Dems Eye Legal Attack on Shadow Spending Groups

Lawmakers and interest groups are crafting a strategy to challenge the tax status of dark money outfits like Karl Rove’s Crossroads GPS.

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Democrats in Congress fighting to blunt the effects of the Supreme Court’s Citizens United decision face an uphill battle in the 112th Congress. After last year’s defeat of the DISCLOSE Act, which would’ve beefed up disclosure requirements in campaign ads and blocked foreign money from seeping into American elections, new legislative efforts face long odds under House Speaker John Boehner (R-Ohio). But a top House Democrat says lawmakers and reform groups are eyeing a more direct strategy to crack down on the powerful outside groups that were so influential in the 2010 midterms: challenging their tax status.

In an interview with Mother Jones, Rep. Chris Van Hollen (D-Md.), the past chairman of the Democratic Congressional Campaign Committee and one of Congress’ staunchest campaign-finance reform advocates, says Democrats and left-leaning groups are mulling a legal fight that would challenge the tax-exempt status of independent right-wing groups that sprung up in the aftermath of the Citizens United decision. Their targets include groups such as Karl Rove’s Crossroads GPS and the American Action Network (AAN), run by former GOP Minnesota Sen. Norm Coleman, which together spent more than $43 million supporting conservative candidates and attacking Democratic ones, making up 23 percent of all outside conservative spending. “People are looking at different legal strategies through the courts because there’s emerging evidence that these groups have abused the rules,” Van Hollen says.

Rep. David Price (D-N.C.), another backer of campaign-finance reform, echoes Van Hollen. In an interview, he confirms there’s been discussion among Democrats about legal challenges to challenging outside groups, adding, “I think there are ample goals for challenging the way those groups have acted.”

Jonathan Collegio, a spokesman for Crossroads GPS, told Mother Jones that “Van Hollen is irresponsibly making claims on zero evidence whatsoever and this is extremely irresponsible for an elected official holding high office.” A spokesman for American Action Network didn’t respond to a request for comment on Thursday.

Crossroads GPS, AAN, and similar outside spending groups are organized as tax-exempt, not-for-profits whose purpose, under the Internal Revenue Service code, is “primarily to further the common good and general welfare of the people of the community.” Such a group, classified as a 501(c)4, can, however, engage in political advocacy—running ads for or against candidates, for instance—with one major stipulation: that politicking “is not its primary activity.”

That distinction is crucial. Since a 501(c) group doesn’t have to register as a political action committee (PAC), it need not disclose its donors and open up its books to public scrutiny. They operate, more or less, under a veil of secrecy—and so do their donors. But if the Federal Election Commission or the IRS determine a group violated the rules, it would be forced to register as a PAC and disclose the sources of its funding.

The legal avenue lawmakers like Van Hollen and Price are considering wouldn’t be the first challenge to outside groups’ tax status. In late October, Public Citizen, the Center for Media and Democracy, and Protect Our Elections alleged that the Iowa-based American Future Fund violated campaign finance law by not registering as a PAC after a New York Times analysis of AFF’s advertisements showed that 56 percent of its TV budget went toward political ads. A similar coalition of public advocacy groups, led by Public Citizen, filed a similar complaint with the FEC against Crossroads GPS, claiming the group’s “major purpose is to influence the 2010 federal elections and to elect Republicans to office.” (The complaints are still pending.)

In September, Sen. Max Baucus (D-Mont.), chairman of the Senate finance committee, asked the IRS to examine influential 501(c) groups and “ensure that political campaign activity” isn’t their primary activity. “With hundreds of millions of dollars being spent in election contests by tax-exempt entities, it is time to take a fresh look at current practices and how they comport with the Internal Revenue Code’s rules for nonprofits,” Baucus wrote.

Paul Ryan, legal counsel at the Campaign Legal Center in Washington, says the fight over Crossroads GPS and American Action Network’s tax-exempt status will be one of the most closely watched issues of 2011. In order to prove they’re not primarily political outfits, such groups need to hit the airwaves with non-election ads, he says, by taking a stand on a particular ballot proposal or social issue. Crossroads GPS, for instance, bought $400,000 of radio time for ads about extending the Bush tax cuts last December. But Ryan also suggests these groups could take a different approach. “Will they go back and break out ads from election season, saying they were actually issue ads and not political?” he asks.

Craig Holman, a lobbyist with the advocacy group Public Citizen, says challenges to groups like Crossroads GPS must first be made through the Federal Election Commission and the IRS. While he holds out little hope for the perpetually deadlocked FEC, Holman is more optimistic about the IRS’ appetite for investigating outside groups. He hedges that optimism by referencing the IRS’ refusal to investigate another outside group named Americans for Job Security, an outfit that Holman believes blatantly violated the IRS rules. (Stephen DeMaura, who runs Americans for Job Security, didn’t respond to a request for comment.) But, he adds, “I really have a hard time imagining the IRS turning a blind eye to this.”

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with The Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with The Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate