A the request of the Senate Finance Committee, the Treasury Inspector General for Tax Administration (TIGTA) has issued an audit report on the Internal Revenue Service's (IRS) Political Activities Compliance Initiative (PACI) for the 2004 election season. PACI involves examinations of 501(c)(3) organizations for possible violation of the political campaign intervention prohibition. Six organizations had their tax-exempt status revoked for violating the prohibition on political activity during the 2004 election. The report found that the IRS overstated the number of cases with confirmed prohibited political activity. OMB Watch found a similar conclusion after the IRS issued its report on the 2006 election.

TIGTA reviewed 99 cases and found that 14 cases were incorrectly classified as a violation of the prohibition, and found that actually no intervention occurred. Most of the examinations involved local organizations with a single possible infraction, and approximately half involved churches. The cases also mostly originated from external sources, such as watchdog organizations. The investigations also included questionable activities that were both in the form of printed and electronic material, and verbal statements. Four and a-half years after the election, the IRS still has three examinations open.

The most notable parts of the report seem to call for more clarity from the IRS; "closing letters sent to tax exempt organizations did not always state whether the IRS determined the prohibition against political intervention had been violated, which can be confusing for tax exempt organizations." Furthermore, those organizations have to spend much needed resources on an extensive examination. The report recommended that closing letters clearly state whether a prohibited political activity violation did in fact occur.