(Adds further from testimony, audit probe details)
By Kim Dixon
WASHINGTON, July 16 (Reuters) - A top Democrat investigating U.S. Internal Revenue Service scrutiny of conservative groups on Tuesday said interviews with 15 agency employees had found no hint of White House involvement, challenging Republicans on a lingering controversy.
Moving to reframe an affair that first rocked the tax-collecting agency in May, the top Democrat on the U.S. House of Representatives Oversight and Government Reform Committee issued a 36-page memo that quoted IRS officials interviewed by panel investigators and internal IRS documents. As of late Tuesday, 16 employees have been interviewed and more are expected.
"None of these (15) witnesses reported any political motivation or White House involvement," Democratic Representative Elijah Cummings said in releasing the memo.
More than two months ago, an IRS official publicly apologized for the IRS giving extra scrutiny to conservative political groups seeking tax-exempt status, including using key words like "Tea Party" and "Patriot" to flag applications.
One IRS official quoted in Cummings' memo is described as a Republican IRS tax law specialist working in Washington.
Asked by congressional investigators if there was any evidence of political targeting by President Barack Obama, the official said, "That's kind of laughable that people think that ... unfortunately, Cincinnati didn't have enough guidance."
Processing of applications for tax-exempt status from non-profit groups is centralized in an IRS office in Cincinnati.
Of the 15 IRS employees interviewed as of Monday, six described themselves as Republicans, or said they had voted for a Republican, three identified themselves as Democrats and six said they had no party affiliation.
Another self-described Republican manager interviewed by the committee said: "I have no idea what the White House is doing."
Most Republicans, including oversight panel Chairman Darrell Issa, early on in the controversy said the targeting of conservative groups showed political bias within the IRS under the Obama administration.
A spokesman for Issa was not available for comment.
Partisan sparks are likely to fly on Thursday when two mid-level IRS workers and the Treasury inspector general for tax administration are scheduled to testify before the committee.
An inspector general report on the matter came days after the IRS official apologized, triggering the controversy.
Last week, Cummings released documents suggesting that liberal key words such as "Progressive" and "Occupy" were also used by IRS staff to sift through applications for added review, in addition to conservative key words.
Cummings and other Democrats have blasted TIGTA chief Russell George for not addressing the treatment of liberal-leaning groups in its report.
TIGTA has said it stands by its findings and testimony.
The affair led Obama to oust the IRS chief from his job and several others were removed from their posts at the agency.
Cummings on Friday released a May 3, 2013, email between George and his deputy for investigations. In those documents, the deputy concluded after a search of 5,500 IRS emails that there was no sign of political motives in Tea Party searches.
The search was omitted from the TIGTA report.
Groups seeking tax exemption may engage in limited amounts of political activity, but some types of exemption limit that activity more than others. That and the vagueness of the rules often make it difficult for IRS agents to tell which groups overstep and become ineligible for tax exemption.
"There isn't an obvious answer of how to treat these groups, so you have a hot potato," said Gene Steuerle, a top tax Treasury official for Republican President George H.W. Bush.
NO EVIDENCE OF IRS TARGETING POLITICAL CANDIDATES
Republicans have contended the controversy shows the IRS is an out-of-control agency with a track record of harassing taxpayers, including by auditing candidates and donors.
Senator Charles Grassley on Tuesday released a letter from TIGTA finding no evidence that IRS officials inappropriately targeted candidates for public office, in a search of cases since 2006.
In response to request from Grassley, the inspector general letter did identify eight allegations where IRS officials had unauthorized access to or disclosed tax records for political candidates or donors.
In four of the cases, the allegations were not backed up by evidence, the inspector general said in its letter dated July 3.
One case of wilful unauthorized access was referred to the Justice Department for investigation, but it declined to prosecute.
The Justice Department said it is reviewing Grassley's request for the rationale for not prosecuting. (Editing by Kevin Drawbaugh and Cynthia Osterman)