Tea Party and Conservative Groups Use of 501 c4

Republicans witch hunt in which they have tried to claim President Obama directed the IRS to target Conservative groups like the Tea Party may backfire, because it has raised awareness of the misuse of  501 c4.

Top Republican political strategist Karl Rove’s method of secretly funneling unlimited contributions from big donors was hugely successful in the 2010 campaign. But his model may yet end up backfiring spectacularly.

roveIn one scenario, groups like Rove’s Crossroads Grassroots Political Strategies could find themselves subject to massive fines, ranging as high as 35 to 70 percent of the money they received in secret donations.

In another scenario, their deep-pocket donors could be hit by a 35 percent tax on their contributions.

Rove may well have found a way around the nation’s federal election laws. But now the key question is whether the Internal Revenue Service is willing to be assertive. Because if it is, then just like with Al Capone, it could be the IRS that gets him.

In Crossroads GPS’s solicitations for money, the group describes itself as a tax-exempt 501(c)(4) organization, and due to a controversial loophole in federal campaign finance rules, the names of donors to those organizations do not have to be disclosed publicly.

But contrary to popular belief, Rove’s group has not formally attained 501(c)(4) status. The group’s application, requesting the IRS to classify it as a “social welfare” group, is still pending.

And while the designation is typically not much more than a formality — organizations routinely call themselves (c)(4) groups before they’ve been formally approved — tax and campaign finance experts contacted by The Huffington Post said the IRS could well deny Crossroads GPS’s application.

Here’s a press release from The Campaign Legal Center on the matter as well: April 17, 2012 – IRS Urged to Curb Crossroads GPS Abuse of Tax Status in Wake of Secret $10 million Contribution to Run Attack Ads:

In a letter sent to the IRS today, Democracy 21 and the Campaign Legal Center again called on the agency to investigate and take appropriate enforcement action against Crossroads GPS for its apparent misuse of a privileged tax status. The letter specifically calls attention to a secret $10 million dollar contribution to the 501(c)(4) group to run attack ads that The Washington Post recently brought to light.

Political operatives are increasingly turning to the 501(c)(4) tax status to hide their donors from the public despite the fact that they are not “social welfare” organizations but are primarily dedicated to supporting and opposing candidates and are poised to spend hundreds of millions of dollars on election advertising this year.

“The continued refusal by the IRS to reign in scofflaws abusing a privileged tax status has only encouraged even more blatant disregard for the law by these groups and their anonymous funders,” said J. Gerald Hebert, Executive Director of the Campaign Legal Center. “A secret ten million dollar contribution to run attack ads shows pure contempt for the law, the agency’s willingness to enforce it, and the public’s right to know who is funding our elections. The IRS must do its job and enforce the law even in the face of political pressure to let the scofflaws continue.”

It is clear that President Obama and the IRS was not involved in any scandal at all.  The IRS was only doing it’s job in trying to determine if Tea Party and Conservative groups applying for 501 c 4 tax exempt were qualified to be granted 501 c 4 tax exempt status.