U.S. Markets close in 1 hr 30 mins

Republicans Blast $70-million IRS Bonus Plan

Rebekah Metzler

The political spotlight on the Internal Revenue Service continues to burn bright, with Republican lawmakers condemning the reported $70 million in bonuses about to be bequeathed to union workers.

[BROWSE: Editorial Cartoons on the IRS Scandal]

The agency has been embroiled in controversy since officials recently confirmed some conservative political groups seeking tax exempt status had been unfairly singled out and scrutinized. Now, agency officials appear to be defying a White House directive to cancel discretionary bonuses in the face of federal budget cuts.

"On the one hand the IRS claims it's short on resources but on the other hand it appears they're ready to dole out $70 million in bonuses that looks like a payoff to union workers at a time when we're drowning in a sea of red ink," said Sen. Orrin Hatch, R-Utah, top Republican on the Senate Finance Committee. "Given the government guidelines on sequestration, this is certainly an issue that demands further scrutiny."

Sen. Chuck Grassley, R-Iowa, announced the bonuses, with his office citing "a person with knowledge of IRS budgetary procedures."

"[The IRS] appears to be making an extra effort to give the bonuses despite opportunities to renegotiate with the union and federal instruction to cease discretionary bonuses during sequestration," he said in a release.

Meanwhile tea partiers, the political movement whose groups were largely targeted by the IRS for increased scrutiny, gathered at the Capitol to rally against the government. Speakers, including sitting congressmen, called on auditing or eliminating the tax-collecting agency.

[MONEY: What Was So Lavish About the IRS Employee Conference?]

But the bureaucrats did catch a break earlier this week, when a top Democrat on the House Oversight Committee defied the Republican chairman's wishes and released the full transcripts of interviews the committee had with officials in Cincinnati to determine whether or not the orders for increased oversight originated with lower-level officials or came from Washington.

The transcripts reveal more than anything else the cumbersome bureaucracy and lack of clarity faced by IRS officials struggling to cope with the high volume of cases facing them. One of the officials interviewed said agents reviewed 20 to 25 cases daily.

The official - whose name was blacked out but has been identified in news reports as John Schafer - said he was not a union member and was a conservative Republican. The targeting of tea party applications had more to do with the contents of the application than the "tea party" name, he said.

"Part of our effort with [exempt organization] determinations is to be very consistent about applications," he said. "What I'm talking here is that if we end up with four applications coming into the group that are pretty similar, and we assign them to four different agents, we don't want four different determinations. This was normal business, by the way, why this was brought to my attention was for consistency."

Schafer also acknowledged the difficulty the agency has with determining when to grant the 501(c)(4) tax-exempt status to groups because of the vagaries in the law.

[READ: New IRS Chief Pledges to Work With Congress]

"In itself, on a (c)(4), [political activity]'s not prohibited, but it's not real clear as to how much political activity a (c)(4) public organization can participate in," he said.

Schafer was also asked if he targeted conservative groups because of disagreement with the political views of tea party groups identified on the applications.

"No, I did not," said the self-described "conservative Republican."

Lawmakers have said they will continue to investigate the matter, looking for any connection that the Obama White House directed the increased scrutiny of conservative groups.

More From US News & World Report