In his weekly “Stories I’d like to see” column, journalist and entrepreneur Steven Brill spotlights topics that, in his opinion, have received insufficient media attention. This article was originally published on Reuters.com.
1. The IRS bureaucrat who could upend the campaign finance money flow:
Here’s an idea for a story about an obscure government bureaucrat whose decisions could have a major impact on the 2012 elections and on the entire issue of campaign finance reform going forward.
As this article in Roll Call, the Washington weekly, reports, there is increasing controversy surrounding super PAC-like groups that fashion themselves as coming under the Internal Revenue Service’s 501(c)(4) classification as a “social welfare organization.” Under IRS rules, 501(c)(4)’s are not only tax-exempt but also don’t have to disclose their donors. This means that they can spend unlimited sums on political advertising - including corporate contributions, following the Citizens United decision - but unlike super PACs, they can do so while keeping the sources of the money completely secret.
That’s why many of the big super PACS, such as Karl Rove’s American Crossroads - which are simply non-profits that engage fully and unabashedly in political activity but must disclose donors - operate companion 501(c)(4)’s that can take undisclosed donations. In the case of Rove’s super PAC, the companion 501(c)(4) is called Crossroads GPS.
The sole catch is that under the IRS rules, a 501(c)(4) can only spend money on political activities so long as that is not its “primary activity.”
Ads paid for by a 501(c)(4) can advocate political positions. Thus, there have been Crossroads GPS TV ads that declare, “Tell Obama: Stop the spending. Support the New Majority Agenda,” and “Senator Claire McCaskill was a key Obama adviser in passing his failed $1.18 trillion stimulus.” But these ads cannot directly urge that someone be elected or not elected. And, again, even this slightly tailored political advocacy cannot be the group’s “primary activity,” which is supposed to be “social welfare.” In fact, the IRS regulations specifically state that “the promotion of social welfare does not include the direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”
As The New York Times reported last week, Robert Bauer, a lawyer for the Obama campaign and the Democratic National Committee, has filed a complaint with the Federal Election Commission disputing Crossroads GPS’s claim to be a “social welfare” organization. “There has never been any doubt,” asserts Bauer’s complaint, “about its true purpose: to elect candidates of its choice to the Presidency and the Congress.”
Bauer told the FEC that under a recent federal court ruling, the commission was now empowered to determine the “true purpose” of the 501(c)(4) on a case-by-case basis. However, Bauer wrote, the Rove group seemed determined to “run out the clock,” hoping that its donors would be shielded well beyond Election Day because the FEC is so notoriously slow in making any decisions. “The Commission should act without delay,” Bauer urged, “to ensure that, before heading to the polls, voters are operating with full information about the political interests behind what they have seen on the airwaves.”
Given the FEC’s perennial paralysis, Bauer’s plea is unlikely to work. However, there’s another agency - the IRS - that could act to investigate whether groups like Crossroads GPS and similar 501(c)(4)’s from both parties are more involved in politics than social welfare. Losing a 501(c)(4) designation would force Crossroads GPS to disclose its donors.
Whatever else you think about the IRS as an impenetrable bureaucracy, when it comes to decisions like these designations for tax-exempt groups, it has proved to be far less political than the perpetually deadlocked FEC, whose six members are split between the two political parties.
Ever heard of Steven T. Miller? He’s the IRS deputy commissioner for services and enforcement, and he supervises the Tax Exempt and Government Entities Division, run, according to the IRS website, by Acting Commissioner Joseph H. Grant.