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Post-crisis U.S. IRS allows more tax-exemption applications

November 6, 2013

WASHINGTON (Reuters) – The U.S. Internal Revenue Service is speeding up its reviews of applications for tax-exempt status, said the agency’s acting chief on Tuesday, as the tax collection body recovers from a scandal involving conservative political groups.

Danny Werfel said at a conference that 40 applications have been approved under a new fast-track program that has helped cut the backlog by 80 percent.

“We have reduced the inventory,” Werfel said. “We are making improvements throughout the exempt organizations area.”

The IRS earlier this year came under scrutiny when lawmakers with ties to the conservative Tea Party movement accused the agency of unfairly subjecting conservative groups who had sought tax-exemptions to extra time-consuming scrutiny.

A two-month political uproar ensued, leading to the resignation of the IRS commissioner, embarrassment for the White House and damage to the agency’s politically neutral image.

The IRS chief resigned over the affair in May. He was replaced on a temporary basis by Werfel, who was formerly a White House budget official.

In June, responding to outside criticism, the IRS started allowing some applicants for tax-exempt status to “self-certify” as tax-exempt if they agreed to certain rules. These “fast-track” applicants had to pledge not to devote more than 40 percent of their activity and expenses to political activity.

The program has drawn criticism. Marc Owens, who led the IRS tax-exempt unit from 1990 to 2000 and is now at law firm Caplin & Drysdale, said the IRS is “rubber-stamping” applications.

In August, Representative Chris Van Hollen, a Maryland Democrat, sued the IRS in part to halt the fast-track approval program, criticizing it as a “safe harbor.”