THE BLOG
12/19/2011 06:09 pm ET | Updated Feb 16, 2012

Absent IRS Action, Secretly-Funded Political Party Could Decide Outcome Of Presidential Election

In a letter sent last week to the IRS, Democracy 21, joined by the Campaign Legal Center, submitted additional information to the IRS to demonstrate that Americans Elect, the American Action Network and Crossroads GPS are not entitled to section 501(c)(4) tax status and therefore are not entitled to keep their donors secret on that basis.

Last week's letter supplements a letter sent on September 28th to the IRS in which the two watchdog groups called on the IRS to investigate four organizations -- Crossroads GPS, the American Action Network, Americans Elect and Priorities USA -- to determine whether they are operating in violation of their claimed status as section 501(c)(4) "social welfare" tax-exempt groups. The September 28th letter included information on each of these four groups which demonstrates that the groups are not entitled to section 501(c)(4) tax status.

The four groups have claimed 501(c)(4) tax status in order to keep secret the donors financing their expenditures to influence federal elections. These secret funds could have major a influence on and possibly determine the outcome of races for federal office in the 2012 elections.

Crossroads GPS, the American Action Network, Americans Elect and Priorities USA are campaign operations attempting to operate under the guise of being section 501(c)(4) "social welfare" organizations. They are doing this in order to keep secret the donors financing their campaign-related expenditures.

These political groups are anything but "social welfare" organizations and their donors are not "secret Santas." They are "secret influence-seekers" whose hidden contributions threaten to corrupt government decisions and undermine the integrity of our elections.

We have been writing to the IRS for more than a year urging the agency to take action to prevent political groups from misusing the tax laws to hide the donors financing their campaign activities.

To date, we have seen no evidence that the IRS is prepared to enforce the tax laws that apply to groups improperly attempting to operate as section 501(c)(4) "social welfare" organizations.

In failing to enforce the tax laws against groups improperly claiming 501(c)(4) tax status, the IRS is failing the American people.

The IRS is also creating the opportunity for hundreds of millions of dollars in secret contributions to be improperly spent to influence and possibly determine the outcome of the 2012 presidential election and targeted Senate and House races in 2012.

The IRS cannot allow this to happen to our elections and must move promptly to enforce the tax laws.

Americans Elect, for example, is qualifying on state ballots as a political party in order to run a candidate for president in 2012. The organization reportedly has already raised $22 million and is already listed on the ballot in eleven states as a political party. Its goal is to be listed on the ballot as a political party in all fifty states to run a candidate for president. The organization has refused to make public its donors

Americans Elect is claiming tax status as a 501(c)(4) "social welfare" organization in order to prevent the American people from knowing who is financing its campaign activities.

There is no way that a political party listed on the ballot as legally qualified to run a candidate for president can also qualify as a section 501(c)(4) tax-exempt "social welfare" organization. This is what the word "oxymoron" was invented to describe.

Just as third party candidates decided the outcome of the 2000 presidential race, Americans Elect's candidate for president in 2012 could conceivably determine the outcome of this year's presidential election.

Unless the IRS acts promptly, the agency could be responsible for allowing a new political party improperly financed with secret contributions to determine the next president of the United States.

In our letter, we also submitted additional information on American Action Network which makes clear that the group it is not entitled to tax status as a section 501(c)(4) organization.

In 2010, American Action Network spent $26 million of its $30 million in total expenditures, or 87 percent of its expenditures, on "independent expenditures" and "electioneering communications," according to an article in the Center for Public Integrity's iWatch News.

These "independent expenditures" and "electioneering communications" were reported to the Federal Election Commission under the nation's campaign finance disclosure laws.

Nevertheless, American Action Network is claiming tax status as a section 501(c)(4) "social welfare" group in order to hide the identity of the donors financing their campaign-related expenditures.

Under no one's understanding of the tax laws can American Action Network spend 87 percent of its annual expenditures on campaign-related expenditures reported under the nation's campaign finance laws and qualify for tax status as a section 501(c)(4) "social welfare" organization.

American Action Network plans to spend heavily to influence the 2012 congressional races. Unless the IRS acts promptly, the agency could be responsible for allowing campaign-related expenditures by American Action Network that are improperly financed with secret contributions to influence and possibly decide the outcome of targeted House and Senate races.

We also have provided additional information to the IRS to show that the overriding purpose of Crossroads GPS, the brainchild of Karl Rove, is to influence elections.

Karl Rove is not precisely known for his "social welfare" activities. His organization, Crossroads GPS, is about as far away from engaging in "social welfare" activities as you can get.

The information provided in today's letter, combined with the information we submitted in two previous IRS letters, makes clear that Crossroads GPS is not entitled to section 501(c)(4) tax status as a "social welfare" group and is not entitled to keep its donors secret on that basis.

Our letter notes, for example, that according to a recent National Journal article, Crossroads GPS plans to spend more than $500,000 in Nebraska on broadcast ads designed to convince Senator Ben Nelson to drop his 2012 reelection bid. "We want Ben Nelson to recognize that 2012 will be an extraordinarily grueling proposition in the case he decides to run," a Crossroads spokesman said, according to National Journal.

Crossroads GPS and its affiliated Super PAC, American Crossroads, reportedly plan to spend a combined $240 million or more to influence the 2012 presidential and congressional elections.

Once again, the failure by the IRS to take action could result in the agency being responsible for allowing campaign-related expenditures by Crossroads GPS, improperly financed with secret contributions, to influence and possibly determine the outcome of federal races in 2012.

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