WASHINGTON — Internal Revenue Service employees used other politically-loaded terms besides “tea party” when they culled applications for tax-exempt status and then subjected them to extra scrutiny — including the words “progressive” and “blue,” according to agency memos.

The lists with key words to watch for, released Monday by congressional Democrats, are the first documents showing that IRS employees were instructed to flag other types of nonprofit groups engaged in politics, not just conservative ones.


“Common thread is the word ‘progressive,’” said “Be on the Lookout” memos sent to workers in the tax-exempt division of the IRS. “Activities appear to lean toward a new political party. Activities are partisan and appear as anti-Republican.”

One memo, heavily redacted by the IRS, also tells employees to watch for groups engaged in advocacy on disputed territories in the Middle East, saying the applications “may be inflammatory” and “signify propaganda.”


The documents add a twist to the controversy over the improper IRS screening of politically active groups that were seeking tax-exempt status. Last month, an inspector general’s report found that agency employees pulled applications that used words such as “tea party” and “patriots,” and the groups were subjected to overly intrusive questions and lengthy delays.

The report indicated that not all the groups selected for additional screening used those terms, but it didn’t provide any description of the other organizations.


Daniel Werfel, acting IRS commissioner, issued a report Monday that confirmed agency employees used other “inappropriate labels” to screen cases besides those mentioned by the inspector general, but did not provide details. Last week, the IRS suspended the use of all such watch lists.

The report, issued in response to President Obama’s order for a 30-day review, confirmed the inspector general’s findings, concluding that the agency’s managers bungled the review of the nonprofit applications and showed “a lack of critical thinking and judgment.” At the same time, it said there was no evidence that IRS employees intentionally did anything wrong, or that anyone outside the agency directed the targeting.


The top five employees in the IRS chain of command over nonprofit organizations have been replaced, starting with former acting IRS Commissioner Steven Miller, who was fired.

The White House called Werfel’s actions “an important step in ensuring accountability” at the IRS.


With the release of the new documents, members of Congress will now try to find out whether liberal organizations also received improper treatment.

Rep. Sander M. Levin of Michigan, the top Democrat on the House Ways and Means Committee, said the new documents showed the inspector general’s report was “flawed in a fundamental way.” Republicans on the committee released a statement that noted conservative groups were not just named on watch lists but repeatedly subjected to “abuse.”


In a statement, Rep. Ander Crenshaw (R-Fla.), chairman of the House Appropriations subcommittee for financial services and general government, said, “I find a disturbing lack of clarity when we need a crystal-clear picture of who ordered this targeting and why, especially in light of the IRS’ admission that a broader number of groups were singled out for review.”

The screening was begun in early 2010 by employees in the IRS’ Cincinnati office as they began to deal with an influx of nonprofit applications from groups active in politics. In statements given by IRS employees to congressional investigators, they said the words “tea party” were first used to pull cases because that was the first political term a screener noticed.


One IRS manager, Liz Hofacre, told investigators that she gave no special scrutiny to applications from progressive groups, sending them back to “general inventory.” She said she already had her hands full.

“I was tasked with the tea parties and overwhelmed with those,” she said.


joseph.tanfani@latimes.com

Richard Simon and Michael A. Memoli in the Washington bureau contributed to this report.