The Treasury Department has admitted for the first time that confidential tax records of several political candidates and campaign donors were improperly scrutinized by government officials, but the Justice Department has declined to prosecute any of the cases. Its investigators also are probing two allegations that the Internal Revenue Service “targeted for audit candidates for public office,” the Treasury’s inspector general for tax administration, J. Russell George, has privately told Sen. Chuck Grassley. In a written response to a request by Mr. Grassley, the ranking Republican on the Judiciary Committee, Mr. George said a review turned up four cases since...