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Originally published May 22, 2013 at 6:31 AM | Page modified May 23, 2013 at 12:35 AM

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Tea party storm largely inside IRS _ so far

Three days of congressional hearings about the Internal Revenue Service's targeting of conservative political groups have lawmakers looking for ways to widen an investigation that has so far been largely contained within the tax collection agency.

Associated Press

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WASHINGTON —

Three days of congressional hearings about the Internal Revenue Service's targeting of conservative political groups have lawmakers looking for ways to widen an investigation that has so far been largely contained within the tax collection agency.

More than 11 hours of testimony and an inspector general's report have revealed plenty of wrongdoing within the IRS. But so far, investigators have not produced evidence that anyone outside the IRS authorized the targeting, or even knew about it before a few weeks ago.

They will keep trying.

Three congressional committees are investigating the matter, and the leaders of those committees say they are just getting started. The Justice Department has launched a criminal investigation, and the new acting head of the IRS says he is conducting an internal review.

"The first step in this effort must be to get to the bottom of the recent allegations regarding the criteria to determine eligibility for tax-exempt status," Danny Werfel, the new acting IRS commissioner, said in an agencywide internal memo to employees Wednesday.

"The missteps uncovered in the recent inspector general report are inexcusable and cannot be tolerated by any of us," wrote Werfel, who was appointed by President Barack Obama last week and started Wednesday. "That is why we must work together with the inspector general, the Justice Department and Congress to ensure that responsible parties are held accountable for the inappropriate activities that occurred and that we correct the breakdowns in process and oversight that allowed them to occur."

The White House has not been unscathed. Obama's top spokesman said Wednesday the White House was facing "legitimate criticisms" for its shifting accounts about who knew what, and when they knew it about the IRS targeting of conservative political groups.

Press secretary Jay Carney first said that only Obama's top lawyer knew the IRS was being investigated in the weeks before the inspector general's report was released. Later, he said the chief of staff and other top officials also knew.

"There have been some legitimate criticisms about how we're handling this," Carney said. "And I say `legitimate' because I mean it."

The inspector general's report, which was released last week, said IRS agents in a Cincinnati office targeted tea party and other conservative groups for additional scrutiny when they applied for tax-exempt status. They started targeting these groups in March or April of 2010. By August 2010, "tea party" became part of a "be on the lookout," or "BOLO," list of terms to flag for additional screening.

Lois Lerner, who heads the IRS division that handles applications for tax-exempt status, learned in June 2011 that agents were singling out groups with "Tea Party" and "Patriots" in their applications for tax-exempt status, the report said. She ordered agents to scrap the criteria immediately, but later they evolved to include groups that promoted the Constitution and the Bill of Rights.

It finally stopped in May 2012, when top agency officials say they found out and ordered agents to adopt appropriate criteria for determining whether tax-exempt groups were overly political.

Former IRS Commissioner Douglas Shulman told two congressional committees this week that he first learned in the spring of 2012 that conservative groups had been improperly singled out for additional scrutiny. However, after learning that the practice had stopped and that the inspector general was investigating, Shulman said he didn't tell anyone in the Treasury Department or the White House about it. The IRS is part of the Treasury Department.

Shulman, who was appointed by President George W. Bush, left office in November, when his five-year term expired.

Lerner was subpoenaed to testify Wednesday before the House Oversight and Government Reform Committee. Her appearance was brief. She read an opening statement in which she denied any wrongdoing. Then she refused to answer questions, invoking her constitutional right against self-incrimination.

"I have not done anything wrong," Lerner said. "I have not broken any laws, I have not violated any IRS rules or regulations, and I have not provided false information to this or any other congressional committee."

Committee Chairman Darrell Issa, R-Calif., said he might recall her. He and other Republicans say they believe she forfeited her Fifth Amendment privilege not to testify by giving an opening statement in which she proclaimed her innocence, but several law professors were skeptical they could make that stick.

Issa later said he would consult with others - including her lawyer and House attorneys - before determining whether to summon her again, hopefully deciding by the time Congress returns early next month from an upcoming recess.

"She's a fact witness with a tremendous amount that she could tell us," Issa said.

Lerner, a career civil servant, is still in her position at the IRS. She was the IRS official who first publicly disclosed the matter at a legal conference on May 10.

J. Russell George, the Treasury Department inspector general for tax administration, has blamed ineffective management for allowing agents to improperly target conservative groups for so long.

On Wednesday, he hinted there may be more revelations to come. He told the oversight committee that his office has since uncovered other questionable criteria used by agents to screen applications for tax-exempt status. But he refused to elaborate.

"As we continue our review of this matter, we have recently identified some other BOLOs that raised concerns about political factors," George said. "I can't get into more detail at this time as to the information that is there because it's still incomplete."

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Associated Press writers Alan Fram and Julie Pace contributed to this report.

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Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap

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