Partisan Political Nonprofits Evading IRS and FEC Oversight

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June 16, 2011, 2011; Source: Bloomberg NewsFormer New York Governor George Pataki was the chair of a 501(c)(4) called “Revere America” when it filed its paperwork with the Internal Revenue Service last spring.  Its ostensible purpose at the time was to push for the repeal of the national health insurance reform promoted by President Obama.  It said, though hard to believe, that it did not intend to spend any money to influence the election of candidates for federal office or any other office for that matter.

Memories are short, commitments to the IRS are shorter. Four months after filing with the IRS, Revere America spent $2.6 million on TV commercials telling voters to defeat Republicans and elect Democrats. 

Revere America is one of several nonprofits identified by Bloomberg News whose statements to the IRS are at variance with their activities. One, for example, reported to the FEC $8 million in campaign ads for the 2008 campaigns while telling the IRS in its 990 that it had no political expenditures whatsoever.

What’s happening? This is the result of disinvestment in government, particularly in the IRS, but also the FEC.  As Michael Franz, a professor at Bowdoin College said to Bloomberg,  “The enforcement system is so weak, nonfunctional, that pretty much anybody can do whatever they want.” 

In the wake of the Citizens United case, the system of nonprofits fronting for secret donors and special interests to do campaign electioneering activity has become a free-for-all.  501(c)(4)s can spend on politics so long as political activities aren’t their primary purpose for being, but what is “primary purpose” and who’s checking anyhow?

There must be  no one home if a group like the Koch-funded Americans for Prosperity can tell the IRS that it made no political expenditures when the FEC has records showing that it spent $341,000 on campaign ads in 2008 and $1.3 million in 2010.  When we disinvest as a nation in the Internal Revenue Service’s ability to read, check, and verify the information on 990s, we are undermining the government’s ability to monitor and enforce compliance with the laws. The nonprofit sector has long said that it doesn’t need more regulation, just enforcement of the regs that already exist.  But if you starve the IRS and the FEC, what kind of enforcement will you get? 

Let’s see the nation’s nonprofit leadership organizations step up to the plate and call for adequate funding (meaning a substantial increase) for the tax exempt unit at the IRS. Maybe they can remember a call made by this author to dedicate the private foundation excise tax to IRS oversight functions. It’s time to reverse disinvestment in core government functions.—Rick Cohen