This changes the dynamic in two ways:

A federal watchdog’s upcoming report says senior Internal Revenue Service officials knew agents were targeting tea party groups in 2011. The disclosure contradicts public statements by former IRS Commissioner Douglas Shulman, who repeatedly assured Congress that conservative groups were not targeted. …. That report says the head of the IRS division that oversees tax-exempt groups learned that groups were being targeted in June 2011. It does not say whether Shulman was notified.

Yesterday, the IRS claimed that this only happened in one office in just 2012, and that only lower-level officials were involved. This report from the Associated Press refutes both of those claims — and adds yet another damning example to a growing list of misleading and false statements from the Obama administration.

Let’s go back to yesterday’s admission:

Lois G. Lerner, the IRS official who oversees tax-exempt groups, said the “absolutely inappropriate” actions by “front-line people” were not driven by partisan motives. Rather, Lerner said, they were a misguided effort to come up with an efficient means of dealing with a flood of applications from organizations seeking ­tax-exempt status between 2010 and 2012.

Lerner’s statement gave the clear impression that the IRS only just learned about this, and that the actions were by rogue agents without enough supervisory control. The AP’s report on the upcoming Treasury IG’s report is that it will demonstrate that “senior officials” knew about this more than a year earlier — while Shulman was telling Congress that nothing of the sort was going on.

If the IG report substantiates this, then the questions will really start flying for the Obama administration. Why would senior IRS officials remain silent while their agents illegally targeted conservative non-profits with their knowledge? Was it because they were ordered to make it happen? Most government bureaucrats don’t go that far out of their way to innovate, especially in a legal landmine area such as this. And I’d suspect that “senior officials” wouldn’t climb out on that limb unless pressed on it, too.

Hey, maybe this is why there were no disciplinary actions, huh?

Anyone still buying that this wasn’t driven by partisan motives? Anyone? Anyone? Bueller? Bueller?

Update: More from the AP, including a huge problem for Lerner and Shulman:

The agency blamed low-level employees, saying no high-level officials were aware. But on June 29, 2011, Lois G. Lerner, who heads the IRS division that oversees tax-exempt organizations, learned at a meeting that groups were being targeted, according to the watchdog’s report. At the meeting, she was told that groups with “Tea Party,” ”Patriot” or “9/12 Project” in their names were being flagged for additional and often burdensome scrutiny, the report says. … On Jan, 25, 2012, the criteria for flagging suspect groups was changed to, “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform/movement,” the report says. While this was happening, several committees in Congress were writing IRS Commissioner Douglas Shulman to express concern because tea party groups were complaining of IRS harassment. In Shulman’s responses, he did not acknowledge targeting of tea party groups. At a congressional hearing March 22, 2012, Shulman was adamant in his denials. “There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman said at the House Ways and Means subcommittee hearing.

Lerner’s going to look like a liar. Shulman might end up facing charges of lying to Congress and perhaps obstruction as well. It probably won’t end there, either.

Update: John Hinderaker notes the convenience of discovering this now rather than before the election:

So the harassment of conservative groups began much earlier than the IRS told us yesterday, when the agency’s spokesman said the improper conduct occurred “during the 2012 election.” As I wrote yesterday, I was skeptical about that since I had heard of the targeting of Tea Party groups by the IRS well before the 2012 campaign season. It now appears that this is one more scandal that the Obama administration managed to keep quiet until after November’s election. One wonders how many more skeletons will come tumbling out of the closet, now that Obama is safely re-elected.

It’s still going to be a massive political problem for Obama, with a Congressional probe now all but guaranteed as yet another set of false talking points collapses.

Update: How big of a deal is abusing the tax system to gain an advantage over the political opposition? Don’t forget that it was one of the charges in the Watergate articles of impeachment:

Article 2 Using the powers of the office of President of the United States, Richard M. Nixon, in violation of his constitutional oath faithfully to execute the office of President of the United States and, to the best of his ability, preserve, protect, and defend the Constitution of the United States, and in disregard of his constitutional duty to take care that the laws be faithfully executed, has repeatedly engaged in conduct violating the constitutional rights of citizens, impairing the due and proper administration of justice and the conduct of lawful inquiries, or contravening the laws governing agencies of the executive branch and the purposed of these agencies. This conduct has included one or more of the following:

He has, acting personally and through his subordinates and agents, endeavoured to obtain from the Internal Revenue Service, in violation of the constitutional rights of citizens, confidential information contained in income tax returns for purposed not authorized by law, and to cause, in violation of the constitutional rights of citizens, income tax audits or other income tax investigations to be intitiated or conducted in a discriminatory manner.

That doesn’t make Obama guilty of the actions, but it does demonstrate the seriousness of the violation — and the fact that the Obama administration tried to shortstop the IG report with yesterday’s dog-and-pony show also demonstrates just how bad they know this will be.

Update: A quote from the Nixon tapes about using the IRS against Nixon’s opponents — “There’s a lot of gold in them thar hills. … Are we looking into Muskie’s returns?”

Update: I missed this earlier, but the IG report will accuse the chief counsel of the IRS of knowing that the targeting was taking place, and saying nothing:

Among the other revelations, on Aug. 4, 2011, staffers in the IRS’ Rulings and Agreements office “held a meeting with chief counsel so that everyone would have the latest information on the issue.” On Jan, 25, 2012, the criteria for flagging suspect groups was changed to, “political action type organizations involved in limiting/expanding Government, educating on the Constitution and Bill of Rights, social economic reform/movement,” the report says.

Hmmm. Why would a chief counsel remain silent on such a development?

Update: Another point: if the chief counsel knew about this in August 2011, how likely would it have been that IRS Commissioner Shulman would have been unaware of it when he testified before Congress in March 2012? I think it’s time for Shulman to find a very good lawyer and start looking to make a deal.

Update: William Jacobson reminds us (along with Daniel Drezner) that the IRS is now also the enforcer for ObamaCare. Nothing to worry about there, though … right?

Update: Hey, here’s a good question:

Good question @stephenfhayes @richardgrenell “@forewit: Did Obama see Romney’s tax records & use that info to call on him to disclose them?” — Jason (@27jaaw27) May 11, 2013

Remember how much Harry Reid was mouthing off about tax returns? Did the White House feed him some inside information, or did the IRS?