelines by spending tens of millions of dollars on political advertising. The large groups claim they are engaged in issue advocacy rather than political advocacy, which means investigations of their status would be conducted by the Internal Revenue Service rather than the Federal Election Commission.