Relax! IRS Rules Are “Lax”

WaPo has good news for anonymous political donors

Are you a 501(c)(4) group that spent millions of anonymous dollars on attack ads during the midterm elections (or, perhaps, a corporation or individual who, unbeknownst to the public, gave money to such a group)? Are you concerned, as you gear up for 2012, that the IRS might revoke your 501(c)(4) status (i.e., that which allows you to keep your donors secret), since the IRS says 501(c)(4)s can’t engage in campaign activity as their primary purpose? Are you busily buying up “issue ads” (See? We’re not just about elections!) in hopes of maintaining your status in the eyes of the IRS?

The Washington Post has some good news for you, as captured in the headline “Lax Internal Revenue Service rules help groups shield campaign donor identities.” (Though, while this may be news to some folks, it is not news to the 501(c)s or the people who love them). Seems there’s something of a “backlog” at the IRS, such that, for example, in the case of the Karl Rove-founded 501(c)(4) Crossroads GPS, the tax agency has not yet even acted on the group’s initial application for 501(c)(4) status, filed in September. (Two points of background: These groups can operate as non-profits even before receiving approval from the IRS. And this particular example of IRS “backlog” came to light via the watchdog group Citizens for Responsibility and Ethics in Washington, which has asked the IRS to review the nonprofit status of right-leaning groups, including the American Future Fund and, most recently, American Action Network.) So: has the IRS not yet acted on Crossroads’s application because the agency has been busy carefully considering that application, or because they just haven’t gotten around to it yet?

Recall last fall that a lawyer who once led the IRS unit in charge of overseeing 501(c)s told The New York Times that the unit is “understaffed, underfunded, and operating under a tax system designed to collect taxes, not as a regulatory mechanism.” And “campaign finance watchdogs, lawyers who specialize in the field and current and former federal officials” told the Times that the IRS “has had little incentive to police the groups because the revenue-collecting potential is small, and because its main function is not to oversee the integrity of elections.”

So, anonymous donors and the groups who spend their money: as you were.

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Liz Cox Barrett is a writer at CJR. Tags: , , , ,