That was 1972, when Roberto Clemente, Willie Stargell, Steve Blass, Al Oliver and Manny Sanguillen represented the defending World Series champions at the National League's 4-3, 10-inning win in Atlanta.

With the addition of reliever Mark Melancon as an injury replacement Sunday, the Steel City has a fab five once again. Seeking to end a record streak of 20 consecutive losing seasons, the Pirates are 56-37 at the All-Star break and contending for the NL Central lead.

"It's a great honor for our organization and shows how far we have come in the last few years," general manager Neal Huntington said.

Once viewed by the Yankees as Mariano Rivera's possible successor, Melancon was traded by New York, Houston and Boston in a span of 2 years. Now he joins third baseman Pedro Alvarez, center fielder Andrew McCutchen and closer Jason Grilli on the NL roster.

Pirates pitcher Jeff Locke, Washington Nationals right-hander Jordan Zimmermann and Braves first baseman Freddie Freeman, all on the original NL All-Star squad, are hurt and will miss Tuesday night's game at Citi Field.

"It's pretty cool to be considered among the upper echelon of major league baseball players," Melancon said. "It's really humbling. It's something you always hope will happen at some point in your career and I'm really excited about it."

He learned of his addition late Saturday afternoon.

"My first thought was, how I am going to get so many people to New York which is a pretty busy city, to say the least on such short notice?" Melancon said.

Pirates traveling secretary Greg Johnson helped with the arrangement to transport a dozen people in the Melancon traveling party.

NL manager Bruce Bochy also selected Sergio Romo, his San Francisco Giants closer, as a replacement pick along with Atlanta catcher Brian McCann. St. Louis closer Edward Mujica was chosen to fill in for teammate Adam Wainwright, who started Sunday night.

Under baseball's labor contract, pitchers who start on the Sunday before the All-Star game may opt not to participate.

Despite all the changes, Yasiel Puig was left out again. The rookie sensation from the Los Angeles Dodgers, beaten out by Freeman in fan balloting online for the NL's final spot, didn't start for the second straight day Sunday because of a sore left hip, though he singled as a pinch hitter in the fifth inning. He came out after four innings Friday and didn't play Saturday.

"If a guy is hurt, it doesn't make sense for him to go," Dodgers manager Don Mattingly said.

Baltimore pitcher Chris Tillman, Kansas City closer Greg Holland and Oakland closer Grant Balfour were chosen by AL manager Jim Leyland of Detroit to replace Tigers ace Justin Verlander, Seattle's Hisashi Iwakuma and Oakland's Bartolo Colon, who all started Sunday. Verlander was the AL starter and loser in last year's All-Star game at Kansas City.

"It's a great honor now that it happened," Balfour said. "It was up in the air and it's nice to know it is official. I can go and have fun and do my thing."

Holland joined outfielder Alex Gordon and catcher Salvador Perez to give Kansas City three All-Stars for the first time since George Brett, Mark Gubicza and Kurt Stillwell in 1988. Holland received the notification Sunday in Cleveland and traveled with Gordon and Perez to New York instead of returning to Kansas City with the rest of the team.

He wasn't sure he was properly packed for the All-Star festivities

"I've got a lot of golf shirts," Holland said. "I don't know if that will pass. We'll see what happens."

Mujica's addition gave the Cardinals six All-Stars, tying Detroit for most in the majors.

Romo joined Giants teammates Buster Posey, Madison Bumgarner and Marco Scutaro to give the struggling World Series champs four representatives.

"I've never really seen myself as an All-Star. I've never really said it's one of my goals to make an All-Star team, but now that it's happening, I'm very proud. I mean, I'm an All-Star. Cool," Romo said. "To be honest, I still feel like I weaseled my way into the big leagues."

NOTES: There are a record 39 first-time All-Stars following the additions of Melancon, Romo, Tillman, Holland, Balfour and Mujica, four more than the previous mark set two years ago in Arizona. ... Holland and Balfour both earned $50,000 bonuses, Romo and Tillman $25,000 each and Melancon $10,000.

___

AP Sports Writers Bernie Wilson in San Diego and Beth Harris in Los Angeles, and AP freelance writers Steve Herrick in Cleveland, John Perrotto in Pittsburgh and Rick Eymer in Oakland, Calif., contributed to this report.

The measure could help Prime Minister Viktor Orban's Fidesz party to cement its comfortable opinion poll lead in the run-up to a national election expected next April or May.

Zoltan Balog, minister for human resources, told a news conference that teachers' pay would rise again in September 2014 by an average 10 percent, with further rises each year to 2017.

Primary and secondary school teachers earn an average 160,000 forints ($700) a year, according to a recent survey, below the overall Hungarian average of 230,000 forints.

Economy Minister Mihaly Varga told state news agency MTI in an interview that the budget impact of the wage increases would amount to 40-45 billion forints this year and 170-180 billion in 2014.

However he added that the government would keep the budget deficit at 2.7 percent of economic output both this year and next partly with the help of tax rises announced last month.

"It's hard to interpret this in any other way than the government is preparing for 2014 elections and it seems that it increases spending," said Orsolya Nyeste, an analyst at Erste Bank.

Last month the European Union took Hungary off the list of member states which must take measures to cut their budgets deficits, removing the threat of cuts in development funds from Brussels.

This year the government targets a deficit of 2.7 percent of gross domestic product, below the 3 percent EU ceiling, and Nyeste said the teachers' wage hike should not threaten this target because the government has passed new revenue-boosting measures.

Nyeste added that she did not expect any significant widening in the budget deficit in the medium term as the government looked committed to keeping it under control.

Political analysts say government-imposed cuts in household energy prices have helped the conservative populist Orban to keep ratings for Fidesz well ahead of rivals in opinion polls and the wage rises could support its popularity further.

Orban has used his two-thirds majority to enact hundreds of laws since winning power in 2010 and has clashed with Brussels over allegations he has weakened democratic checks and balances.

Hungary's leftist opposition remains divided, while close to half of voters are still undecided based on opinion surveys.

($1 = 228.96 Hungarian forints)

(Reporting by Krisztina Than; Additional Reporting by Marton Dunai; Editing by Ruth Pitchford, Ron Askew)

Canada's rebuilding men's senior team saw its hopes of qualifying for the Gold Cup playoff round fade in a 2-0 loss to Mexico.

"I actually thought we played very well in spells," said Miller. "I thought we showed maturity in possession. We're still not the finished article in the final third. That's for sure."

Miller praised his youth-laden squad for holding Mexico to goals off a corner kick and a penalty kick, and rebounding from a disappointing opening loss to tiny Martinique on a last-minute goal.

"To pick the group up and get them ready for the powerhouse that Mexico are speaks volumes for the character, and a well done everyone within our association for helping along," said Miller.

But Canada fell to 0-2 and, with only one round-robin game remaining, will be hard-pressed to advance. Mexico evened its record at 1-1 before a pro-Mexican crowd of 28,354 at CenturyLink Field. The Mexicans have won the last two Gold Cups.

Canadian goalkeeper Milan Borjan, who faced seven shots while Canada was credited with three, also praised his club, but was more blunt in his critique.

"They didn't have a lot of chances," said Borjan. "The last game, (Martinique) had a lot more chances than Mexico today. We played really good, we shaped good, awesome defending. But again, we didn't score a goal, and that's what's killing us the whole tournament.

"We came out with our heads up high, and today we showed that we can play with any team. But we just needed somebody to score."

Raul Jimenez, in the first half, and Marco Fabian, in the second, scored for Mexico.

The Mexicans atoned for an upset loss to Panama in their first game.

Despite Seattle's proximity to Canada, the Canadians were clearly the visiting side. Mexico's supporters vastly outnumbered Canadians in the crowd. Every section of the stadium was flush with fans in green jerseys, with many sporting Mexican flags.

Most of Canada's fans occupied a small corner of the stadium.

Despite the joyous atmosphere, both teams entered the game in difficult circumstances. With new coach Benito Floro waiting take the helm after this tournament, Canada is attempting to rebuild its struggling squad in wake of a humiliating 8-1 loss to Honduras in World Cup qualifying last year.

Meanwhile, Mexican coach Jose Manuel (Chepo) de la Torre has come under fire because of his team's opening loss to Panama and a 1-0-5 record in World Cup qualifying. Reports have speculated that he will be fired unless Mexico wins its third consecutive Gold Cup.

Both Canada's and Mexico's tasks became more difficult when Panama beat Martinique earlier Thursday. The win gave Panama a perfect 2-0 mark and assured it will advance to the knock-out stage regardless of how it fares against Mexico in the final round-robin game for both teams on Sunday in Denver.

Miller stuck with Borjan after he gave up a last-minute goal in the loss to Martinique. But Miller was forced to shuffle other parts of his lineup after midfielder Russell Teibert missed the game due to an illness picked up earlier this week and captain Will Johnson (illness) and striker Simeon Jackson (club commitment) left the club along with reserve striker Randy Edwini-Bonsu (injury.)

"We obviously missed those players, the quality, but I thought the players who filled in tonight stood up and were counted," said Miller.

Canada spent much of the first half hoping for a quick counter attack while often folding five or six players back to defend. However, the Mexicans still found space, recording five shots on goal and earning seven corner-kicks.

Canada mustered just two shots while forcing three corner-kicks in the first 45 minutes.

Borjan was tested early as he two-fisted away a free kick from Fabian from just outside the corner of the Canadian box. A little while later, Canada had a chance but Marcus Haber's close-range shot from a sharp angle was stopped.

Haber had another scoring chance in the 29th minute as Mexican goalkeeper Jonathan Orozco dove to stop his header off a Kyle Bekker free kick.

Jimenez gave Mexico a 1-0 lead on a header in the 42nd minute as Jorge Enriquez flicked a corner kick onto him. The corner kick came after Borjan robbed Marquez from about 10 yards out after an errant bounce off a Canadian defender.

It was Jimenez's first career goal at the senior international level. He is new to the national squad this year.

Canada started the second half with a new striker as Tosaint Ricketts replaced Haber, but the change had little impact. Miller said Haber suffered a heel injury that needs to be assessed further.

Fabian was awarded his penalty-kick in the 57th minute as Canadian defender David Edgar was whistled for tripping him slightly in the box. Goalkeeper Borjan guessed the wrong way as Fabian rolled in a shot to the opposite corner of the net.

The infraction came a day after Edgar spoke of the importance of staying disciplined at the back. Later, Edgar was lucky only to get a yellow card after he delivered a kick from behind to Jimenez's mid-section after the ball had left the vicinity.

Now, Canada faces a must-win situation Sunday against Panama in Denver. But a victory will still not assure the Canadians a playoff berth. The top two teams in each of three pools advance along with the two third-place clubs, regardless of pool, that have the best records.

"We're going to go for a win and then see what happens," said Borjan. "Nothing's over yet."

Notes: After the game, Miller said Teibert returned from hospital Thursday morning following tests and will likely rejoin his Vancouver Whitecaps MLS side while getting further assessment instead of going to Denver. Miller is holding out hope that Johnson can fly into Denver for the game. ... Mexico lost Jorge Enriquez to an apparent hamstring injury early in the second half. ... Canada's Keven Aleman, 19, earned his first senior international cap as he subbed on for Kyle Bekker in the second half. Aleman also had the option of playing for Costa Rica, where he was born, but chose to suit up for Canada instead. ... Unlike most FIFA-sanctioned matches, the game was played on artificial turf. The current turf has received a 2 Star certification from FIFA, which is the highest level recommended by soccer's international governing body.

By Angela Moon

NEW YORK (Reuters) - U.S. stocks advanced on Friday, supported by banks' strong earnings, but Boeing limited the Dow's gain after an airplane fire in London.

Both the Dow Jones industrial average and the S&P 500 index ended Friday's session at record closing highs, even though the point and percentage gains for the day were slim. The Nasdaq closed at a 52-week high.

The S&P 500 scored its best weekly performance since January and a third consecutive week of gains.

Financial stocks were the day's biggest gainers, with the S&P 500 financial sector index up 0.8 percent.

"The momentum has been incredibly strong ... At some point, a breather or some sort of consolidation makes sense," said Joe Bell, senior equity strategist at Schaeffer's Investment Research in Cincinnati.

Over the past three weeks, the benchmark S&P 500 has erased the losses of nearly 6 percent from the selloff triggered by Federal Reserve Chairman Ben Bernanke in late May, when he first raised the prospect of trimming the central bank's $85 billion in monthly bond purchases. Since then, the market has been getting reassurance from Bernanke and other Fed officials that the U.S. central bank will keep monetary policy loose for some time.

"For now, it seems like some of the comments made this past week have settled the market back into place," Bell said. "Hopefully we'll be back to paying more attention to the earnings reports," which will probably take the spotlight in the next few weeks, he added.

Shares of Wells Fargo & Co (NYS: - ), the biggest U.S. mortgage lender, jumped 1.8 percent to $42.63 after the company posted quarterly results that topped expectations. Citigroup (C.N) rose 1.5 percent to $50.81. Bank of America (BAC.N) climbed 2 percent to $13.78 and ranked among the most actively traded stocks in both the Dow and the S&P 500.

JPMorgan Chase & Co (NYS: - ), the largest U.S. bank by assets, reported a 31 percent jump in quarterly profits. The stock, however, slipped 0.3 percent to close at $54.97, giving up an earlier gain of more than 1 percent. The stock had traded higher for most of the day.

The Dow Jones industrial average edged up 3.38 points, or 0.02 percent, to end at 15,464.30, a record closing high. The Standard & Poor's 500 Index rose 5.17 points, or 0.31 percent, to finish at 1,680.19, also a closing high. The Nasdaq Composite Index gained 21.78 points, or 0.61 percent, to close at 3,600.08, a 52-week high.

For the week, the Dow rose 2.2 percent, while the S&P 500 gained 3 percent and the Nasdaq climbed 3.5 percent.

In Friday's session, Boeing (NYS: - ) was the Dow's biggest decliner. Boeing (NYS: - ) shares fell 4.7 percent to $101.87 after a Dreamliner operated by Ethiopian Airlines caught fire at Britain's Heathrow airport on Friday.

Shares of Dreamliner component manufacturers also slipped, including Honeywell International (NYS: - ), off 0.2 percent at $82.37, and Spirit Aerosystems (SPR.N), down 2.3 percent a $22.61.

United Parcel Service (NYS: - ) was among the biggest losers in the S&P 500, sliding 5.8 percent to $86.12, after the world's No.1 package delivery company said second-quarter profit would fall short of expectations. Shares of rival FedEx Corp (NYS: - ) fell 2 percent to $102.29.

UPS weighed on the S&P industrial sector index, which fell 0.6 percent.

Analysts expect S&P 500 companies' second-quarter earnings to have grown 2.8 percent from a year earlier, with revenue up 1.5 percent, data from Thomson Reuters showed.

U.S.-listed shares of Infosys (INFY.N) jumped 4.8 percent to $46.17 after the company reported quarterly results and maintained its revenue growth forecast.

On the economic front, the Thomson Reuters/University of Michigan's preliminary reading for July on the consumer sentiment index was 83.9, down from 84.1 in June and shy of forecasts for 85.

About 5.4 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the 6.4 billion daily average so far this year.

On the NYSE, advancers narrowly beat decliners with 1,488 stocks rising and 1,478 shares falling. On the Nasdaq, nearly 14 stocks rose for every 11 that fell.

(Editing by Jan Paschal)

The U.S. Embassy described the inquest into Shane Truman Todd's death as fair and comprehensive, weeks after Todd's parents walked out of the hearings, saying they had lost faith in the process. Singapore's foreign minister said the ruling was based on "incontrovertible evidence."

The 31-year-old engineer's body was found by his girlfriend in June 2012. State counsel presented evidence of links to suicide websites on his laptop and suicide letters written to family members and loved ones.

Judge Chay Yuen Fatt said Monday he found no evidence of foul play, ruling that Todd "committed suicide by hanging himself."

Chay recorded the official cause of death as "asphyxia due to hanging" and voiced hopes that Todd's family and loved ones would be able to find closure.

Todd's parents have said they believe he may have been murdered over his research in the U.S. into material used to make heat-resistant semiconductors, a technology with both civilian and military applications.

Rick and Mary Todd left Singapore in May before the inquest ended. They said they believed the evidence of suicide was faked and that officials had not followed protocol in the investigation, including in how they accessed Todd's computers and examined the location of his death. Singaporean authorities have denied the claims.

Mary Todd told The Associated Press by telephone from her home state of Montana that "today's result means nothing to us because we expected it." Her husband said last week the family no longer trusts Singapore's legal system.

"It was apparent that the state was only interested in proving suicide and that was why we left," Rick Todd wrote in an email.

The U.S. Embassy in Singapore said in a statement that the inquiry had been "comprehensive, fair and transparent."

It said embassy officers had attended the entire hearing, and that the Todd family had been given the opportunity to participate in the hearing and was represented by experienced legal counsel. It expressed sympathy to Todd's family and friends for their loss.

K. Shanmugam, Singapore's minister for law and foreign affairs, said the city-state had cooperated with U.S. authorities, including the FBI, and acted according to the law "to get to the truth."

"The verdict is clear: Dr. Todd committed suicide and that conclusion was based on clear, incontrovertible evidence," Shanmugam told reporters. "Many of us are parents and can understand the family's grief. At the same time, we need the strength to face the truth and not make fictional and untrue statements."

Todd's parents said documents he had backed up from his work computer included a draft of a project outline between Singapore's Institute of Microelectronics Shane Todd's former employer and Chinese telecom giant Huawei on the development of a device that utilized gallium nitride.

The heat-resistant material has civilian uses in products like LED screens and cellphone towers, and military applications possibly for radar and satellite systems.

Huawei and Singapore officials have said they did not proceed beyond initial discussions into a possible project involving gallium nitride. The Institute of Microelectronics has said neither Todd nor the company was involved in any classified research.

WASHINGTON (AP) -- If businesses get an extra year to meet a new health care mandate, why not everybody else?

Republicans, seizing on the White House delay for employers, are demanding that the Obama administration give individual Americans an equal break. But the White House says that's just a thinly disguised gambit for dismantling the entire health care overhaul.

What to believe?

"If businesses can get relief from Obamacare, the rest of America ought to be able to get relief as well," declares House Speaker John Boehner of Ohio.

"A delay in the individual mandate is repeal by another name," responds White House communications director Jennifer Palmieri. She described it as a political attempt to sabotage health care for the uninsured.

The battle of the mandates is the latest clash in the long-running political fight over health care a fight that's far from over.

Under President Barack Obama's big overhaul, most people will be required to have insurance starting next Jan. 1, and larger businesses were supposed to offer affordable health care to their employees who average 30 hours of work a week.

Here are some questions and answers in the aftermath of the administration's sudden delay of the employer mandate:

Q: So what are the law's mandates?

A: One is for individuals and another for employers. The individual requirement takes effect in 2014; the employer mandate has been delayed until 2015.

Under the health care law, virtually all Americans must carry medical insurance, either through an employer or a government program, or by buying their own policies. Most people are unaffected because they already have coverage.

Q: If you don't have it, how do you get it?

Middle-class individuals and families with no access to job-based health insurance will be able to buy subsidized private coverage through new markets that open Oct. 1. Low-income people will be steered to an expanded version of Medicaid in states that accept it.

Those who remain uninsured will face fines that start small as little as $95 in 2014 but build up over time. There are exceptions for financial hardship and other circumstances.

Q: And what about businesses?

A: The employer mandate applies to companies with 50 or more workers. They could face fines for not providing coverage, and also if their plan is deemed unaffordable under the law.

According to the Kaiser Family Foundation, 95 percent of employers with 50 or more workers already offer health benefits. Nonetheless, it's a big issue for small businesses that are growing, and for companies that employ lots of low-wage workers not currently offered health insurance.

Q: If the administration delays one mandate, why not the other?

A: Actually, the two mandates are in the law for different reasons and purposes. Delaying the individual requirement, which has survived a Supreme Court challenge, would have a much bigger impact.

It serves as a stiff nudge to get as many Americans as possible into the insurance pool. The premiums of healthy people are needed to offset the cost of covering people in poor health who currently can be excluded by insurers.

"It's what's going to keep the insurance markets from collapsing once we open the door to people with pre-existing conditions," said Timothy Jost, a law professor at Washington and Lee University in Virginia who supports the health overhaul. Starting Jan. 1, insurers are barred from turning away people in poor health.

The employer mandate was designed as a guard rail, to deter employers from dropping coverage and shifting workers to taxpayer-subsidized programs. It's expected to play only a supporting role in the expansion of coverage to millions of uninsured people.

Q: What's the impact of delaying the employer requirement?

A: The administration says it will give more time to work out the rules in a way that's fair to businesses. Reporting requirements that would allow the Internal Revenue Service to enforce the mandate turned out to be extremely complicated. Among the problems is that businesses have to keep track of employees' hours in a different way. Business groups were relieved to have another year.

However, the delay could also raise government costs and leave some workers uninsured.

Taxpayers would wind up paying more because some workers will get coverage through the new insurance marketplaces instead of through employers, and they'll be entitled to new tax credits to help with premiums.

Q: Why are Republicans objecting to a delay in a law they've been trying to repeal?

A: Democrats say the answer is clear: politics.

White House spokesman Jay Carney calls it "a nihilistic effort" to undermine the law, accusing Republicans of trying to take away benefits from millions of Americans "in the name of partisan political victory."

Republicans say they are calling attention to problems with the law that run counter to the administration's reassuring message that everything is on track.

"Clearly the rollout of Obamacare is in disarray," said Rep. Kevin Brady, R-Texas, chairman of the Ways and Means health subcommittee. The delay raises questions of whether the White House "is competent enough to administer its own massive health care law."

Q: How does Obama have the legal authority to delay a law just because rules aren't ready in time?

A: The Treasury Department which oversees the IRS says it is acting under long-settled authority to write the rules for carrying out laws passed by Congress. Additionally, a spokeswoman said the department has authority to grant "transitional relief" when major legislation is being introduced.

That may be so, critics say, but the delay is clearly not in keeping with the letter of the health care law.

"It is quite obvious, on its face, that this is not what Congress intended," said James Capretta, a health care expert with the conservative Ethics and Public Policy Center.

___

Associated Press Writers Donna Cassata and Josh Lederman contributed to this report.

RELATED:

So now it can boast higher earnings than even Manhattan, home of Wall Street, which is in second place on the Bureau of Labor and Statistics rankings, at weekly wages of $2,107 for the quarter — over $1,000 less than the Facebook billionaires. 

RELATED:

RELATED:

Another huge jump in weekly wage earning — though not nearly as impressive at 107.3 percent — happened in Douglas county in Colorado, a suburb outside of Denver. Though no big tech company IPOs happened at the end of last quarter, the area does have somein growth industries like healthcare and telecommunications.

RELATED:

Now that San Mateo Co. has so many super-duper rich people, what will happen to the local economy? "It will be interesting to see if that wealth bump is reflected in giving back to the community," wondered Henton. That's a nice thought, but not one that's likely to result in anything. The gap between the rich and the poor in the South Bay , with food stamp participation at a 10 year high . If anything, the influx of money will only make things worse, with the cost of living soaring to reflect the new riches, pushing middle class people up. But hey, , with Zuckerberg leading the pack, will decide to do something about it now? 

The National Association of Realtors said Thursday that sales rose 5.9 percent to a seasonally adjusted annual rate of 5.04 million in November. That's up from 4.76 million in October.

Previously occupied home sales are on track for their best year in five years. November's sales were the highest since November 2009, when a federal tax credit that was soon to expire spurred sales. Excluding that month, last month's sales were the highest since July 2007.

Sales are up 14.5 percent from a year ago, though they remain below the roughly 5.5 million that are consistent with a healthy market.

Job growth and low home-loan rates have helped drive purchases. Prices are also rising, which encourages more potential buyers to come off the sidelines and purchase homes. And more people may put their homes on the market if they feel confident they can sell at a good price.

In addition, the excess supply of homes that built up during the housing bubble has finally thinned out. The number of previously occupied homes available for sale fell to a 10-year low in October. The supply of new homes is also near its lowest level since 1963.

At the same time, more people are looking to buy or rent a home after living with relatives or friends during and immediately after the Great Recession.

These trends have supported a steady recovery in housing. Builder confidence rose in December for a seventh straight month to the highest level in more than 6 years, according to a survey released Tuesday by the National Association of Home Builders/Wells Fargo.

The pace of home construction slipped in November, but it was still nearly 22 percent higher than a year earlier. Builders are on track this year to start work on the most homes in four years.

Economists note that the increase in building should lead to more construction jobs, though it hasn't yet done so. That could mean more construction hiring is coming.

WASHINGTON (Reuters) - A watchdog inside the Internal Revenue Service, responding to charges of agency bias against Tea Party and other conservative groups, called on Wednesday for "apology payments" of up to $1,000 for those the agency subjects to excessive delays.

In its semi-annual report to Congress, the National Taxpayer Advocate said it largely agreed with recommendations for reform last month by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA's report set off controversy after it found the IRS gave undue partisan scrutiny to Tea Party and other conservative groups, even holding up some applications for years without action. It recommended more concise guidelines for IRS agents when reviewing tax-exempt applications.

That report threw the IRS into a crisis, prompting the exit of top IRS officials and FBI and congressional investigations. New developments in the six-week long saga have slowed, and prospects for quick fixes in Congress seem unlikely.

In her report on Wednesday, Taxpayer Advocate Nina Olson said IRS problems go deeper.

"The real crisis facing the IRS - and therefore taxpayers - is a radically transformed mission coupled with inadequate funding to accomplish that mission," Olson said.

Olson recommended that Congress authorize the IRS to make "apology payments" to applicants for tax exempt status stuck in IRS bureaucracy due to miscommunication and management failures.

She called for payment of up to $1,000 to taxpayers where the agency "has caused excessive expense or undue burden," or a "significant hardship."

Many Republicans want to cut funding for the agency, which they say has become too powerful in recent years.

A major source of controversy in the tax-exempt fracas has been the use of a "be on the lookout list" using terms like "Tea Party" to flag applicants for extra scrutiny.

Internal IRS documents released this week showed liberal groups, using the search terms "progressive" and "blue," may also have faced excessive scrutiny and delays.

Olson said that of the 915,000 taxpayer cases her office handled during the time studied by the inspector general, only 19 cases appeared to have faced the selection criteria.

She said of these, the IRS granted exemption status to 11, and said it found that none of the six cases handled by the Cincinnati office, at the center of the controversy, appear to involve a pattern of inappropriate selection criteria.

At the heart of the tax-exempt controversy were groups applying for tax-exempt status under 501(c)(4) of the tax code. These entities can engage in a limited amount of partisan activity, as long as that is not their primary purpose.

Fuzzy IRS rules in this area led to confusion among IRS agents in applying the law, Olson said in her report.

Under current law, applicants seeking (c)(4) status cannot use the courts to demand an answer on their applications, like charities organized under 501 (c)(3) can.

Olson recommended giving the groups this legal redress.

(Reporting By Kim Dixon; Editing by Nick Zieminski)

SEOUL (Reuters) - Samsung Electronics Co Ltd missed already modest expectations for its quarterly earnings guidance on Friday, deepening worries that its smartphone business may have peaked, as growth in sales of its blockbuster Galaxy phones begins to wane and new rivals emerge to eat away at its market share.

The Galaxy S, powered by Google's free Android platform, propelled the South Korean firm into the top rank of smartphone makers in 2012, overtaking Apple Inc whose iPhone had set an industry standard five years earlier.

Now investors fear Samsung may also follow in the footsteps of Apple and other once-mighty players that are struggling with shrinking margins, in an industry where companies live and die by their ability to stay ahead of the innovation curve.

"Is Samsung's smartphone story now over? Not quite yet. It's growth is indeed slowing due largely to disappointing sales of the S4," said Jung Sang-jin, a fund manager at Dongbu Asset Management, which owns Samsung shares.

"Yet I think Samsung has some exciting stuff up its sleeves. The problem is no one is sure whether these products can really wow investors and consumers."

The disappointing earnings estimate by Samsung, which has had a track record of beating even the most bullish forecasts, sent its shares down more than 3 percent on Friday.

They have dropped 17 percent since early June, hit by a series of brokerage downgrades. The share price reflects concerns about Samsung's handset margins, with its mobile business generating 70 percent of the tech giant's total profit.

The fall in the share price equates to a drop in market value of 39 trillion won ($34.2 billion), or worth the combined market capitalisation of Sony Corp and LG Electronics Inc.

"One of the biggest risks for Samsung Electronics going forward is that 70 percent of total operating profit comes from mobile business. Diversification is key. Samsung needs to engage in active business transition until end-2014," said Jeff Kim, an analyst at Hyundai Securities.

ALL TIME HIGH AGAIN IN H2?

To be sure, Samsung's 9.5 trillion won ($8.3 billion) operating profit forecast, up 47 percent from a year ago, is a record and it is expected to report higher earnings in the current and fourth quarters as sales of its latest Galaxy S4 phone pick up and new products hit the stores. Prices of memory chips, another industry which Samsung holds the lead, are also expected to remain strong.

"Samsung's got diversified businesses. When one business lags, it's got others outperforming and propping up the overall profit," Jung at Dongbu said.

"The component business is widely expected to pick up the slack in the second half when smartphones slow, but now worries are also mounting that the component business' recovery could be short-lived."

The guidance, released ahead of full quarterly results due on July 26, was worse than an average forecast of 10.16 trillion won in a poll of 43 analysts by Thomson Reuters I/B/E/S.

"I think Samsung spent more on marketing expenses than expected because of the launch of Galaxy S4 smartphone, which led the company's results to miss the market consensus," HMC Investment Securities analyst Nho Geun-Chang said.

Samsung spent more on marketing than R&D in 2012 for the first time in at least three years, and the S4 was launched in March with a Broadway-style show in New York.

The company also invested heavily in distribution channels including opening brand shops in 1,400 Best Buy stores in the United States.

But the glitz and glamour has failed to arrest a slide in handset sales growth, and shipments are seen rising only 4 percent to 8 percent in the second quarter from the previous quarter.

Handset margins are also being squeezed, as consumers in countries like China - the world's biggest smartphone market - opt for stripped-down cheaper devices.

NEXT BIG THING

Competition is getting intense with Chinese manufacturers such as Huawei Technologies Co Ltd and ZTE Corp making ground in the popular mid- to low-end market.

Nokia Oyj, once the handset king, unveiled two back-to-basics 3G phones this week. They allow access to popular applications such as Facebook and Twitter, and sell for just $68.

"There's still a big uncertainty about how Samsung will respond to the low-end market," said Brian Park, an analyst at Tong Yang Securities, referring to its plans to launch a device based on the open-source Tizen operating system.

Wearable gadgets will also be crucial to the company's hopes of riding a new wave of extraordinary profit growth.

Apple has applied for a trademark for "iWatch" in Japan, signaling the iPhone-maker may be moving ahead with plans for a watch-like device as the industry turn its attention to wearable computers.

Samsung has also filed a trademark for "Samsung Gear" in the Untied States for its range of wearable devices.

"The (expected launch of) wearable devices won't be able to replace Samsung's smartphone business, but it's more likely to complement its earnings at best," said Byun Han-joon, an analyst at KB Investment & Securities. ($1 = 1139.2000 Korean won)

(Additional reporting by Joyce Lee and Hyunjoo Jin; Editing by Stephen Coates)