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6 Surprising Things About The IRS Scandal

Lois Lerner, head of the IRS unit that decides whether to grant tax-exempt status to groups, leaves a House Oversight and Government Reform Committee hearing in May.
J. Scott Applewhite
Lois Lerner, head of the IRS unit that decides whether to grant tax-exempt status to groups, leaves a House Oversight and Government Reform Committee hearing in May.

Hundreds of pages of transcribed interviews reveal that IRS employees in Washington were involved at an early stage in the improper targeting of Tea Party groups — but at least so far the trail stops well short of the White House.

Based on interviews with two longtime IRS employees working in the Cincinnati field office, there's no smoking gun, no direct connection to the Obama administration or even any indication that those involved in the flagging of conservative groups had political motives.

Rather, the transcripts from the ongoing investigation, recently viewed by NPR, paint a more mundane picture about the office at the center of the IRS scandal: a dysfunctional workplace where office politics in Cincinnati and Washington, not partisan politics, served as the animating force behind a scandal that would dominate cable news and newspaper headlines for weeks.

Here are six revelations from the 360 pages of transcribed interviews with Gary Muthert, a screener who processed applications for tax-exempt status and assigned them to agents for further review; and Elizabeth Hofacre, an "emerging issues" coordinator who was tasked with the so-called Tea Party cases.

1) There's still no smoking gun.

There's nothing in the interviews to suggest that the word came from on high to scrutinize Tea Party groups. The reality, according to Muthert's account, was a lot less interesting.

He said a co-worker in March 2010 noticed an application from a Tea Party group seeking tax-exempt 501(c)(4) status as a social welfare group. Muthert's manager then asked him to search for all the Tea Party-related files.

"When I was asked to research Tea Parties, it was like, 'OK, I understand why you would want me to look at these cases and see if there is going to be a million coming in or not,' " said Muthert, in his interview with a bipartisan group of congressional investigators.

501(c)(4) groups are allowed to participate in politics, but it can't be their primary activity. Screening applicants for political activity and trying to divine whether they qualify for tax-exempt status is not out of the ordinary. But ultimately, the Tea Party groups were lumped together and fell into a bureaucratic black hole facing excessively long wait times and intrusive questioning according to an inspector general's report.

2) The IRS bureaucracy can be stifling and soul-crushing.

Hofacre was initially the person in Cincinnati who was assigned the Tea Party cases. From the start, she said, it was an awful portfolio.

Hofacre told investigators she was "micromanaged to death" by a tax law specialist in the Exempt Organizations Technical office in Washington. (That lawyer, Carter Hull, was interviewed by congressional investigators on Friday, and the transcript hasn't yet been made available to reporters).

"I didn't have any authority," said Hofacre. "I mean, Carter Hull had the ultimate authority — or I don't know if he did, but I had to go through him to get any kind of authority to review the applications and make a determination."

According to her account, Hofacre had to fax every application to Hull — and some of them were quite thick, which took a long time to send. She'd write letters to the organizations asking for more information, but she'd have to send them to Hull first for review.

When the organizations responded, he'd have to review that, too, before determining the next steps.

"I sent every application to him. It didn't matter what I thought," said Hofacre, explaining that it was especially frustrating, because at her level on the government civil service pay scale, she was supposed to have more autonomy, and usually did. "He had to review it. I mean, he wasn't looking for my opinion."

She found herself stuck between groups who wanted a response on their applications for tax-exempt status, and the lawyer in Washington telling her the cases were still under review.

"It was an awful place to be because it was like working in lost luggage," said Hofacre. "You are getting it from everywhere, irate taxpayers. It wasn't a good place to be."

About six months after the Tea Party cases started coming in, Hofacre changed jobs to get away from the frustration.

3) Tea Party, what's that?

Throughout the transcribed interviews, both Hofacre and Muthert refer to Tea Party groups as "tea parties," indicating either an unusual vocabulary that developed inside the IRS or a total lack of awareness of how most people talk about the Tea Party movement and individual Tea Party groups. Muthert told investigators he learned about the existence of the Tea Party movement watching CNN and describes himself as an apolitical person.

"I didn't know what the Tea Party was or what," Muthert said. "I still don't know what it is."

When asked about conducting his search for Tea Party groups, Muthert seemed more interested in complaining about the IRS records systems.

It seems the original search terms arose out of the need to navigate a clunky records system, and Muthert went into some detail explaining that there are actually two systems. The TEDS system is computerized. The EDS system is not — and he made clear he wasn't a big fan of it.

In Muthert's first search he found about 10 files. But then he realized Tea Party groups sometimes go by other names like "TP Patriots." So, he broadened his search to include the terms "patriot" and "912."

"So, I said, 'OK, I will use these to find Tea Parties,' " said Muthert, explaining his search. "At one point I used the word 'tea,' but t-e-a doesn't get you very far because TEDS might have 5,000 entities in there."

He wound up pulling up a lot of teachers groups searching just "tea": "So I had to watch my queries and zero in on what I wanted."

4) The embarrassing story behind the BOLO alert.

The person who sent out the first BOLO — the be-on-the-lookout notice telling agents to flag all Tea Party cases that came in — was Hofacre.

She didn't actually develop the terms, but rather told investigators she added them to an Excel spreadsheet at her manager's instruction. Only after the manager signed off did Hofacre send it out (more of that micromanaging). She e-mailed it to her colleagues, but there was a slight problem: She wasn't all that familiar with the e-mail program Outlook, so she sent it to too many people.

"Well, either Wednesday or Thursday they told me to send it to everybody in Cincinnati," Hofacre told investigators, describing what happened next as embarrassing. "Well, I made a mistake and everybody in D.C. got it by mistake."

By "everyone," she clarified following questions from investigators, she meant everyone on the "Rulings and Agreements" e-mail list.

It's not clear who in Washington actually read her accidentally blasted e-mail or went through the trouble of opening the attachment. It took nearly a full year from that date for managers in Washington to express concerns and ask for changes to the BOLO.

5) The IRS Cincinnati field office is just like your office, or maybe just like The Office.

Hofacre said other agents would occasionally bring her cases from progressive or liberal groups. She chalked it up to others trying to get out of doing work and treating her as a "dumping ground for cases." She declined to take them on.

"I sent them back to the specialist and said they needed to develop the case," Hofacre said. "I was tasked to do Tea Parties, and I wasn't — I wasn't equipped or set up to do anything else."

She described herself as overwhelmed and not at all interested in doing someone else's work.

A key issue in the investigation is whether conservative and Tea Party groups were uniquely targeted, or if liberal groups were also flagged and faced similar long waits and intrusive questioning.

According to Hofacre's account, at least, the explanation is more like a plotline from an office-themed sitcom than a political thriller.

6) The targeting was the work of rogue agents? Please.

Hofacre and Muthert both bristled at the idea initially advanced by IRS officials that the targeting of Tea Party groups was the work of a couple of rogue agents in Cincinnati.

"It's impossible," said Muthert. "As an agent, we are controlled by many, many people. We have to submit many, many reports. So the chance of two agents being rogue and doing things like that could never happen."

Hofacre said she was furious and also confused about whether IRS officials were talking about her or someone else. And, she added, there was no way managers weren't aware of the extreme delays the Tea Party applications were facing.

"[The managers] have really right inventory control systems," said Hofacre. "I mean they get periodic prints of our inventory, so they know exactly what cases we had, how old they are, how long we have had them and stuff like that. So these two rogue agents running amuck for three years, even for three months, it would never happen."

Copyright 2021 NPR. To see more, visit https://www.npr.org.

Tamara Keith has been a White House correspondent for NPR since 2014 and co-hosts the NPR Politics Podcast, the top political news podcast in America. Keith has chronicled the Trump administration from day one, putting this unorthodox presidency in context for NPR listeners, from early morning tweets to executive orders and investigations. She covered the final two years of the Obama presidency, and during the 2016 presidential campaign she was assigned to cover Hillary Clinton. In 2018, Keith was elected to serve on the board of the White House Correspondents' Association.