Political front groups, such as Karl Rove’s Crossroads GPS and the Koch Brothers’ Americans for Prosperity, use the 501 (c)(4) section of the tax code meant for social welfare organizations, to hide their donors’ identities. Karl Rove and the Koch Brothers are clearly abusing this section of the code meant for charities.
The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity.
Back in March, we reported that Democratic Senators asked the IRS to investigate front groups’ use of the social welfare classification, requesting “a strict, percentage-based cap on the amount of a nonprofit group’s spending that can go towards political activities”. “We urge the IRS to take these steps immediately to prevent abuse of the tax code by political groups focused on federal election activities,” the Democratic senators wrote.
In response, the IRS started sending questionnaires to these organizations to determine their eligibility. Desperately trying to keep the secret money flowing to the GOP, a group of Republican Senators responded with a letter to the IRS accusing them of pursuing a political agenda. The IRS promptly stopped their investigation.
Fast-forward to July and the IRS is once again being pressured to enforce the 501(c)(4) section of the tax code, that it is to be used by charities supporting social welfare, not political groups involved in federal elections. The IRS again responded that they “will consider proposed changes” and “identify tax issues that should be addressed through regulations and other published guidance.”
It is abundantly clear that Crossroads GPS and Americans for Prosperity exist solely to influence the outcome of elections, with the majority of their expenditures going towards political advertising. Republicans are the great beneficiary of this “dark money”. So once again, they threatened the IRS with a letter of their own stating, “we believe these petitions have less to do with concerns about the sanctity of the tax code and more about setting the tone for the upcoming presidential election, and we urge you to resist allowing the IRS rulemaking process to be subverted to achieve partisan political gains.”
The letter seeking to protect the secrecy of Karl Rove’s and the Koch brothers‘ donors was written by Senators Orrin Hatch (R-Utah), Chuck Grassley (R-Iowa), Jon Kyl (R-Ariz.), Pat Roberts (R-Kan.), Mike Enzi (R-Wyo.), John Cornyn (Texas), John Thune (R-S.D.), Mitch McConnell (R-Ky.), Lamar Alexander (R-Tenn.), and Kay Bailey Hutchison (R-Texas).
The IRS does not want to be involved in the middle of a political battle. The last time the issue came up, they backed off at the request of the GOP Senators. But because Crossroads GPS and Americans for Prosperity are so obviously abusing a tax status that is meant for charities, they have no choice but to consider the petitions seeking to examine these groups.
One thing is certain: Republicans will fight tooth and nail to keep the corporate (and possibly foreign) money flowing to their campaigns from these front groups. And groups like Crossroads GPS give corporations the ability to fund politicians to do their bidding without public awareness or scrutiny.