Watchdog Groups Call on IRS to Ignore Partisan Pressure From Republican Senators and Proceed to Consider New Eligibility Rules for 501(c)(4) Organizations
In a letter sent today to the IRS, Democracy 21, joined by the Campaign Legal Center, called on the agency to ignore the partisan pressures they have received from Republican Senators and proceed to consider new eligibility regulations for section 501(c)(4) “social welfare” organizations.
The letter to the IRS stated:
According to news reports, Senator Orrin Hatch (R-UT) and other Republican Senators have sent a letter to the IRS urging the agency to delay undertaking any effort to revise IRS regulations that govern the extent to which a group eligible for tax-exempt status as a section 501(c)(4) “social welfare” organization can engage in candidate campaign activity.
According to Democracy 21 President Fred Wertheimer:
It appears obvious that Senator Orrin Hatch and his Senate Republican colleagues are attempting to intimidate the IRS into backing away from dealing with the corrupting problem of secret money being laundered into federal elections through section 501(c)(4) tax-exempt organizations. Senator Hatch and his Senate Republican colleagues apparently are acting to protect the secret donors to groups like Crossroads GPS, which is ripping off the tax laws by posing as a “social welfare” organization to keep its donors hidden from the public.
Ironically, Karl Rove, a founder of Crossroads GPS, explicitly confirmed in a Wall Street Journal op-ed last week that more than $50 million in ads run by his group Crossroads GPS are campaign ads intended to damage President Obama and boost Mitt Romney in the 2012 presidential campaign. In an act of hubris, Rove has publicly stripped away the phony claim that his group, Crossroads GPS, is a “social welfare” organization and not a campaign operation.
It is essential that the IRS resist and ignore the partisan pressures from Senator Hatch and his Senate Republican colleagues, or any other partisan pressures, and proceed with a rulemaking to revise the regulations that govern eligibility for 501(c)(4) tax-exempt status. New regulations are essential to stop the widespread abuses of the tax laws that are taking place in order to keep the donors financing their campaign expenditures secret from the American people.
The letter to the IRS from Democracy 21 and the Campaign Legal Center stated:
In your July 17 letter, you acknowledged receipt of our earlier letters to the IRS in which we submitted and then
supplemented a petition for rulemaking that challenges as inadequate and contrary to law the existing IRS regulations which set eligibility criteria for section 501(c)(4) tax-exempt status.
As we have noted in a series of letters to the IRS, groups that clearly have an overriding purpose to influence elections are claiming status as “social welfare” organizations in order to keep secret the donors whose funds they are spending to influence the 2012 presidential and congressional elections.
Your July 17 letter to us recognized that the existing regulations in this area were put in place more than a half century ago, that you “are aware of the current public interest” in this matter and that you “will consider proposed changes in this area.”
The letter continued:
We consider the letter you recently received from the Republican Senators to be a partisan effort to pressure the IRS to back away from the position you correctly took in your July 17 letter to look at new regulations to govern eligibility for section 501(c)(4) tax-exempt status.
We believe the Republican Senators’ letter is intended to preserve the ability of groups with an overriding purpose to support Republican candidates to continue to improperly claim tax-exempt status as “social welfare” organizations in order to keep secret the donors financing their campaign expenditures.
We urge you in the strongest possible terms to ignore this partisan pressure or any other partisan attempts to dissuade the IRS from carrying out its responsibilities to properly interpret the tax laws and protect the interests of American taxpayers and voters.
The letter stated:
As you know, in addition to the petition we submitted to the IRS we have also filed complaints with the IRS to challenge improper claims of eligibility for section 501(c)(4) tax-exempt status by pro-Republican, pro-Democratic and independent groups. We have called on the IRS to investigate and take appropriate enforcement action against these groups.
These groups include Crossroads GPS, the brainchild of Republican Party operative Karl Rove, whose purpose is to support Republican candidates, and Priorities USA, formed by two former Obama White House officials, whose purpose is to support President Obama’s reelection.
These groups are campaign operations, not “social welfare” organizations, and they are not entitled to section 501(c)(4) tax-exempt status.
The letter noted:
Recent published reports, for example, overwhelmingly document what is obvious – Crossroads GPS is all about electing Republican candidates and defeating Democratic candidates for federal office.
According to a
May 22, 2012 New York Times article, a $25 million advertising campaign by Crossroads GPS in 10 swing states, “is expected to become one of the most heavily broadcast political commercials of this phase of the general election.” Crossroads GPS conducted “18 different focus groups” that took place “over nearly a year” and that provided “a clear rationale for voters to deny Mr. Obama a second term.”
We do not believe that “social welfare” organizations conduct 18 focus groups over nearly a year to determine a clear rationale for defeating a presidential candidate. That is what campaign operations do.
Last week, Karl Rove proudly
wrote in The Wall Street Journal that in response to the Obama campaign’s recent ads, outside groups had spent $107.4 million on “ads attacking Mr. Obama’s policies or boosting Mr. Romney,” with “Crossroads GPS, a group I helped found, providing over half” of that total.
With this statement, Rove has confirmed that more than $50 million in ads run by Crossroads GPS are campaign ads intended to damage President Obama and boost Mitt Romney in the 2012 presidential campaign. Again, this is not what “social welfare” organizations do. It is what campaign operations do.
The letter to the IRS continued:
The letter from the Republican Senators to the IRS seeking to delay and discourage any action by the agency to correct flawed regulations is not about determining the proper interpretation and enforcement of the tax laws. The letter instead is a partisan effort to allow pro-Republican campaign groups like Crossroads GPS to continue hiding their donors from the American people by posing as section 501(c)(4) “social welfare” organizations.
As we have discussed at length in our previous submissions, the existing IRS regulations do not properly define and limit the amount of candidate campaign activity that a section 501(c)(4) “social welfare” organization may permissible conduct. As we have also documented, the regulations do not comply with court decisions on the eligibility requirements for section 501(c)(4) tax-exempt status.
The letter concluded:
It is a matter of urgent public importance for the IRS to undertake all appropriate efforts to fix its rules. Because of the existing flawed regulations, massive amounts of secret contributions are being spent in federal elections by groups that are improperly claiming status as “social welfare” organizations. This abuse of the tax laws to hide political donors is contrary to the Internal Revenue Code, to court interpretations of that Code and to the longstanding national policy of providing citizens with transparency for campaign finance contributions and expenditures.
It is vitally important for the IRS not to be swayed or deterred on this matter by partisan pressure. The IRS must carry out its statutory responsibilities to oversee and enforce the tax laws.
The IRS needs to conform its regulations with the requirements of the tax laws and court decisions which hold that in order to be eligible for tax-exempt status as a section 501(c)(4) “social welfare” organization, an organization may not engage in more than an “insubstantial amount” of non-social welfare activity, such as candidate campaign activity.
We appreciate your July 17 letter stating that you will consider changes in this area. We strongly urge you to continue these efforts without delay.