IRS SCANDAL

As IRS scandal flares, a watchdog calls attention to other tax-exempt groups

 

Tampa Bay Times

There’s a framed Wall Street Journal editorial outside Fred Wertheimer’s office that still makes him smile. The headline: “The man who ruined politics.”

Eighteen years later, politics are doing just fine as one whiff of scandal-beset Washington attests.

Headlines track the uproar over the Internal Revenue Service’s singling out tea party groups. But if you ask Wertheimer, who has been battling for good government long before the public heard of the Cincinnati IRS office, the outcry obscures a deeper scandal.

“We fully support the investigation going on into the improper targeting,” said Wertheimer, president of Democracy 21. “But we also think it’s essential to investigate why what we believe are blatant abuses of the tax laws were never challenged by the IRS. These phony groups were created solely for the purpose of hiding their donors.”

Wertheimer isn’t taking about local tea party groups that have sought tax-exempt status but big players such as Crossroads GPS and Priorities USA that have unleashed a torrent of money into elections.

Many of the ads you saw last fall bashing President Barack Obama’s policies or slamming Mitt Romney came from Crossroads GPS, Priorities USA and similar groups. Unlike exclusively political organizations, they do not have to disclose donors.

“In 2012, C4 groups accounted for more than $250 million in dark money expenditures in federal elections,” Wertheimer said, using the shorthand for section 501(c)(4) of the tax law. “The interests of the American people are being violated because they have a right to basic campaign finance information.”

Crossroads GPS, started by Republican strategist Karl Rove, and Priorities USA , run by a former aide to Obama, are technically “social welfare” groups. The law says the nonprofit groups must be operated “exclusively” for the promotion of the public good. But IRS guidelines state, “to be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community.”

Behold the rub: Exclusively vs. primarily.

In a series of letters to the IRS, Wertheimer has challenged the tax status of Crossroads GPS and Priorities USA, arguing, for example, that the fact that Crossroads reported spending $70 million on campaign ads in 2012 is “prima facie evidence that the organization does have a 'primary purpose’ to engage in campaign activities.”

The C4 designation is rooted in tax law from 1913 but it was a 2010 U.S. Supreme Court decision, Citizens United vs. Federal Election Commission, allowing corporations to spend unlimited amounts on elections that led to the proliferation of nonprofit groups Wertheimer and other watchdogs say are flaunting the law.

Wertheimer’s Democracy 21 has been pestering the IRS to take a closer look at Crossroads and Priorities and reconcile the difference between the law and its guidelines.

The mess the IRS created by targeting tea party groups who also wanted tax-exempt status could make the agency reluctant to touch the issue.

“Until this all settles down, it could,” said Sen. John McCain, R-Ariz. “We have to make sure we have eliminated all aspects of discrimination in the IRS that is obviously taking place. But once that is done there is still a need for overall campaign finance reform. There will be scandals. I have promised that since the Supreme Court decision. You cannot have that much money washing around without corruption.”

Alex Leary, Washington Bureau Chief of the Tampa Bay Times, can be reached at aleary@tampabay.com

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