IRS Sued for Catatonia in the Monitoring of 501(c)(4)s

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February 19, 2013; Source: The Hill

Dr. David Gill isn’t a “mad scientist,” nor was he, as a Bloomington, Ill. emergency room physician, out to destroy Medicare. However, the American Action Network (AAN), a 501(c)(4) “social welfare organization,” spent $1.5 million in 2012 telling the voters of the 13th Congressional District in Illinois exactly that. As a result, Gill, a Democrat, was forced to spend much of the waning days of his campaign responding to these anonymously funded attack ads. He lost his race against U.S. Rep. Rodney Davis (R-Ill.) by only .36 percent.

Now Gill is fighting back. He’s not challenging the results of the election, but he’s challenging the legitimacy of (c)(4)s like AAN that he says exist, for all intents and purposes, to engage in electoral politics with scant or nonexistent program activity that might be characterized as “social welfare.” Joined by the campaign watchdog organization Citizens for Responsibility and Ethics in Washington (CREW), Gill says he is suing the Internal Revenue Service (IRS) for allowing (c)(4)s like AAN to violate the law. IRS regulations allow groups like AAN to function if they “primarily” serve public welfare purposes, which, according to CREW Executive Director Melanie Sloan, is in contrast to the statutory language that maintains that these organizations must “exclusively” serve social welfare purposes.

According to Sloan, the IRS’s regulation has not been challenged as being in violation of the statute in court before. She said in a press conference that the IRS, when challenged on the behavior of (c)(4)s like AAN, “has said only that it is ‘aware’ of the public’s concern. Now the IRS can explain its deplorable inaction in federal court.”

AAN is hardly the only (c)(4) that was active with anonymous attack ads during the 2012 election cycle. NPQ Newswire readers have read numerous reports here about Karl Rove’s Crossroads GPS and many other (c)(4)s, mostly but not all on the Republican side of the spectrum, buying attack ads. AAN received special attention when Aetna inadvertently revealed that it was one of the big secret donors to the (c)(4). As an advocate of a single-payer scheme for national health insurance, Gill attracted special attention from Aetna and other opponents of Gill’s ideas. The fact that Illinois’ 13th congressional district was one of the nation’s few truly competitive congressional elections made it a logical target for a flood of attack ad funding, probably tipping the balance against Gill in the latter part of the campaign. In a press conference announcing the lawsuit against the IRS, Gill and his campaign manager, Sherry Greenberg, described what it was like to fend off the tsunami of ads that prompted voters to conclude that Gill was against Medicare.

Many campaign observers are accustomed to taking aim at the Federal Election Commission (FEC), which Sloan described as “well known to be the most dysfunctional agency in Washington,” accomplishing little or nothing to regulate campaign spending. But this lawsuit targets the IRS as having allowed (c)(4)s to be involved—contrary to the law, the lawsuit asserts—in electoral spending. The FEC, as we have reported, may have inappropriately allowed politically active (c)(4)s to keep their donors secret, but CREW is pointing to the IRS as having allowed (c)(4)s to engage in electoral politics in the first place.

Gill asserts that, “Voters should know who is funding political advertisements, so that they have the information necessary to properly evaluate the claims contained therein.” He calls it “offensive” that the IRS allows political organizations to “hide” behind their status as 501(c)(4) social welfare organizations. Gill and CREW maintain that the IRS’s issuance of a regulation that they say contradicts the law is a failure of governance, an abdication of oversight and responsibility. We hope that the Gill/CREW litigation compels the IRS to explain in court why it has chosen to be catatonic about 501(c)(4)s like AAN making mincemeat of the nation’s increasingly tattered campaign finance regulatory structure.—Rick Cohen

  • Jeff Greim


    Thank you for posting this article about legal action being taken against the IRS for not enforcing its own regulations. It’s good to see that someone is trying to hold the IRS accountable. I am very concerned about the abuse of the 501c4 legal structure to avoid the campaign finance laws that are designed to preserve the financial transparency and legitimacy of our election process. A 2/12/13 NPR broadcast on this topic might be of interest to you and your readers. The link is given below:

  • rick cohen

    It’s not that the IRS isn’t enforcing its own regulations on (c)(4)s–which is isn’t–but it even wrote the regulations in a way that contradicts the meaning of the statute governing (c)(4)s. So the IRS has a double challenge here–what does it mean when it says that political activity cannot be the predominant activity of a (c)(4) and how does that square with a statute that says that (c)(4)s have to exclusively promote social welfare? And of course both of those questions don’t get to the issue of disclosure of (c)(4) donors.