“Lost In The IRS Scandal”: The Need To Know Facts About The Big Picture And Big Donors Of Dark Money
In the furious fallout from the revelation that the IRS flagged applications from conservative non-profits for extra review because of their political activity, some points about the big picture – and big donors — have fallen through the cracks.
Consider this our Top 6 list of need-to-know facts on social welfare non-profits, also known as “dark money” groups because they don’t have to disclose their donors. The groups poured more than $256 million into the 2012 federal elections.
1. Social welfare non-profits are supposed to have social welfare, and not politics, as their “primary” purpose.
A century ago, Congress created a tax exemption for social welfare non-profits. The statute defining the groups says they are supposed to be “operated exclusively for the promotion of social welfare.” But in 1959, the regulators interpreted the “exclusively” part of the statute to mean groups had to be “primarily” engaged in enhancing social welfare. This later opened the door to political spending.
So what does “primarily” mean? It’s not clear. The IRS has said it uses a “facts and circumstances” test to say whether a group mostly works to benefit the community or not. In short: If a group walks and talks like a social welfare non-profit, then it’s a social welfare non-profit.
This deliberate vagueness has led some groups to say that “primarily” simply means they must spend 51 percent of their money on a social welfare idea — say, on something as vague as “education,” which could also include issue ads criticizing certain politicians. And then, the reasoning goes, a group can spend as much as 49 percent of its expenditures on ads directly advocating the election or defeat of a candidate for office.
Nowhere in tax regulations or rulings does it mention 49 percent, though. Some non-profit lawyers have argued that the IRS should set hard limits for social welfare non-profits — setting out, for instance, that they cannot spend more than 20 percent of their money on election ads or even limiting spending to a fixed amount, like no more than $250,000.
So far, the IRS has avoided clarifying any limits.
2. Donors to social welfare non-profits are anonymous for a reason.
Unlike donors who give directly to politicians or even to Super PACs, donors who give to social welfare non-profits can stay secret. In large part, this is because of an attempt by Alabama to force the NAACP, then a social welfare non-profit, to disclose its donors in the 1950s. In 1958, the Supreme Court sided with the NAACP, saying that public identification of its members put them at risk of reprisal and threats.
The ACLU, which is itself a social welfare non-profit, has long made similar arguments. So has Karl Rove, the GOP strategist and brains behind Crossroads GPS, which has spent more money on elections than any other social welfare non-profit. In early April 2012, Rove invoked the NAACP in defending his organization against attempts to reveal donors.
The Federal Election Commission could in theory push for some disclosure from social welfare non-profits — for their election ads, at least. But the FEC has been paralyzed by a 3-3 partisan split, and its interpretations of older court decisions have given non-profits wiggle room to avoid saying who donated money, as long as a donation wasn’t specifically made for a political ad.
New rulings indicate that higher courts, including the Supreme Court, favor disclosure for political ads, and states are also stepping into the fray. During the 2012 elections, courts in two states – Montana and Idaho – ruled that two non-profits engaged in state campaigns needed to disclose donors.
But sometimes, when non-profits funnel donations, the answers raise more questions. It’s the Russian nesting doll phenomenon. Last election, for instance, California’s election agency pushed for an Arizona social welfare non-profit to disclose donors for $11 million spent on two California ballot initiatives. The answer? Another social welfare non-profit, which in turn got the money from a trade association, which also doesn’t have to reveal its donors.
3. The Supreme Court’s Citizens United decision meant that corporations could pay for political ads, anonymously, using social welfare non-profits.
In January 2010, the Supreme Court ruled that corporations and unions could spend money directly on election ads. A later court decision made possible SuperPACs, the political committees that can raise and spend unlimited amounts of money from donors, as long as they don’t coordinate with candidates and as long as they report their donors and spending.
Initially, campaign finance watchdogs believed corporations would give directly to SuperPACs. And in some cases, that happened. But not as much as anyone thought, and maybe for a reason: Disclosure isn’t necessarily good for business. Target famously faced a consumer and shareholder backlash after it gave money in 2010 to a group backing a Minnesota candidate who opposed gay rights.
Many watchdogs now believe that large public corporations are giving money to support candidates through social welfare non-profits and trade associations, partly to avoid disclosure. Although the tax-exempt groups were allowed to spend money on election ads before Citizens United, their spending skyrocketed in 2010 and again in 2012.
A New York Times article based on rare cases in which donors have been disclosed, sometimes accidentally, explored the issue of corporations giving to these groups last year. Insurance giant Aetna, for example, accidentally revealed it gave $3 million in 2011 to the American Action Network, a social welfare group founded by former Sen. Norm Coleman, a Republican, that runs election ads.
Groups that favor more disclosure have so far failed to force action by the FEC, the IRS, or Congress, although some corporations have voluntarily reported their political spending. Advocates have now turned to the Securities and Exchange Commission, which is studying a proposal to require public companies to disclose political contributions.
The idea is already facing strong opposition from House Republicans.
4. Social welfare non-profits do not actually have to apply to the IRS for recognition as tax-exempt organizations.
With all the furor over applications being flagged from conservative groups — particularly groups with “Tea Party,” “Patriot” or “9/12″ in their names — it’s worth remembering that a social welfare non-profit doesn’t even have to apply to the IRS in the first place.
Unlike charities, which are supposed to apply for recognition, social welfare non-profits can simply incorporate and start raising and spending money, without ever applying to the IRS.
The agency’s non-profit wing is mainly concerned about ferreting out bad charities, which are the biggest chunk of non-profits and the biggest source of potential revenue. After all, the IRS’s main job is to collect revenue. Charities allow donors to deduct donations, while social welfare non-profits don’t.
Most major social welfare non-profits do apply, because being recognized is seen as insurance against later determination by the IRS that the group should have registered as a political committee and may face back taxes and disclosure of donors. A recognition letter is also essential to raise money from certain donors — like, say, corporations.
But some of the new groups haven’t applied.
The first time the IRS hears about these social welfare non-profits is often when they file their first annual tax return, not due until sometimes more than a year after they’ve formed.
In many cases, the first time the IRS hears about these groups is a full year after an election.
5. Most of the money spent on elections by social welfare non-profits supports Republicans.
Of the more than $256 million spent by social welfare non-profits on ads in the 2012 elections, at least 80 percent came from conservative groups, according to FEC figures tallied by the Center for Responsive Politics.
None came from the Tea Party groups with applications flagged by the IRS. Instead, a few big conservative groups were largely responsible.
Crossroads GPS, which this week said it believes it is among the conservative groups “targeted” by the IRS, spent more than $70 million in federal races in 2012. Americans for Prosperity, the social welfare non-profit launched by the conservative billionaire brothers Charles and David Koch, spent more than $36 million. American Future Fund spent more than $25 million. Americans for Tax Reform spent almost $16 million. American Action Network spent almost $12 million.
Besides Crossroads GPS, each of those groups has applied to the IRS and been recognized as tax-exempt. (You can look at their applications here.)
All of those groups spent more than the largest liberal social welfare non-profit, the League of Conservation Voters, which spent about $11 million on 2012 federal races. The next biggest group, Patriot Majority USA, spent more than $7 million. Planned Parenthood spent $6.5 million. VoteVets.org spent more than $3 million.
None of those figures include the tens of millions of dollars spent by groups on certain ads that run months before an election that are not reported to the FEC.
6. Some social welfare groups promised in their applications, under penalty of perjury, that they wouldn’t get involved in elections. Then they did just that.
Much of the attention when it comes to Tea Party nonprofits has focused on their applications and how the IRS determines whether a group qualifies for social welfare status.
As part of our reporting on dark money in 2012, ProPublica looked at more than 100 applications for IRS recognition. One thing we noted again and again: Groups sometimes tell the IRS that they are not going to spend money on elections, receive IRS recognition, and then turn around and spend money on elections
The application to be recognized as a social welfare non-profit, known as a 1024 Form, explicitly asks a group whether it has spent or plans to spend “any money attempting to influence the selection, nomination, election, or appointment of any person to any Federal, state, or local public office or to an office in a political organization.”
The American Future Fund, a conservative non-profit that would go on to spend millions of dollars on campaign ads, checked “No”in answer to that question in 2008. The very same day the group submitted its application, it uploaded this ad to its YouTube account: http://youtu.be/2oEz3lzgDsI
Even before mailing its application to the IRS saying it would not spend money on elections in 2010, the Alliance for America’s Future was running TV ads supporting Republican candidates for governor in Nevada and Florida. It also had given $133,000 to two political committees directed by Mary Cheney, the daughter of the former vice president.
Another example of this is the Government Integrity Fund, a conservative non-profit that ran ads in last year’s U.S. Senate race in Ohio. Its application was approved after it told the IRS that it would not spend money on politics. The group went on to do just that.
By: Kim Barker and Justin Elliott, ProPublica; Published in The National Memo, May 22, 2013
“The GOP Has Learned Nothing”: A Party Letting Its Base Lead Where The Rest Of America Dares Not To Follow
You’d think the conservative base would have learned its lesson in 2010, when, in a fever pitch of epic magnitude, it nominated Christine O’Donnell, Ken Buck, Sharron Angle and Joe Miller to run for the U.S. Senate. Suddenly, what looked like a prime opportunity for Republicans to flip the upper chamber and send Democratic Majority Leader Harry Reid, D-Nev., packing turned into an example of a party letting its base lead where the rest of America dared not follow. Or perhaps in 2012, when Indiana Senate nominee Richard Mourdock was sunk by an extremely ill-advised and incorrect rape comment.
However, one look at the gubernatorial ticket in Virginia shows that the tea party’s dream is alive and kicking. Not only has the party nominated Ken Cuccinelli for governor – who believes that the entire social safety net is “despicable, dishonest, and worthy of condemnation“– but it has added Rev. E.W. Jackson to run for Lieutenant Governor.
Amongst Jackson’s greatest hits are calling gay and lesbian Americans “sick people psychologically, mentally and emotionally”; claiming that the infamous 3/5ths clause of the Constitution was “anti-slavery”; saying that Planned Parenthood is akin to the Ku Klux Klan; and claiming that the agenda of the Democratic party is “worthy of the Antichrist.”
This was not supposed to be the plan. Though Cuccinelli is an avowed culture warrior and tea party darling, he has been staying away from those issues on the campaign trail, instead focusing on jobs and the economy. But as Jamelle Bouie explains at the American Prospect, Jackson’s inclusion on the ticket is going to make that strategy a lot harder to pull off:
Ken Cuccinelli’s plan for winning the Virginia gubernatorial race is straightforward. Avoid outspoken statements on social issues—the same ones that alienate most Virginians but excite his rightwing base—and focus the campaign on jobs and growth.
So far, he’s done exactly that. Of his three television advertisements, for example none mention abortion or same-sex marriage … E.W. Jackson, the newly-minted GOP nominee for lieutenant governor, throws a huge wrench in this strategy.
As Tim Murphy detailed at Mother Jones, Jackson was able to grab the nomination because Virginia’s GOP eschews a traditional primary in favor of “a one-day nominating convention packed with grassroots activists.” And those activists, as they have across the country, clearly have little regard for such parochial concerns as electability in a state that voted for President Barack Obama twice and is represented in the Senate by two Democrats. “These kinds of comments are simply not appropriate, especially not from someone who wants to be a standard bearer for our party and hold the second highest elected office in our state,” said the current Republican Lt. Gov., Bill Bolling, when asked about Jackson. “They feed the image of extremism, and that’s not where the Republican Party needs to be.”
Of course, Cuccinelli and Jackson may very well win. (They are running against Terry McAuliffe, after all, who doesn’t inspire much in the way of excitement.) Stranger things have certainly happened.
But in the long run, consistently nominating extreme social warriors, when the country is shown to be consistently going the other way on social issues, is only going to hurt the GOP’s actual policy goals. For proof of that, go say hello to Majority Leader Reid or google how the repeal of Obamacare is going.
By: Pat Garofalo, U. S. News and World Report, May 22, 2013
“Hoping No One Will Know The Difference”: Conservatives Shift Gears On IRS To “Income Tax Audits”
Something odd happened to Barack Obama’s approval rating last week: nothing. With a bunch of controversies swirling about the administration, one might think Americans would be thinking less of his performance. Yet the latest polls from Gallup and CNN both show his job approval essentially unchanged, at just at or above 50 percent.
So far anyway, these “scandals” are, like most scandals, an almost completely partisan phenomenon. Yes, there are some—Watergate, Iran-Contra—where the facts are so damning and undeniable that even the president’s own party can’t help but acknowledge them. But Benghazi and the IRS are not Watergate or Iran-Contra. Perhaps they’ll turn out to be, if we find out something completely shocking. Perhaps we’ll discover that Barack Obama is on tape personally ordering the Cincinnati IRS office to put the screws to Tea Party groups, just as Richard Nixon was on tape ordering his aides to get the IRS to audit his political opponents. But that hasn’t happened yet.
So conservatives are trying something new. If you were paying close attention the last couple of days, you saw them bringing up a new charge, one unrelated to the actual controversy: IRS income-tax audits. At first glance that may seem strange. After all, there hasn’t been any evidence that anyone was audited because of their political beliefs or activities. This controversy is about political groups being given undue scrutiny when they applied for 501(c)(4) status as “social welfare” organizations. The part of the agency that carries out those reviews doesn’t audit individuals’ tax returns. Yet here was Peggy Noonan, claiming “The IRS scandal has two parts. The first is the obviously deliberate and targeted abuse, harassment and attempted suppression of conservative groups. The second is the auditing of the taxes of political activists.” The “evidence” for Noonan’s explosive charge is that she read about a couple of conservatives who were among the 1.5 million Americans who were audited by the IRS last year (read Nate Silver for more on how unbelievably stupid Noonan’s allegation is). Here‘s an account of the weekend’s Virginia GOP convention, at which a whole slate of Tea Partiers was selected to run in November’s elections there: “By being here today, every one of you has just signed up for an audit by the I.R.S.,’ Governor Bobby Jindal of Louisiana, a potential 2016 presidential candidate, said in a keynote speech. ‘You are officially now on the White House enemies list.'”
We’ll be hearing more of these stories. Because after all, if 1.5 million Americans were audited last year, plenty of them were conservatives. And plenty of those will be happy to tell their stories to Fox News or Rush Limbaugh or Peggy Noonan. “I signed up for my local Tea Party, and not six months later the IRS came after me!” they’ll say. Some of these stories will be told in high-profile forums, and others in more obscure outlets; for instance, here’s a conservative writer telling her tale of oppression to the Catholic News Agency. During her audit, she says, “They only wanted to talk about who was paying me to do my writing.” Really? “Hendershott said that the questions were not explicitly political, but she interpreted them to mean the agency was ‘wanting to know if there were individuals or groups who wanted me to write to advance their cause.'” Maybe. Or maybe because she’s a writer and they were auditing her income taxes, they were asking her who paid her to write because that’s where she gets her income. Just tossing that out there.
It’s pretty obvious what’s going on here. On one hand, nobody likes the IRS, so people are ready to believe the worst about the agency’s activities. On the other hand, getting your 501(c)(4) application subjected to unusual scrutiny is not something most people can relate to. Even worse, the reporting that’s emerging about the IRS office in Cincinnati (see here) paints a picture not of some coordinated effort at political oppression, but of a bunch of overworked, ill-trained people who barely understood the standards they were supposed to apply to these applications and didn’t get the support they needed from Washington. They ended up acting inappropriately, but it wasn’t a criminal conspiracy, and it didn’t reach up to the heights of power.
For conservatives, that’s not a very satisfying story. But they know that everyone fears getting their tax returns audited. So why not just tell everyone that’s what happened?
By: Paul Waldman, Contributing Editor, The American Prospect, May 20, 2013
“Resonance Resistant”: Republicans Racing Off The Cliff In Their Supercharged Outrage Machine
Whether one thinks the demiscandals being howled about in Washington should or should not resonate more widely, they don’t.
According to a Gallup report released Thursday, “The amount of attention Americans are paying to the I.R.S. and the Benghazi situations is well below the average for news stories Gallup has tracked over the years.” (The Associated Press phone records case wasn’t mentioned.) Why might this be? I have a few theories:
CREDIBILITY People know that the Internal Revenue Service is the conservatives’ bogeyman. It’s the agency that collects the taxes that Republicans hate so much. Some Americans see taxes as, at worst, a necessary nuisance; Republicans see them as an absolute evil. The I.R.S. is the agency that collects the wealth from “us” for the government to redistribute to “them.” As National Journal pointed out Friday, “The agency also implements much of the country’s social policy through the tax code.” We all know that anything with “social” in its name activates the conservative gag reflex.
And on the Associated Press front, it just doesn’t ring true to have Republicans standing up as defenders of the “lame-stream media.” It’s like the person with the club feigning common cause with the baby seal. People just don’t buy it.
Furthermore, Republicans have exhibited a near-pathological need to say anything, no matter how outlandish, that would invalidate the Obama presidency. This has left them with little credibility now that there may be legitimate problems. This is the story of the political party that cried “Kenyan.”
COMPLEXITY Where is Benghazi? Seriously, folks, quickly point it out on a map. Thought so. Now, to the controversy: the talking points — what they said, and the machination of how that was altered, and whether Al Qaeda should have been immediately blamed, and whether the word “terror” should have had an “-ist” or an “-ism.” Seeking to find the killers of four dead Americans is honorable; endless testimony about a fussed-over script used to explain the tragedy is mind-numbing.
UNPOPULARITY It is clear that the Justice Department overreached on the Associated Press scandal and that its strong-arm tactics are likely to have a chilling effect. But Americans are not big fans of mass media. A November Gallup poll found that only a fourth of Americans rate the honesty and ethical standards of journalists highly. Even bankers ranked higher.
As for Tea Party groups that received extra scrutiny from the I.R.S., an Associated Press-GfK poll released last month found that fewer than a fourth of Americans say they support the group. The Tea Party may well be passé.
The policy issue is a different story, as The Washington Post pointed out this week: “In 2010, the Supreme Court’s landmark ‘Citizens United’ decision cleared the way for corporations and labor unions to raise and spend unlimited sums of money, and register for tax-exempt status under section 501(c)(4).”
That decision was extremely unpopular. An ABC News/Washington Post poll released nearly a month after the decision was handed down found that 80 percent of Americans opposed it.
So an unpopular movement applied for tax-exempt status under conditions made possible by an unpopular court decision, in order to influence politics with unfathomable amounts money from unnamed donors? Good luck gaining sympathy for that.
ZEALOTRY The Congressional Tea Party Caucus founder, Michele Bachmann, who never misses a chance to say something asinine, suggested to the conservative site wnd.com that it was “reasonable” to worry that the I.R.S. might use Obamacare to kill conservatives.
The article reads, in part:
“Since the I.R.S. also is the chief enforcer of Obamacare requirements, she asked whether the I.R.S.’s admission means it ‘will deny or delay access to health care’ for conservatives. At this point, she said, that ‘is a reasonable question to ask.’ ”
“Reasonable” and “Bachmann” don’t even belong in the same conversation, let alone the same sentence, and yet she remains one of the most visible spokeswomen for the movement.
Even former House Speaker Newt Gingrich warned Republicans against overreaching. In an NPR interview that aired Friday, Gingrich, referring to the impeachment of President Clinton, said, “I think we overreached in ’98 — how’s that for a quote you can use?”
He continued, advising his party to be “calm and factual.” Ha! That’s too rich, and too late. Republicans are already invoking the I-word.
Republicans are their own worst enemies at times like these, unable to leave well-enough alone, and missing chances to honestly engage the public as they race off the cliff in the supercharged outrage machine.
By: Charles M. Blow, Op-Ed Columnist, The New York Times, May 17, 2013
“Not Too Smart”: How The IRS Planted The Question That Sparked The Tea Party Scandal
Washington tax lawyer Celia Roady acknowledged that at the behest of the IRS, she asked a question at a May 10 conference that would ignite the controversy over inappropriate targeting of conservative groups.
Four days before a damning Inspector General’s report was due to be released, the IRS wanted to get out ahead and potentially defuse some of the backlash.
Roady serves on the IRS Advisory Committee on Tax-Exempt and Government Entities. She asked the planted question to Lois Lerner, the IRS’ director of the tax-exempt division. Within minutes, it sparked shock and a firestorm that the IRS had revealed it inappropriately targeted certain groups, particularly with the words “Tea Party” and “patriot” in their title.
Morgan, Lewis & Bockius, the firm that employs Roady, released a statement on her behalf explaining her role in asking the question:
“On May 9, I received a call from Lois Lerner, who told me that she wanted to address an issue after her prepared remarks at the ABA Tax Section’s Exempt Organizations Committee Meeting, and asked if I would pose a question to her after her remarks. I agreed to do so, and she then gave me the question that I asked at the meeting the next day. We had no discussion thereafter on the topic of the question, nor had we spoken about any of this before I received her call. She did not tell me, and I did not know, how she would answer the question.”
Outgoing Acting IRS Commissioner Steven Miller confirmed during testimony before the House Ways and Means Committee on Friday that the question had been planted.
That led to intense questioning from members of Congress, who wondered why Lerner did not reveal the news during testimony before the committee on May 8, two days before the conference.
Miller said that the plan had been to simultaneously notify Congress after Lerner’s public admission, but acknowledged that “didn’t happen.”
“She has been directly involved in this matter,” Rep. Sander Levin (D-Mich.) said on Friday. “She failed to disclose what she knew to this committee, choosing instead to do so at an ABA conference two days later.
“This is wholly unacceptable.”
By: Bret LoGiurato, Business Insider, May 18, 2013
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