Obama picks new acting tax chief amid scandal

WASHINGTON (AP) - President Barack Obama picked a senior White House budget official to become the acting head of the federal tax authority on Thursday, the same day another top official announced plans to leave the troubled agency amid the growing controversy over agents targeting conservative groups.

After days of inaction, Mr Obama has tried to move swiftly in response to the growing uproar over reports of inappropriate targeting by the Internal Revenue Service.

The IRS crisis is just one of several scandals that are distracting Mr Obama from his second-term agenda and giving ammunition to Republicans ahead of campaigning for next year's midterm legislative elections.

Mr Obama dismissed the idea of a special prosecutor to investigate the federal tax agency, saying probes by Congress and the Justice Department should be able to figure out who was responsible for improperly targeting the groups when they applied for tax-exempt status.

Mr Obama named longtime civil servant Daniel Werfel as the acting IRS commissioner. He replaces Mr Steven Miller, who was forced to resign on Wednesday amid the scandal, though he is still scheduled to testify on Friday at a congressional hearing.

Also on Thursday, Joseph Grant, one of Mr Miller's top deputies, announced plans to retire on June 3, according to an internal IRS memo. Mr Grant is commissioner of the agency's tax exempt and government entities division, which includes the agents that targeted the groups for additional scrutiny. It was not immediately clear whether Mr Grant's retirement was related to the controversy.

Mr Werfel, 42, takes over an agency in crisis and under investigation.

The IRS apologised last week for improperly targeting conservative political groups for additional, sometimes burdensome scrutiny when they applied for tax-exempt status. The practice went on more than 18 months, diminishing the ability of these groups to raise money during election cycles in 2010 and 2012, said an inspector general's report released this week.

The report did not indicate that Washington initiated the targeting of conservative groups. But it did blame ineffective management in Washington for allowing it to happen.

Mr Werfel, who currently serves as controller of the Office of Management and Budget, agreed to head the IRS through the end of September, the White House said. Presumably, Mr Obama will nominate a new commissioner by then.

"Throughout his career working in both Democratic and Republican administrations, Danny has proven an effective leader who serves with professionalism, integrity and skill," Mr Obama said in a statement.

"The American people deserve to have the utmost confidence and trust in their government, and as we work to get to the bottom of what happened and restore confidence in the IRS, Danny has the experience and management ability necessary to lead the agency at this important time."

The inspector general's report said that if agents saw the conservative political labels "Tea Party" or "Patriots" in an application, they automatically set it aside for additional scrutiny that could hold up approval for an average of nearly two years. The agents did not flag similar progressive or liberal labels, though some liberal groups did receive additional scrutiny because their applications were singled out for other reasons, the report said.

Tea party groups generally advocate limited government. They emerged after Mr Obama took office and take their name from the 1773 protest in Boston by American colonists against taxation without representation in the British government.

At a White House news conference earlier, Mr Obama promised to work with Congress in its investigations, and he reiterated that he did not know that conservative groups were targeted until it became public last Friday.

"Between those investigations I think we're going to be able to figure out exactly what happened, who was involved, what went wrong, and we're going to be able to implement steps to fix it," Mr Obama said.

"I promise you this, that the minute I found out about it, then my main focus was making sure that we get the thing fixed," Mr Obama added.

"I'm outraged by this in part because look, I'm a public figure, if a future administration is starting to use the tax laws to favour one party over another or one political view over another, obviously, we're all vulnerable."

Three congressional committees are investigating, and the FBI is looking into potential civil rights violations at the IRS, Attorney General Eric Holder said.

Other potential crimes include making false statements to authorities and violating the law that prohibits federal employees from engaging in some partisan political activities, Mr Holder said.