IRS apologizes for singling out conservative groups: How did it happen?

The Internal Revenue Service singled out conservative political groups for additional scrutiny of their tax-exempt status during the 2012 election, which conservative groups say is proof that the IRS has been unfairly targeting them.

About 75 organizations with “tea party” or “patriot” in their tax-exemption applications received extra review during a broader screening process of political advocacy groups, said Lois Lerner, who oversees the tax-exemption division at the IRS.

“That was wrong. That was absolutely incorrect, it was insensitive, and it was inappropriate,” Ms. Lerner said Friday at a conference sponsored by the American Bar Association. “That's not how we go about selecting cases for further review. The IRS would like to apologize for that.”

Low-level employees in Cincinnati initiated the practice to deal with an influx of tax-exemption applications between 2010 and 2012, Lerner said.

“Mistakes were made initially, but they were in no way due to any political or partisan rationale,” said the IRS in a statement. “We fixed the situation last year and have made significant progress in moving the centralized cases through our system.”

Conservative groups accused the IRS of targeting them during the 2012 election by sending additional questionnaires for their applications. So for them, the IRS apology is too little, too late.

“The IRS has demonstrated the most disturbing, illegal and outrageous abuse of government power,” Jenny Beth Martin, national coordinator for Tea Party Patriots, said in a statement. “This deliberate targeting and harassment of Tea Party groups reaches a new low in illegal government activity and overreach.”

Top Republican lawmakers are calling for a White House investigation into the agency.

“Today, I call on the White House to conduct a transparent, government-wide review aimed at assuring the American people that these thuggish practices are not underway at the IRS or elsewhere in the administration against anyone, regardless of their political views,” said Sen. Mitch McConnell (R) of Kentucky in a statement.

Rep. Charles Boustany (R) of Louisiana told The Hill that he wanted the IRS to hand over the names of the employees involved with the matter.

“My greatest concern is what would have come from this blatant abuse of power if Ways and Means, as well as others, had not spoken up and stepped in to question the IRS about these activities,” said Representative Boustany, who brought up the issue in hearings of the Ways and Means Subcommittee on Oversight last year.

The IRS is an independent enforcement agency, with only two political appointees, said White House press secretary Jay Carney during a press conference Friday. The director during the time of the inappropriate activity – former Commissioner Douglas Shulman – was appointed by President George W. Bush.

“If this inappropriate activity did take place, the president would want it to be thoroughly investigated,” Mr. Carney said.

During the campaign, liberal groups thought that the IRS was not doing enough to review groups applying for tax-exempt status.

"That's the most interesting thing about this: They were actually doing it," Kenneth Gross, a campaign-finance law expert and former counsel of the Federal Election Commission, told ABC News.

The IRS apology could affect future regulations of political, tax-exempt groups, said Nick Nyhart, president and CEO of Public Campaign in Washington, which advocates campaign-finance reform.

"There are legitimate questions to be asked about political groups that are hiding behind a 501(c)4 status," Mr. Nyhart said in a statement. "It's unfortunate a few bad apples at the IRS will make it harder for those questions to be asked without claims of bias."

• Material from the Associated Press contributed to this report.