FBI Launches Probe of IRS

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"The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS," Mr. Holder said at a news conference. "Those were, I think, as everyone can agree, if not criminal, they were certainly outrageous and unacceptable."

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The inspector general's report left unanswered a key question—how exactly IRS workers came to focus excessively on conservative groups. "We could not specifically determine who had been involved in creating the criteria" that led to selection of so many applications from conservative groups for extra review, the report said in a footnote.

The report called on the IRS to better document the reasons for choosing groups for extra review, request better guidance on rules by the Treasury Department, and quickly resolve cases—some of which "have been in process for three years." "Although the IRS has taken some action, it will need to do more," the report said.

The IRS generally agreed with the recommendations and said that "while flaws in our process were corrected last year based on our own review," it held off on publicly discussing them because the agency was awaiting the inspector general's report. "There was no intent to hide this issue," an IRS statement said.

The IRS didn't respond to a request for comment on the DOJ probe. IRS acting Commissioner Steven Miller said in an op-ed published Tuesday in USA Today that, "mistakes were made, but they were in no way due to any political or partisan motivation."

IRS officials have previously said agency workers have stopped using the inappropriate standards for scrutinizing applications and politically neutral criteria are now being used. They blame the problems on bureaucratic shortcuts.

Also on Tuesday, a House Republican said IRS officials had conducted their own internal investigation in 2012, finding a "substantial bias against conservative groups" in the agency's handling of applications for tax-exempt status. Yet IRS officials never disclosed that probe to GOP lawmakers who were asking about the handling of tea-party groups, said Rep. Darrell Issa (R., Calif.) in a letter to the IRS.

Applications selected for the heightened scrutiny essentially remained in "limbo" for up to two years, Mr. Issa said, who added that no IRS employees have been disciplined in the matter and one appears to have been promoted.

Mr. Miller met Tuesday with Senate Finance Chairman Max Baucus (D., Mont.), who plans hearings. "The senator didn't pull any punches and warned Mr. Miller that he is in for some serious questioning from the committee," said Baucus spokesman Sean Neary.

The inspector general's report said that as of Dec. 17, it had reviewed 296 applications from groups seeking tax-exempt status that had been set aside for scrutiny by a team of specialists. Of those, 108 had been approved, 28 were withdrawn by the applicant, none had been denied, and 160 were open from 206 to 1,138 calendar days.

About one-third of these applications included "Tea Party," "Patriots," or "9/12" in their names, while the remainder didn't, the report said.

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