News Column

Biggest Groups Not Targeted by IRS

May 20, 2013
internal revenue service

There's an irony in the Internal Revenue Service's crackdown on conservative groups.

The nation's tax agency has admitted to inappropriately scrutinizing smaller tea party organizations that applied for tax- exempt status, and senior Treasury Department officials were notified in the midst of the 2012 presidential election season that an internal investigation was under way. But the IRS largely maintained a hands-off policy with the much larger, big-budget organizations on the left and right that were most influential in the elections and are organized under a section of the tax code that allows them to hide their donors.

"The IRS goes AWOL when wealthy and powerful forces want to break the law in order to hide their wrongful efforts and secret political influence," said Sen. Sheldon Whitehouse, D-R.I., who is among a small Senate group pushing campaign finance reform measures that would force these big outside groups to disclose their donors. "Picking on the little guy is a pretty lousy thing to do."

Karl Rove's Crossroads GPS and the Koch brothers' Americans for Prosperity were among those that spent tens of millions of dollars on TV ads and get-out-the-vote efforts to help Republicans. Democrats were aided in similar fashion by Priorities USA, made up of former Barack Obama campaign aides, and American Bridge 21st Century Foundation, an opposition research group led by a former adviser to Senate Majority Leader Harry Reid.

And yet those groups so far have escaped investigations into whether they have crossed the blurry line under the law between what constitutes a tax-exempt "social welfare" organization that is free from donor reporting requirements and a political committee subject to taxes and disclosures.

Watchdog groups and lawmakers who have sought more disclosure and restrictions on such groups claim an injustice. They say the IRS saga over the targeting of smaller groups shines a bright light onto the agency's failure to guard against the flood of secret money into the political system through the creation of the deep-pocketed groups.

Yet other advocates of reform worry that, in light of the IRS disclosure of targeting small groups, government regulators will be less likely to scrutinize the tax-exempt status of the bigger, more powerful groups out of fear that they will appear to be targeting groups for political reasons.

"We expect that opponents of disclosure will try to use the recent developments to allow the groups that are misusing the tax laws to hide donors to continue misusing them. But that's a battle that we will engage in," said Fred Wertheimer, founder and president of watchdog group Democracy 21.

An IRS inspector general's report released last week recommended developing for the first time specific guidelines to measure the primary activity of social welfare organizations, and some in Congress have shown a willingness to review big groups.

A Senate investigative panel led by Democrat Carl Levin of Michigan and Republican John McCain of Arizona has been reviewing the use of social welfare groups for political causes for the past year and now is examining the agency's handling of the tax-exempt reviews.

And in a letter to congressional investigators Thursday, Rep. Chris Van Hollen, D-Md., urged the House Ways and Means Committee not to ignore the influx of groups that may be abusing the tax code as part of its upcoming IRS probe, saying: "I hope we can remove the incentive for any group, regardless of its political orientation, to seek 501(c)(4) tax-exempt status to engage in significant political campaign activities while hiding their donors."

Examining 501(c) nonprofits

In recent years, advocacy groups have paired their nonprofit arms with "super" political action committees, moves that took hold after a series of court rulings - including the Supreme Court's 2010 Citizens United decision - loosened the rules on money in politics.

Section 501(c)(3) can be the most lucrative financially for organizations because in addition to conferring tax-exempt status, it allows donations to qualifying groups to be tax deductible.

Section 501(c)(4) doesn't permit tax-deductible donations but gives groups more latitude to lobby and to dabble more directly in political campaigns as long as "social welfare" remains their primary mission. They can also keep their donors secret, a big benefit over more blatantly political super PACs.

In congressional testimony about the discredited IRS actions, Attorney General Eric Holder said there is good reason to take a skeptical look at some Section 501 applications, but "it has to be done in a way that does not depend on the political persuasion of the group."

Originally published by Associated Press.

(c) 2013 Tulsa World. Provided by ProQuest LLC. All rights Reserved.




For more stories covering politics, please see HispanicBusiness' Politics Channel



Source: Copyright Tulsa World 2013


Story Tools