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Politics

IRS asked to investigate politically active groups

Last year, as the Karl Rove-backed group Crossroads GPS dumped more than $17 million into helping elect Republicans in congressional districts across the country, a duo of campaign finance reform advocates asked the IRS to investigate the special tax status claimed by Rove’s group.

As a self-styled “social welfare” group, Crossroads was able to accept unlimited anonymous donations and used the money to air advertisements supporting or opposing candidates. 

Today, those same reform advocates have gone back to the IRS with a new complaint aimed not just at Rove’s group, but at three others, including one group that was started last spring by former Obama aides. 

In a letter sent to the IRS on Wednesday, Democracy 21 and the Campaign Legal Center challenged the social welfare tax status claimed by Crossroads GPS, American Action Network, Priorities USA and Americans Elect. 

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“The idea that these organizations are social welfare groups is nonsense,” said Fred Wertheimer, president of Democracy 21. “The overriding purpose of these groups is to participate in and influence elections, which makes them ineligible for tax exempt status.”

Jim Landry, a spokesman for American Action Network – a group that spent $26 million on election advertising in 2010 -- called the IRS petition “a baseless complaint.”

“The American Action Network takes its legal responsibilities seriously and complies with all of them,” Landry said.

The social welfare designation is generally intended for local cultural preservation committees or community associations. IRS guidelines stipulate that a social welfare group “may engage in some political activities, so long as that is not its primary activity.”

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To meet this test, groups like Crossroads GPS  have been spending money year-round on advertising and other efforts to promote their views on issues, rather than candidates. 

Jonathan Collegio, a spokesman for Crossroad GPS, pointed to a handful of recent “social welfare initiatives” as proof that the group was fulfilling its social welfare mission.

And it’s not just Republicans who’ve made use of the social welfare status. Former White House aides Bill Burton and Sean Sweeney launched their own group, Priorities USA, last spring.

“While we agree that fundamental campaign finance reforms are needed, Karl Rove and the Koch brothers cannot live by one set of rules as our values and our candidates are overrun with their hundreds of millions of dollars,” Burton told the L.A. Times when the group launched in April.

Next to join the social welfare fray was Americans Elect, a group that aims to gain a spot on the presidential ballot in all 50 states.

As Matea Gold reported in July, “Its mission is to upend the traditional party primary process by selecting an alternate presidential ticket through an online, open nominating convention.”

Americans Elect is making steady progress in its bid to qualify for the primary ballot in California, where the secretary of State is now verifying a random sample of the nearly 1.6 million signatures the group submitted in July. Once the random check is completed, state officials will determine if the group collected enough valid signatures to be certified as a political party and thus secure a place on the June 5, 2012, primary ballot.

By Thursday evening, Americans Elect will have gained ballot access in Arizona, Alaska, Kansas, Florida, Michigan and Nevada, said spokeswoman Ileana Wachtel.

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In their letter to the IRS, Democracy 21 and Campaign Legal Center argued that Americans Elect “is not only devoted to intervening in the 2012 elections, it is actually qualifying itself as a political party for purposes of state ballot access laws.”

“A political party is not eligible to qualify as a [social welfare] organization,” the groups said.

Daniel B. Winslow, chief legal counsel at Americans Elect, disputed that argument.

“Consistent with the requirements for tax-exempt status under the law, Americans Elect does not and will not support or oppose any candidate or candidate committee – it simply provides the nominating process where the American people can participate directly,” Winslow said in a statement. “…As a social service organization dedicated to providing a civic space for the American people, we are confident that Americans Elect is in full compliance with all legal requirements.”

By petitioning the IRS to act, the reform-minded groups have attempted to engage a federal bureaucracy that has left heads scratching on this issue in the past.

Take the case of Emerge America, a national organization with nine state affiliates whose mission is to “increase the number of Democratic women in public office.”

The national group, headquartered in San Francisco, claims social welfare status, as do many of its state affiliates.  As the organization has expanded over the last decade, the group has voluntarily petitioned the IRS for tax status guidance each time it adds a new state group.

For years, the IRS approved Emerge America and its affiliates as social welfare groups. The agency reversed course this year, when it declared that affiliates in Nevada, Maine and Massachusetts would not qualify as social welfare groups because their “training program primarily benefits the interests of the party and its candidates.”

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Emerge America President Karen Middleton said there was no difference in the missions – or the petitions that were submitted to the IRS – of the various Emerge groups.

“I think the difference is the timing,” Middleton said in an interview last month. “Since the 2008 elections, how [social welfare groups] have been used in political work has changed, and now I think the IRS is shifting its standard of scrutiny.”

That standard, however, was only applied to Emerge affiliates whose petitions were still pending with the IRS this year.  The national organization and those state affiliates that had already received their IRS guidance continued to operate as social welfare groups.

It’s been nearly a year since Democracy 21 and Campaign Legal Center petitioned the IRS to investigate Crossroads GPS.

What action – if any – the tax agency might take remains anyone’s guess.

“We’re hopeful that behind closed doors, they’re taking seriously the letter that we filed last year,” said Paul Ryan, associate legal counsel at the Campaign Legal Center. “The IRS is an agency that moves slowly and with tight lips.”

Melanie Mason in the Washington bureau contributed to this report.


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