The IRS said the audit was triggered by staffers in a satellite office. | REUTERS IRS targeted NAACP in 2004

This isn't the first time the IRS has been in hot water for meddling in the politics of nonprofits. And if past is prelude, the Obama administration may have a years-long scandal on its hands.

In 2004, the NAACP was hit with an audit over accusations of improper political activity for criticizing the Bush administration.


"We have received information that during your 2004 convention in Philadelphia, your organization distributed statements in opposition of George W. Bush for the office of presidency," the IRS wrote in an audit notice that the group released to the media at the time.

Auditors also notified the group that it could be subject to a 10 percent tax for political expenditures as well as a 2.5 percent tax on any manager that signed off on the political activity.

The NAACP went public and sparked a now-familiar firestorm. Democrats in Congress were up in arms and called for answers about what constitutes political activity and questioning the political motivations of the agency.

Rep. Charles Rangel, the top Democrat on the Ways and Means Committee at the time, called the audit a police state tactic. Max Baucus, then the ranking member on the Senate Finance Committee, sent a letter to then-IRS Commissioner Mark Everson demanding answers to a list of questions about other similar audits.

“The integrity of our tax enforcement system is a critical matter,” Baucus wrote at the time. “The American public expects a high degree of non-partisanship and professionalism from the IRS."

The agency denied a culture of bias. They said the audit was triggered by staffers in a satellite office, this time in Kentucky.

It took more than two years and a lengthy legal battle for the IRS to drop its case against the NAACP. That was all well before the Supreme Court unleashed a flood of political groups into the IRS pool with its Citizens United decision.

“It caught the IRS completely flatfooted,” Lloyd Mayer, one of the attorneys that represented the NAACP in the case, told POLITICO on Monday. “They had never even thought of the possibility that one of their audit targets would go public and accuse the agency of bias.”

This article first appeared on POLITICO Pro at 4:44 p.m. on May 13, 2013.