In a letter to Congress that was released on Thursday, the inspector general for tax administration, J. Russell George, acknowledged that the term "Progressives" appeared on a list of terms used by IRS screeners from to look for applicants with potential problems that would merit close scrutiny. But he said there was no evidence the IRS set aside progressive groups' applications because they appeared on that list, which was aimed at finding groups that may have engaged in political activity — which could affect whether they were granted tax-exempt status.
George said his investigators have "multiple sources of information corroborating" that tea party groups' applications were set aside for close examinations, including interviews with IRS employees, emails and other documents. But he added, "We found no indication in any of these other materials that 'Progressives' was a term used to refer cases for scrutiny for political campaign intervention."
George's explanation did not satisfy Rep. Sander Levin of Michigan, top Democrat on the House Ways and Means Committee.
At a hearing of that panel Thursday at which IRS chief Danny Werfel testified, Levin said he wanted that committee to have George answer questions at a future session. Levin and other Democrats say George's report last month revealing IRS mistreatment of tea party groups unfairly focused on conservatives and omitted mention of progressives.
"Our committee, in its oversight role, has an obligation to fully understand the manner in which the inspector general conducted his audit, and at what direction," Levin said.
The congressman, to whom George sent his letter, said that applications from progressive groups were sent to a different group of screeners within the IRS and that George failed to investigate that. Levin also criticized George for not investigating why the word "Progressives" appeared on the lists IRS screeners used and not openly acknowledging until now that the word was on those lists.
"The failure of the IG's audit to acknowledge these facts is a fundamental flaw in the foundation of the investigation and the public's perception of this issue," said Levin, using the abbreviation for inspector general.
George's letter said that out of 298 groups the IRS set aside between 2010 and 2012 for close examination of their political activities, six had the words "progress" or "progressive" in their names. Another 14 groups with those words in their names were not sidetracked for close scrutiny because of their political efforts, he said.
Overall, George wrote, 30 percent of groups with "progress" or "progressive" in their names received tough processing because of their political activities. That compared to 100 percent of organizations with "Tea Party," ''Patriots" or "9/12" in their names, George said.
Under questioning from Ways and Means Chairman Dave Camp, R-Mich., Werfel said his own investigation of his agency's behavior had produced no evidence to contradict George's finding that progressive groups' applications were not set aside so their political activities could be examined. But he later said there was "a diversity of political labels" among the groups whose applications were set aside for further review.
Some progressive groups seeking tax-exempt status have complained about facing lengthy delays and detailed questions from the IRS.
It is unclear whether progressive groups faced the same extent of mistreatment as conservative organizations. Dozens of them ran into delays exceeding a year, and many received scores of detailed questions that officials have since said were overly intrusive, including demands for information about their donors.
The back-and-forth came as Werfel answered questions from Congress for the first time since revelations that progressives joined the tea party on a list of groups whose applications for tax-exempt status drew extra scrutiny.
Camp criticized a report that Werfel issued this Monday, six weeks after President Barack Obama named him to head the troubled agency.
Werfel wrote that he found mismanagement but no purposeful wrongdoing at the IRS in a report that also pointed to the officials who have been replaced and other changes he has made. Camp said that conclusion was "incomplete" because Werfel did not interview several former top IRS officials, including former commissioner Douglas Shulman.
Werfel also came under Republican fire for his agency's request for a $1 billion budget increase next year, with several recounting recent revelations about costly conventions for employees and videos that some workers made.
"Until the IRS proves that it can responsibly manage its current funds, the IRS will not see one more dime in taxpayer funding," Camp said.
Werfel said no decisions had yet been made on the agency's previous plans to distribute $70 million in bonuses to employees, payments that have been required by union contracts. He said bargaining was underway.
Democrats seem determined to shift the focus to this week's disclosure that the term "Progressive" was also on the agency's watch lists.
IRS regulations allow tax-exempt social welfare organizations to engage in some political activity but it cannot be their primary mission. The agency must decide whether each applicant's activities meet those vague guidelines.
The IRS has been under withering fire since May 10, when an agency official acknowledged that it had targeted conservative groups seeking tax-exempt designations for tough examinations. Until then, IRS officials had insisted that conservatives had not been singled out for such treatment.
Some Republicans have suggested that the focus on conservative groups came from the White House or other Obama allies.
There has been no evidence of that so far. Instead, according to investigators and testimony from IRS workers to congressional committees, workers in the agency's Cincinnati office that handled tax-exempt applications developed the lists to help them find groups that merited additional scrutiny.
Obama and members of both parties in Congress have said such targeting is inexcusable. At least five top officials, including former acting Commissioner Steven Miller, have been removed.