Political Nonprofit Investigation Sought By Democrats
WASHINGTON -- Seven Democratic senators sent a letter to the Internal Revenue Service (IRS) calling for an investigation into social welfare nonprofits that spend large amounts on direct political advertising.
The letter came amid rising concerns that nonprofit groups are acting primarily as political vehicles after the Supreme Court's January 2010 decision in Citizens United v. Federal Election Commission (FEC) allowed them to spend money on express advocacy of candidates, which was previously banned.
Because of their nonprofit status, these groups do not have to disclose donors, making them appealing vehicles for secret political donations in recent years. Social welfare nonprofits, organized under section 501(c)(4) of the tax code, have tax-exempt status as long as their primary purpose is social welfare causes.
But many groups have interpreted this to mean that, as long as they spend 51 percent of their budget on something other than political activities, they are complying with the law.
"It is contrary to the letter and the spirit of the statute for political organizations formed primarily to advocate for a political candidate or to run attack ads against other candidates to take advantage of section 501(c)(4)," the letter states.
The seven senators signing the letter include Chuck Schumer (D-N.Y.), Tom Udall (D-N.M.), Michael Bennet (D-Colo.), Sheldon Whitehouse (D-R.I.), Jeanne Shaheen (D-N.H.), Al Franken (D-Minn.), and Jeff Merkley (D-Ore.).
Nonprofit political spending has increasingly been in the spotlight as more groups form and increase their political activity. Much of the growth has come from the burgeoning field of conservative social welfare groups that spend large sums on both express advocacy and issue ads.
Political advertisements considered issue advocacy steer clear of calling for the election or defeat of a candidate, instead presenting negative cases against the candidates as they relate to issues. The court's ruling said an ad qualifies as express advocacy only if it explicitly calls for viewers to vote for or against a particular candidate.
One of the better funded groups is Crossroads GPS, the nonprofit sister to the super PAC American Crossroads. Crossroads GPS' official goal is to promote conservative ideas and policies. Both Crossroads groups are linked to the famous Republican political guru Karl Rove and are staffed by a collection of former Republican Party operatives that includes a former chairman of the Republican National Committee and a former political director for the National Republican Congressional Committee.
But Crossroads GPS, which has donor anonymity because it claims social welfare nonprofit status, has consistently outraised its sister super PAC. In 2011, largely due to the donor anonymity, the group raised $32.6 million compared to the PAC's $18.4 million in disclosed funds.
The nonprofit spent $26 million of that on issue ads in 2011 targeting President Barack Obama and various members of Congress, according to a Huffington Post review of Crossroads GPS press releases.
None of this money, however, would count as spending on express advocacy since the ads do not call for the election or defeat of any candidates.
Campaign finance watchdogs have previously called on the IRS to investigate the tax exempt status of political nonprofits like Crossroads GPS and Priorities USA, the nonprofit arm of the pro-Obama super PAC Priorities USA Action.
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First Posted: 02/16/2012 5:18 pm Updated: 02/16/2012 6:09 pm