It’s not a big secret that the Koch Brothers fund the Tea Party and have Americans for Prosperity affiliated with 501(c)(4) status (Americans for Prosperity Foundation has 501(c)(3) status) that, thanks to the Supreme Court’s January 2010 “Citizens United v. Federal Election Commission” decision, provide them with the ability to have billionaires be able to contribute to stealthy political action groups undisclosed contributions while being completely anonymous.
The historic transparency and scrutiny involved with wealthy donors having to disclose their contributions within reasonable limits are now vapor. With the IRS 501(c)(4) status available, there is plenty of legal openings to hide behind and pollute the airwaves with distortions, lies and attacks:
Types of Organizations Exempt under Section 501(c)(4)
Internal Revenue Code section 501(c)(4) provides for the exemption of two very different types of organizations with their own distinct qualification requirements. They are:
- Social welfare organizations: Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, and
- Local associations of employees, the membership of which is limited to the employees of designated person(s) in a particular municipality, and the net earnings of which are devoted exclusively for the promotion of social welfare.
Homeowners associations and volunteer fire companies may be recognized as exempt as social welfare organizations if they meet the requirements for exemption. Organizations that engage in substantial lobbying activities sometimes also are classified as social welfare organizations.
The difference between a 501(c)(4) and a 501(c)(3) is that the former is allowed to do considerably more political advocacy work while neither group needs to disclose the identity of its donors or the contributions.
When the news that the Internal Revenue Service (IRS) had targeted some conservative groups seeking and applying for 501(c)(4) tax-free status with zero transparency and anonymous donations from greedy billionaires between 2010 and 2012 where applications spiked, suddenly the tinfoil conspiracy crowd was joyous that they were seen as The Victim.
The reality is that the IRS inspector general’s report stated that 298 political groups received special scrutiny with only 96 – about a third — Tea Party groups or related obviously politically right-wing agenda groups getting checked for validity and compliance. Add that the only group so far to have tax-free status rejected was the Maine chapter of Emerge America, who train Democratic women to run for office. So much for the big attack on the Tea Party as seen on Murdochian Fox News and the Drudge Echo Chamber of Zealots. Yes, there are those that just dial it in like tired Chris Matthews on MSNBC and the CNN flub-o-maniacs that are hooked on the half-truths.
It’s always been an intense obsession for those within that predictable political faction to be seen as poor victims targeted for their purity and pious arrogance fueled with morally subjective tantrums. Fox News and those not really paying attention or ignoring what 501(c)(4) status has done to damage democracy want to paint the IRS somehow overstepping for actually doing their job to check out groups applying for tax-free, anonymous status before bestowing them their will to spend millions on negative political ads without anyone knowing who was behind the curtain.
The Treasury Inspector General for Tax Administration (TIGTA) had issued a report “Inappropriate Criteria Were Used to Identify Tax-Exempt Applications for Review” that illustrates the IRS activities.
With Koch Brothers 501(c)(4) groups like Americans For Prosperity spending undisclosed amounts of anonymous money defending Scott Walker and other Republicans during the 2011-12 Wisconsin Recall season, it is particularly relevant that financial secrecy and politically charged negative ads and funding for manufactured astroturf “grassroots” events made outside Wisconsin forces have a distinct advantage over the people of Wisconsin. Outspending the anti-Walker opposition by nearly 8 to 1 in media ad buys allowed for the hidden-from-view out-of-state funders to hoodwink the populace or render them burnt-out of the whole process.
Here is an example of Americans For Prosperity during the Walker recall season with obvious support for “a candidate” that is against 501(c)(4) status policy. Warning: the ad is full of the usual garbage that was overwhelming the airwaves at the time.
Essentially, the Tea Party and conservatives whining about how the big bad IRS is picking on them by bringing scrutiny and accountability is particularly ironic since that’s what they are always complaining about regarding the government. Since the mathematical reality that the majority of groups seeking 501(c)(4) status were conservative with titles like “Tea Party” and “Patriot”, it is obvious that the numbers of those under scrutiny who eventually got their status were “targeted”.
How did this get started? It began back in March 2010, when the tea party movement was all the rage. According to a leaked timeline (PDF) from a draft report by the Treasury inspector general for tax administration, IRS staffers began flagging applications from groups with politically themed names like “We the People” and “Take Back the Country.” Staffers also targeted groups whose names included the words “tea party” and “patriots.” Those flagged applications were then sent to specialists for a more rigorous review than is typical.
The IRS gave extra scrutiny to 298 groups applying for tax-exempt status, the Washington Post reported. Seventy-two of those groups had “tea party” in their title, 13 had “patriots,” and 11 had “9/12,” shorthand for the 9/12 movement started by conservative TV host Glenn Beck.
The real question is who are those who contribute to 501(c)(4) groups and should they be allowed to be politically charged when their status allows them to “primarily” remain messaging in “social welfare” issues. Isn’t using the term “Tea Party” as part of a group aiming for non-political 501(c)(4) status admitting a political bent that itself would be a violation of the status definition?
Speaking of scrutiny, it is laughable that complaints from anti-government Tea Party types want to use government programs like the IRS 501(c)(4) status and get caught red-handed with being delinquent on paying their taxes. Obviously, it’s evident that they aren’t the sharpest blades in the drawer.
The IRS denied at the time that it had targeted conservative groups for special attention, an assertion that has proven to be an embarrassment for the Obama administration in recent days.
While embroiled in a lengthy dispute with the IRS over her group’s tax-exempt application, Rapini said the IRS office in Ogden, Utah, audited her and alerted California tax authorities that she and her husband had neglected to pay $20,000 in taxes. They were billed $43,000 with penalties and fees.
Rapini alleges that the personal audit and her group’s application were connected. She intends to pay the taxes, which she blamed on an accounting error and are owed to the state, but is still fighting the fees. The IRS declined to comment.
There is also another layer of intrigue where there is evidence that some 501(c)(4) groups are missing millions of dollars:
Sometime in late 2009 or early 2010, a 501(c)(4) group called TC4 Trust — about which OpenSecrets.org wrote several months ago — gave $3.8 million to another 501(c)(4) with a Phoenix address. The recipient’s name, however, is smudged on TC4’s IRS form 990, where it had to report any grants that it made to other organizations.
But there’s a clue: TC4 made another $5.5 million grant the following year to a group called American Commitment — which had the same IRS-assigned employer identification number (EIN) as the unknown recipient of the $3.8 million grant the year before.
Between August 2009 and June 2011, then, TC4 gave more than $9 million to this group.
The hitch? No 501(c) organization (or 527 group) with that EIN has ever filed a tax form 990, according to IRS data. Even given the delayed filing deadlines that allow these nonprofits to send their forms in long after their activity has occurred, the American Commitment group on the receiving end of TC4’s largesse would have reported many months ago.
While millions are lost, there are the obvious violations by conservative 501(c)(4) groups like Americans for Job Security, American Commitment, American Action Network, Karl Rove’s Crossroads and many others that not only need to be brought under scrutiny, but also investigated for criminal offenses.
In their initial applications seeking tax-exempt status under a particular provision of the tax code, section 501(c)(4), dozens of political nonprofits told the IRS their political spending would be limited or, in some cases, nonexistent. (Otherwise, they wouldn’t qualify for this advantageous tax status, which allows them to take foreign donations and hide the identities of their funders.) But ProPublica reported that many of those groups have spent big on politics. In 2008, for instance, the Iowa-based American Future Fund assured the IRS on its tax-exempt application that it would spend “no” money to influence elections; the same day the group mailed its application, it released a web ad hailing then-Sen. Norm Coleman (R-Minn.) and went on to spend $8 million on politicking in the 2010 elections. Americans for Responsible Leadership, an Arizona-based nonprofit, was more bold: It told the taxman it would engage in zero political work. It then spent $5.2 million backing Mitt Romney.
There are some records available that indicate who some of the big players are who helped contribute to conservative 501(c)(4) groups in that last election cycle, although much more money doesn’t have to be accounted for:
Sheldon and Miriam Adelson: $36.25 million
Much of the Las Vegas Sands tycoon’s early outlay went to the now-defunct Newt Gingrich super PAC Winning Our Future. When the former Speaker dropped out of the race, the Adelsons switched their allegiance to Romney, vowing to plough $100 million towards his victory if necessary. With a net worth of $20.5 billion, it’s not a stretch.
Harold and Annette Simmons: $15.74 million
The Texas oilman and his wife told the Wall Street Journal they’d happily spend $36 million removing Obama from the White House. So far they’ve donated almost half that to Restore Our Future as well as Karl Rove’s conservative super PAC American Crossroads, itself a magnet for big-spending billionaires.
Peter Thiel: $4.735 million
The PayPal billionaire and early Facebook investor is the only rich list member to have given to Ron-Paul backing super PAC Endorse Liberty. The self-proclaimed libertarian also cut a check to Club For Growth Action, which supports candidates running against Democrats.
Robert Rowling: $4.13 million
Most of the oil mogul’s millions went to Karl Rove’s American Crossroads super PAC.
William Koch: $3 million
The “other” Koch, Charles and David’s lesser known brother Bill, is a supporter of Mitt Romney-backing Restore Our Future.
Jerrold Perenchio: $2.6 million
One-time Univision owner has backed both Restore Our Future and American Crossroads.
Harlan Crow: $2.5 million
Like Perenchio, the real estate mogul has split his cash between Romney and Rove.
Paul Singer: $2.2 million
New York hedge funder has donated cash to Restore Our Future, but also to his own pro-equal rights super PAC American Unity PAC. He’s a firm backer of marriage equality and gay rights.
Ken Griffin: $2.08 million
Citadel honcho has cut checks to Restore Our Future and American Crossroads.
Joe Craft: $1.75 million
The billionaire coal magnate split his funds between Romney and Rove.
Julian Robertson: $1.25 million
Hedge fund legend backed American Crossroads and Restore Our Future.
Bob Parsons: $1.05 million
Eccentric founder of GoDaddy.com is the most recent billionaire donor to Romney-backing super PAC Restore Our Future, making his gift in August.
Kenny Troutt: $1 million
Telecoms king and Kentucky Derby winner backed Rove’s American Crossroads as well as Americans for Rick Perry and the Texas Conservatives Fund.
B. Wayne Hughes: $1 million
The founder of Public Storage is a longtime donor to Rove’s American Crossroads.
Until Citizens United is somehow repealed and real campaign finance reform is initiated and signed into law, 501(c)(4) groups will continue to bloat within the fabric of democracy and favor buying politicians with dark, secret money with unlimited, secret money to continue influencing elections. Between stealth 501(c)(4) groups hiding their money and contributors and the agenda of the American Legislative Exchange Council, much more has to be done to fight back in grassroots movements as future elections come into the next cycle.
Meanwhile, the greedy billionaires and banksters will hide behind the curtain and have their way through sordid means like legal extortion and hope no one is paying attention.