By Kim Dixon
WASHINGTON (Reuters) - Terms associated with politically liberal groups such as "Emerge" and "ACORN" were used by U.S. tax agents to flag applicants seeking tax-exemption for added scrutiny, according to internal IRS documents released by Democrats on Tuesday.
The memos, training materials and other materials are the latest salvo in a controversy that erupted in May over Internal Revenue Service scrutiny and delays of applications from Tea Party groups and other conservative organizations.
A May 14 report by the Treasury Inspector General for Tax Administration (TIGTA) critical of IRS practices led to the removal of top IRS officials along with FBI and congressional investigations.
Since then, Democrats have accused TIGTA of unfairly focusing on Tea Party-related groups in its report, while failing to look for liberal terms. TIGTA has since expanded its review to such groups.
The internal IRS documents made public on Tuesday include the word "Emerge," a term used by some Democratic-leaning groups, and "ACORN," an acronym for a liberal community activism group no longer in business.
One documents says applicants associated with ACORN should be elevated to a Washington IRS official, Chip Hull, who was also helping review Tea Party applications.
"This new information should put a nail in the coffin of the Republican claims that the IRS's actions were politically motivated or were targeted at only one side of the political spectrum," said Representative Elijah Cummings, the top Democrat on the House oversight panel probing the matter.
Republicans said the search terms only proved that the IRS was going after known "bad actors," not a broad swath of conservative groups like the Tea Party-linked entities. Before it closed, ACORN was accused of irregularities in its voter registration drives.
Republicans also said the use of the terms did not suggest the liberal groups suffered excessive delays in the handling of their applications, as spelled out in the original TIGTA report.
A spokesman for Darrell Issa, the top Republican investigating the matter as head of the House oversight committee, said the case of "Emerge" was a special one because they were approved and then had their tax-exempt status later revoked.
"How many times have congressional Democrats now tried to declare the IRS targeting investigation over?" said Frederick Hill, a spokesman for Issa. "An application for tax-exempt status from an Emerge America affiliate was originally approved before the IRS concluded the organization was overtly training candidates for the Democratic Party."
PRIMARILY VERSUS EXCLUSIVELY
The IRS struggles with determining tax-exempt status for groups seeking to qualify as a "social welfare organization" under 501(c)(4) of the tax code, which allows a vague amount of political activity.
Separately on Tuesday, another Democratic Representative Chris Van Hollen said he would file a lawsuit against the Treasury Department and the IRS to force the agency to clarify its rules.
The lawsuit, which also will be filed consumer groups, challenges IRS regulations adopted in 1959 that govern eligibility for tax-exempt status under 501(c)(4).
The IRS regulations say groups can qualify if they "primarily" engage in social welfare activities.
But the original Revenue Act of 1913 states that such groups should operate "exclusively" for the promotion of social welfare goals, as opposed to political activity.
Democrats and other critics say confusion about the law has made it impossible for the IRS to properly vet applicants for tax-exemption.
(Additional reporting by Patrick Temple-West; Editing by Howard Goller and Bill Trott)