WASHINGTON (AP) — Already reeling from a pair of scandals, the Internal Revenue Service is drawing new criticism over plans to hand out millions of dollars in employee bonuses. The Obama administration has ordered agencies to cancel discretionary bonuses because of automatic spending cuts, but the IRS says it's merely following legal obligations under a union contract. The agency is about to pay $70 million in employee bonuses, said Sen. Chuck Grassley of Iowa, a senior Republican on the Senate Finance Committee, which has jurisdiction over the IRS. Grassley says his office has learned that the IRS was to execute an agreement with the employees' union Wednesday to pay the bonuses. Grassley says the bonuses should be canceled under an April directive from the White House budget office. The directive was written by Danny Werfel, a former budget official who has since been appointed acting IRS commissioner. "The IRS always claims to be short on resources," Grassley said. "But it appears to have $70 million for union bonuses. And it appears to be making an extra effort to give the bonuses despite opportunities to renegotiate with the union and federal instruction to cease discretionary bonuses during sequestration." The IRS said it is negotiating with the union over the matter but did not dispute Grassley's claim that the bonuses are imminent. Under the union contract, employees can get individual performance bonuses of up to $3,500 a year. Office of Management and Budget "guidance directs that agencies should not pay discretionary monetary awards at this time, unless legally required," IRS spokeswoman Michelle Eldridge said in a statement. "IRS is under a legal obligation to comply with its collective bargaining agreement, which specifies the terms by which awards are paid to bargaining-unit employees." Eldridge, however, would not say whether the IRS believes it is contractually obligated to pay the bonuses. "In accordance with OMB guidance, the IRS is actively engaged with NTEU on these matters in recognition of our current budgetary constraints," Eldridge said. The National Treasury Employees Union did not respond to requests for comment. In a message to members on an NTEU website, the union said it had invoked its "right to bargain over any suspension of bargaining unit performance awards programs." "NTEU fought hard for these awards programs," said the unsigned message. "They are an important part of compensation at the IRS and it is unfair to suspend these awards when employees have worked hard to earn them." The IRS has been under fire since last month, when IRS officials acknowledged that agents had improperly targeted conservative groups for additional scrutiny when they applied for tax-exempt status during the 2010 and 2012 elections. A few weeks later, the agency's inspector general issued a report documenting lavish employee conferences during the same time period. Three congressional committees and the Justice Department are investigating the targeting of conservative groups. And key Republicans in Congress are promising more scrutiny of the agency's budget, especially as it ramps up to play a major role in implementing the new health care law. Much of the agency's top leadership has been replaced since the scandals broke. President Barack Obama forced the acting commissioner to resign and replaced him with Werfel, who used to work in the White House budget office. In a letter to Werfel on Tuesday, Grassley said the IRS notified the employee union March 25 that it intended to reclaim about $75 million that had been set aside for discretionary employee bonuses. However, Grassley said, his office has learned that the IRS never followed up on the notice. Instead, Grassley said, the IRS negotiated a new agreement with the bargaining unit to pay about $70 million in employee bonuses. Grassley's office said the information came from a "person with knowledge of IRS budgetary procedures." "While the IRS may claim that these bonuses are legally required under the original bargaining unit agreement, that claim would allegedly be inaccurate," Grassley wrote. "In fact, the original agreement allows for the re-appropriation of such award funding in the event of budgetary shortfall." Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said paying the bonuses "looks like a payoff to union workers at a time when we're drowning in a sea of red ink. Given the government guidelines on sequestration, this is certainly an issue that demands further scrutiny." Werfel wrote the directive on discretionary employee bonuses while he was still working in the White House budget office. The directive was part of the Obama administration's efforts to impose across-the-board spending cuts enacted by Congress. The spending cuts, known as "sequestration," are resulting in at least five unpaid furlough days this year for the IRS' 90,000 employees. On these days, the agency is closed and taxpayers cannot access many of the agency's assistance programs. Werfel's April 4 memorandum "directs that discretionary monetary awards should not be issued while sequestration is in place, unless issuance of such awards is legally required. Discretionary monetary awards include annual performance awards, group awards, and special act cash awards, which comprise a sizeable majority of awards and incentives provided by the federal government to employees." "Until further notice, agencies should not issue such monetary awards from sequestered accounts unless agency counsel determines the awards are legally required. Legal requirements include compliance with provisions in collective bargaining agreements governing awards."

NEW YORK (AP) — Stocks are falling after the Federal Reserve gave a slightly more optimistic outlook for the U.S. economy, which investors took as a hint that the bank was nearer to a decision to reduce its economic stimulus program. The Dow Jones industrial average was down 70 points to 15,249 points at 2:30 p.m. Eastern Daylight Time, half an hour after the Fed released its policy statement and economic outlook. The Dow was down 16 points shortly before the announcement. The Standard & Poor's 500 index was down five points, 0.3 percent, to 1,645. The yield on the 10-year Treasury note rose to 2.27 percent from 2.21 percent as traders sold the bonds. The Fed has been buying $85 billion of bonds a month to support an economy that is still struggling to grow faster following the Great Recession. For weeks investors have been trying to figure out when the central bank will start to ease back on those purchases. The Fed has said it will keep up the purchases until the outlook for the job market improves substantially, but it's still not clear yet to many investors what benchmarks the Fed will use to determine when that happens. On Wednesday the Fed said it would continue with the bond purchases and keep interest rates at record lows. In a statement released after a two-day policy meeting, the Fed said the economy was growing moderately. "The Fed right now is really trying to walk a tightrope," George Rusnak, head of fixed income at Wells Fargo Private Bank, said shortly after the Fed's statement was released. "They're preparing the market for tapering but at the same time they are trying to comfort the markets that it won't be too dramatic or too quick." The Fed's policy of low interest rates coupled with bond-buying has been a major factor in driving stocks higher from their lows during the Great Recession. The S&P 500 has gained 15.7 percent this year and has advanced more than 140 percent since bottoming out in March 2009. The stock market started this week on a strong note. The Dow rose more than 100 points both Monday and Tuesday. While reports of increased home building and low inflation propelled some of the gains, some investors said the buying was driven by expectations that Bernanke would ease investor concerns that the Fed is poised to turn off its stimulus. In commodities trading, the price of crude oil fell 15 cents, or 0.2 percent, to $98.51 a barrel. The price of gold rose $7.10, or 0.5 percent, to $1,374 an ounce. The dollar edged lower against the euro and the Japanese yen. In other U.S. stock trading, the Nasdaq composite fell 10 points, or 0.2 percent, to 3,471. Among stocks making big moves: — Sprint Nextel fell 23 cents, or 3.1 percent, to $7.09 after satellite TV operator Dish Network said late Tuesday that it wouldn't submit a revised bid for the wireless carrier. — Adobe jumped $2.83, or 6.5 percent, to $46.19 after the software maker said that its Creative Cloud subscriptions continued to climb in its fiscal second quarter. — FedEx gained $2.49, or 2.5 percent, to $101.90 after the company posted earnings that beat the expectations of Wall Street analysts. — Men's Wearhouse fell 60 cents, or 1.6 percent, to $35.20 after the company dismissed its founder and executive chairman George Zimmer. The company also delayed its annual shareholders' meeting, which had been scheduled for Wednesday.