October 6, 2010; Source: Washington Post | Two campaign-finance watchdogs, Democracy 21 and the Campaign Legal Center’ asked the IRS yesterday to investigate Crossroads GPS, the nonprofit supported by Karl Rove, for allegedly violating U.S. tax laws limiting the political activities of nonprofit groups.

The complaint filed with the IRS says the group is using its nonprofit status to shield the identities of its wealthy donors.

“This is a baseless complaint, filed by a partisan group that files baseless complaints for its living,” Jonathan Collegio, spokesman for American Crossroads and Crossroads GP, told the Washington Post.

Crossroads GPS is organized as a nonprofit “social welfare” organization under section 501(c)(4) of the federal tax code, which effectively means the group can raise and spend as much as it wants with minimal public disclosure. But U.S. tax laws also say the primary purpose of such nonprofit groups cannot be political, including the “participation or intervention in political campaigns.”

501(c)(3)’s are prohibited from participating in any partisan political activity.

Crossroads GPS is an arm of American Crossroads, which is organized as a so-called “super PAC,”—it can raise and spend as much as it wants on direct advocacy but must reveal donors. According to The Post, records show that a handful of billionaires and their companies have contributed nearly all of American Crossroads’ money. And the two Crossroads groups together have spent nearly $10 million so far in support of Republican candidates, part of a stated goal of more than $50 million by the midterm elections.

Supreme Court ruling in Citizens United v. Federal Election Commission, which found that corporations can spend as much as they want for or against political candidates has helped unleash a frenzy of spending by groups outside the party system this year, most of it by donors who do not have to be publicly identified.

As midterms approach and 2012 just around the corner there will be much more money flowing. There promises to be many more complaints as well, leading to a vigorous legal scrum over election and campaign-finance rules for 2012.—Aaron Lester