WASHINGTON -- Internal Revenue Service documents showing that the agency might have scrutinized politically liberal groups before it inappropriately targeted conservative ones intensified debate on Capitol Hill last week, leaving the agency and its watchdog scrambling to explain themselves.
The result may be an already embattled IRS that faces even more criticism, and an inspector general risking a compromised reputation.
J. Russell George's May report about the IRS' treatment of conservative groups led to public outrage, agency apologies, congressional hearings, a Justice Department probe and several dismissals, including the forced resignation of acting commissioner Steven Miller by the White House.
But Democrats are now questioning the Treasury inspector general's audit in light of the new IRS documents, which show that terms such as "progressive," "health care legislation" and "medical marijuana" appeared on a multipart "Be on the Lookout" list, or BOLO, that helped agents determine which groups deserved additional screening.
In a June 26 letter to the inspector general, Rep. Sander M. Levin, D-Mich., said: "There is increasing evidence that the May 14, 2013 audit was fundamentally flawed and that your handling of it has failed to meet the necessary test of objectivity and forthrightness."
George's spokeswoman, Karen Kraushaar, fueled that notion when she told the Hill newspaper that the office of House Oversight and Government Reform Committee Chairman Rep. Darrell Issa, R-Calif., asked the inspector general to "narrowly focus on tea party organizations."
Issa's office has denied it made such a request.
Kraushaar has walked back her remarks, telling The Washington Post, "The statements attributed to me in The Hill are not accurate." She did not say the article misquoted her.
"Several members of Congress shared their concerns about tea party organizations" with the inspector general's office, Kraushaar said in an e-mail. "However, the focus of our audit was on the IRS's consistency in its identification and review of applications for tax-exempt status involving potential political advocacy issues."
George, appointed to his position in 2006 by President George W. Bush, said in a letter to Levin that his office "reviewed all cases that the IRS identified as potential political cases and did not limit our audit to allegations related to the Tea Party."
The inspector general testified before Congress last month that his office was unable to determine whether any cases in the audit involved progressive groups. He said the names "in many instances were neutral, in that you couldn't necessarily attribute it to one particular affiliation or another."
Rep. Gerald E. Connolly, D-Va., whose questioning prompted that response, said in a recent letter to George that his testimony was "at best incomplete, if not misleading." He also suggested that George should appear again before the House Oversight Committee to "explain himself."
There is little doubt that the IRS erred in its review of tax-exemption applications.
Acting IRS Commissioner Daniel Werfel, whom President Obama appointed to lead the agency after Miller's resignation, said in a conference call with reporters last week that the screening methods were inappropriate.
But, Werfel added, his agency's 30-day internal review had "not found evidence of intentional wrongdoing by anyone in the IRS or involvement in these matters by anyone outside the IRS."
The BOLO could still be problematic for the IRS. The list's "emerging issues" category included only conservative-associated terms at the outset, raising questions about why the IRS prioritized conservative groups but not those from the political left.
The term "progressive" appeared in a separate part of the BOLO, and questions remain about when and how that term was used, as well as whether those separate BOLO categories were even relevant to the audit. The IRS and George's office have said they're still looking into those matters.
The BOLO also directed agents to flag tea party cases for further review while allowing processors to approve other types of groups "on merit if applicable."
George's audit focused primarily on the "emerging issues" category as part of an effort to help identify groups involved in possible campaign intervention -- something that can potentially disqualify an organization from tax-exempt status.
George has said the IRS did not use progressive criteria to identify groups involved in campaign intervention.
"We are reviewing whether these criteria led to expanded scrutiny for other reasons and why these criteria were implemented," his office said in a statement last week.
Republicans have downplayed the recent revelations about "progressive" search criteria.
"Our Democratic colleagues should stop trying to derail the investigation by defending IRS officials with distorted claims equating the systematic scrutiny of Tea Party groups with the more routine screening progressive groups received," Issa said.
House Ways and Means Committee Chairman Dave Camp, R-Mich., said the IRS controversy goes beyond the issue of search terms to the inappropriate questions agents asked of conservative groups and alleged leaks of private taxpayer information.
"At this point, the evidence shows us that conservative groups were not only flagged, but targeted and abused by the IRS," said Camp spokeswoman Sarah Swinehart. "As we gather the facts, we will follow them wherever they lead us."