IRS' Tea Party controversy added to Senate probe

• IRS controversy may hinder efforts to change how groups are treated
• Some non-profit groups spent hundreds of millions of dollars to sway 20102 election
• Sens. Levin and McCain said their panel will expand its inquiry

WASHINGTON — A Senate panel investigating the role of non-profit groups in politics will expand its probe to include the Internal Revenue Service's targeting of conservative groups, the committee's top Democrat and Republican announced Monday.

For several months, the Senate Permanent Subcommittee on Investigations has been quietly examining whether the IRS sufficiently regulated tax-exempt groups that are playing a bigger role in politics and had tentatively scheduled a hearing in June on the topic.

"After Friday's announcement that the IRS, to the extent that it has been enforcing the law, may have done so in a way that singled out some groups for special scrutiny, we have determined that the subcommittee should investigate that additional issue," the panel's chairman, Sen. Carl Levin, D-Mich., and top Republican, Arizona Sen. John McCain, said in a joint statement.

The committee will delay the hearing to further examine the new IRS controversy, which erupted Friday when an IRS official admitted the group subjected Tea Party-related groups' applications for tax-exempt status to additional scrutiny.

The practice has been denounced by President Obama and top Republicans in Congress. The first public hearing will come Friday in the House Ways and Means Committee. The Senate Finance Committee, chaired by Sen. Max Baucus, D-Mont., also will investigate but has not announced a date.

The announcement by Levin and McCain signals that they intend to keep examining the tax-exempt organizations that can conduct political activity without disclosing their contributors. All tax-exempt groups — including social-welfare organizations, labor unions and trade groups — spent more than $300 million in last-minute spending to influence federal contests in 2012, according to a tally by the non-partisan Center for Responsive Politics. None disclosed donors.

Campaign-finance watchdogs expressed outrage Monday that the IRS targeted Tea Party groups and other organizations critical of the government and appear to have done little to rein in the big spending by other tax-exempt groups.

"It's fair to say that we are missing the forest for the trees," said Lisa Rosenberg of the Sunlight Foundation, a watchdog group. "The IRS is focused on these small groups, and the big money is still undisclosed.

"I hope that the IRS issue, which is serious, doesn't derail efforts to really investigate the problems with dark money," she said.