Statement by Fred Wertheimer: Karl Rove Confirms Purpose of Crossroads GPS is to Influence Elections, Not Engage in “Social Welfare” Activities

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Statement of Democracy 21 President Fred Wertheimer

 

Democracy 21, joined by the Campaign Legal Center, has written to the Internal Revenue Service on several occasions to challenge the claim by Crossroads GPS that it is entitled to tax-exempt status as a section 501(c)(4) “social welfare” organization.

We have made the case to the IRS that the overriding purpose of Crossroads GPS is to influence elections and for that reason does not qualify to be a “social welfare” organization.  We have asked the IRS to investigate and take appropriate action on this matter.

Democracy 21, joined by the Campaign Legal Center, also has submitted similar complaints to the IRS challenging the claims to section 501(c)(4) tax-exempt status by Priorities USA, American Action Network and Americans Elect.

In a recent statement, Republican political operative Karl Rove has made clear that his brainchild, Crossroads GPS, is essentially a political operation.  As such, it is as far from being a “social welfare” group as an organization could be.

Writing in The Wall Street Journal (August 1, 2012), Rove said the following:

Roughly $111 million of Mr. Obama’s ad blitz was paid for by his campaign; outside groups chipped in just over $20 million. The Romney campaign spent only $42 million over the same period in response, with $107.4 million more in ads attacking Mr. Obama’s policies or boosting Mr. Romney coming from outside groups (with Crossroads GPS, a group I helped found, providing over half).

 With this statement Rove has confirmed for the IRS and everyone else that the purpose of Crossroads GPS is to influence elections and that the group cannot in any credible way claim that it is primarily engaged in “social welfare” activities, which is the test for eligibility for section 501(c)(4) tax-exempt status.

Democracy 21 again strongly urges the IRS to act promptly to reject the claim by Crossroads GPS that it is a “social welfare” organization and to take appropriate action against the group on the basis that it is not entitled to tax-exempt status as a section 501(c)(4) organization.

The IRS recently responded to another effort undertaken by Democracy 21, joined by the Campaign Legal Center, to stop groups from improperly claiming section 501(c)(4) tax-status in order to hide their donors. We submitted a petition to the IRS last year requesting the agency to issue new rules defining eligibility for section 501(c)(4) tax status.  The IRS has informed us that it will consider issuing new regulations in this area to replace the existing regulations which were adopted more than a half century ago.

In an editorial today regarding the IRS response to us, The New York Times took note of the IRS response stating:

[T]he Internal Revenue Service is, at last, promising to review and consider changing 50-year-old rules governing the limits of political activity for social welfare nonprofits that enjoy exemptions under section 501(c)(4) of the tax code. This is encouraging news for voters in the dark as ads thunder away and for taxpayers who underwrite the abuse. It follows a court finding that the Federal Election Commission had arbitrarily weakened disclosure requirements.

The Times editorial is enclosed below.

The New York Times

Further Review for Secret Donations

August 2, 2012

The ploy of disguising secretly financed political machines as tax-exempt “social welfare” organizations has become one of the alarming trademarks of modern, big-money politics. Under cover of the tax code, the identities of donors are kept secret while they pay for attack ads against candidates, all the while claiming their main purpose is civic and nonpartisan. Operatives from both parties have gotten deep into this shell game.

Fortunately, the Internal Revenue Service is, at last, promising to review and consider changing 50-year-old rules governing the limits of political activity for social welfare nonprofits that enjoy exemptions under section 501(c)(4) of the tax code. This is encouraging news for voters in the dark as ads thunder away and for taxpayers who underwrite the abuse. It follows a court finding that the Federal Election Commission had arbitrarily weakened disclosure requirements.

The I.R.S., citing “current public interest in this issue,” promised a review after receiving complaints from the Campaign Legal Center and Democracy 21 — watchdog groups that have been tracking the ballooning use of the “social welfare” guise to finance classic hardball politics. It is ludicrous to perceive Karl Rove, the canny Republican strategist and money raiser, as primarily nonpartisan and civic-minded as he tools up his Crossroads GPS operation with plans to spend millions of dollars during this year’s elections. Envious Democrats are following suit with attack machines of their own.

Any changes would involve a drawn-out process of review at the Treasury Department unlikely to moderate the current campaign’s spending binge. But changes are needed, including tighter policing practices and credible definitions of those obviously walking, talking and spending like political pros. Otherwise, the abuse will only mushroom and fuel corruption in the runaway casino of modern politics.