Holder Calls for FBI Investigation Over IRS Tea Party Scandal

Audio of IRS official admitting to conservative group targeting made available.

Attorney General Eric Holder is questioned about the Justice Department secretly obtaining two months of telephone records of reporters and editors for The Associated Press, during a news conference at the Justice Department in Washington, Tuesday, May 14, 2013. (J. Scott Applewhite/AP Photo)

Attorney General Eric Holder during a news conference Tuesday at the Justice Department.

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"The state of the law in c4 is incoherent across the board because it serves the IRS purposes of avoiding difficult issues and saying no to powerful forces who are trying to shoehorn their generally commercial activities into c4," she says, citing groups like HMOs and homeowners organizations as common applicants for the tax exemption, though she doesn't think they truly fit the description connoted by "social welfare" in the law.

"One has to understand it is far broader than just anything to do with politics and I think it's been a failure of IRS administration of 501c4 for decades and decades," Hill says.

As far as Julia Hodges, the head of the Mississippi Tea Party, is concerned the whole ordeal was just a waste of time and energy that left her demoralized and feeling picked upon. Hodges' group had been working on their application for the tax designation for three years before finally giving up.

"My thought was, okay, well we want to dot our I's and cross our T's and answer this as honest as possible because that's what we're supposed to do," she says, explaining how they treated each of the lengthy questionnaires and letters that they continued to receive from the IRS. She says a retired CPA and lawyers who were part of the political group volunteered their time to complete the application, but eventually they decided enough was enough.

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"It was just – you wanted to pull your hair out," Hodges says. The IRS had more than 20 contacts with the Mississippi group over a three-year period, including sending questionnaires requesting information such as whether or not the group had a Facebook page and to provide "all email communications to members for call to action," according to copies of the requests provided to U.S. News.

"But for us, it's a matter of being worried about the government harassing citizens for participating in the political process, and it's a right to assemble, it's a right to the First Amendment, it's a right to say, 'hey I don't agree with this and I need to speak up' and it was an overzealous government harassing you – that's what we felt."

One Washington, D.C.-based Republican consultant who has gone through the application process says he's not surprised to hear of the targeting, which is one of the reasons his group spent top dollar on a legal team to handle it.

"We spent a ton of money and months – and we got very detailed set of questions about what we were doing and we answered them professionally and with the assistance of counsel and non-profit consultants and our approval came very quickly," he says.

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He also says it's unlikely someone actually within the Obama administration directly asked the IRS to target conservative groups, but adds there's no doubt it offered clear disapproval for the proliferation of tax exempt political groups.

"I am a big believer in what I call 'signaling,'" he says. "I think Obama administration officials signaled very loudly and aggressively over the last four years all about this secret, dirty money and the IRS goes, 'okay, but let's just target the tea party.'"

The fallout will likely continue for weeks, as lawmakers await the opportunity to grill IRS officials on Capitol Hill.

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