The announcement has come after weeks of allegations that the IRS may have unduly targeted conservative political groups for extra tax scrutiny. Attorney General Eric Holder gave the order for a criminal investigation to be launched by the FBI a mere four hours before an inspector general’s report over the IRS’ activity suggested the tax agency lacked oversight as it struggled to review hundreds of cases of advocacy groups claiming to be tax exempt. Most of the allegations date back to before the 2012 elections.

The report by the Treasury Inspector General for Tax Administration was extremely critical of the way the IRS seemed to single out conservative groups while claiming to be suffering with poor management and processing delays. The report claimed targeting of such groups “gives the appearance that the IRS is not impartial in conducting its mission,” and may lead to the public losing confidence in the agency. There was no mention of any form of political motivation on the part of the IRS.

President Obama has been critical of the IRS since allegations of undue screening, suggesting the tax agency had failed. “The IRS must apply the law in a fair and impartial way, and its employees must act with utmost integrity. This report shows that some of its employees failed that test.”

The FBI inquiry will be looking into the IRS activity before the 2012 presidential elections. Most of the allegations suggest that the tax agency was searching for key words like “Tea Party” and “patriot” within applications for tax exemption in order to single out organisations with a conservative bias.

The issue is particularly sensitive for the Obama administration as the IRS is playing an increasingly significant role in enforcing key parts of the president’s healthcare reform. Republican opponents have been quick to suggest that the scandal puts into question the IRS’ ability to enforce the many tax regulations associated with healthcare.

Republicans have suggested that Obama’s political adversaries were being targeted by the tax agency, as a number of conservative groups advocating small government and lower taxes were amongst the first to complain about the IRS. American corporations and well-known business leaders have been known to contribute large sums to such organisations particularly in the run-up to elections.

Despite the attorney general’s announcement of a criminal investigation, it is still unclear what charges, if any, might result from a probe.