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Barker reports: "Political insiders and campaign-finance watchdogs have long questioned how Crossroads, the brainchild of GOP strategist Karl Rove, had characterized its intentions to the IRS."

Barker: Karl Rove's Crossroads GPS 'has helped remake how modern political campaigns are financed.' (photo: Fred Prouser/Reuters)
Barker: Karl Rove's Crossroads GPS 'has helped remake how modern political campaigns are financed.' (photo: Fred Prouser/Reuters)


What Karl Rove's Dark Group Promised the IRS

By Kim Barker, ProPublica

14 December 12

 

n a confidential 2010 filing, Crossroads GPS - the dark money group that spent more than $70 million from anonymous donors on the 2012 election - told the Internal Revenue Service that its efforts would focus on public education, research and shaping legislation and policy.

The group's application for recognition as a social welfare nonprofit acknowledged that it would spend money to influence elections, but said "any such activity will be limited in amount, and will not constitute the organization's primary purpose."

Political insiders and campaign-finance watchdogs have long questioned how Crossroads, the brainchild of GOP strategist Karl Rove, had characterized its intentions to the IRS.

Now, for the first time, ProPublica has obtained the group's application for recognition of tax-exempt status, filed in September 2010. The IRS has not yet recognized Crossroads GPS as exempt, causing some tax experts to speculate that the agency is giving the application extra scrutiny. If Crossroads GPS is ultimately not recognized, it could be forced to reveal the identities of its donors.

The tax code allows groups like Crossroads to spend money on political campaigns - and to keep their donors private - as long as their primary purpose is enhancing social welfare.

Crossroads' breakdown of planned activities said it would focus half its efforts on "public education," 30 percent on "activity to influence legislation and policymaking" and 20 percent on "research," including sponsoring "in-depth policy research on significant issues."

This seems at odds with much of what the group has done since filing the application, experts said. Within two months of filing its application, Crossroads spent about $15.5 million on ads telling people to vote against Democrats or for Republicans in the 2010 midterm elections.

"That statement of proposed activities does not seem to align with what they actually did, which was to raise and spend hundreds of millions to influence candidate elections," said Paul S. Ryan, senior counsel for the Campaign Legal Center, who reviewed the group's application at ProPublica's request.

Officials with Crossroads GPS would not answer specific questions about the material in the application or whether the IRS had sent a response to it.

"As far as we know, the Crossroads application is still pending, in which case it seems that either you obtained whatever document you have illegally, or that it has been approved," Jonathan Collegio, the group's spokesman, said in an email.

The IRS sent Crossroads' application to ProPublica in response to a public-records request. The document sent to ProPublica didn't include an official IRS recognition letter, which is typically attached to applications of nonprofits that have been recognized. The IRS is only required to give out applications of groups recognized as tax-exempt.

In an email Thursday, an IRS spokeswoman said the agency had no record of an approved application for Crossroads GPS, meaning that the group's application was still in limbo.

"It has come to our attention that you are in receipt of application materials of organizations that have not been recognized by the IRS as tax-exempt," wrote the spokeswoman, Michelle Eldridge. She cited a law saying that publishing unauthorized returns or return information was a felony punishable by a fine of up to $5,000 and imprisonment of up to five years, or both. The IRS would not comment further on the Crossroads application.

"ProPublica believes that the information we are publishing is not barred by the statute cited by the IRS, and it is clear to us that there is a strong First Amendment interest in its publication," said Richard Tofel, ProPublica's general manager.

ProPublica has redacted parts of the application to omit Crossroads' financial information.

With its sister group, the super PAC American Crossroads, Crossroads GPS has helped remake how modern political campaigns are financed.

American Crossroads, which does identify its donors, spent almost $105 million on election ads in the 2012 cycle. For its part, Crossroads GPS poured more than $70 million into ads and phone calls urging voters to pick Republicans - outlays that were reported to the Federal Election Commission. It also announced spending an additional $50 million on ads critical of President Barack Obama that ran outside the FEC's reporting window.

Based on the extent of Crossroads GPS' campaign activities, Obama's re-election campaign asked the FEC in June to force it to register as a political action committee and disclose its donors. The FEC has yet to rule on the request.

Politically active social welfare nonprofits like Crossroads have proliferated since the Supreme Court's Citizens United decision in January 2010 opened the door to unlimited political spending by corporations and unions.

Earlier this year, a ProPublica report showed that many of these groups exploit gaps in regulation between the IRS and the FEC, using their social welfare status as a way to shield donors' identities while spending millions on political campaigns. The IRS' definition of political activity is broader than the FEC's, yet our investigation showed many social welfare groups underreported political spending on their tax returns.

It's impossible to know precisely how Crossroads has directed its efforts, but the breakdown of expenses on its tax returns from June 2010 to December 2011 gives some indications.

During those 19 months, Crossroads spent a total of $64.7 million, of which $1.4 million - or just 2 percent - was identified as being spent on research. That compares with the 20 percent of effort Crossroads said it would devote to research in its application.

A tax return covering this year isn't due until November 2013.

The IRS rarely pursues criminal charges against nonprofits based on statements in their applications. It's more common for the agency to deny recognition or revoke a group's tax-exempt status.

In a letter to Congress in September, the IRS said it was engaged in "more than 70 ongoing examinations" of social welfare nonprofits. Earlier, in its work plan [15] for the 2012 fiscal year, the agency said it was taking a hard look at social welfare nonprofits with "serious allegations of impermissible political intervention."

Campaign finance watchdog Fred Wertheimer, who runs Democracy 21 and has filed several complaints to the IRS about Crossroads, said the group's application for recognition showed why more aggressive enforcement is needed.

"When you read what they say on their application, there are a lot of words there. But I find them to be disingenuous and to have little to do with why Karl Rove founded this organization," Wertheimer said. "If you believe this is a social welfare organization, I have a rocket that can get you to the moon very quickly and at very little cost."

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+45 # mike/ 2012-12-14 15:20
hello, Jonathan Collegio! applications are public record for all non-profits of any type, as are their annual tax returns!

if you are the 'spokesman' for the group you need to know this from your 'legal department'...
 
 
+1 # Diane_Wilkinson_Trefethen_aka_tref 2012-12-15 03:56
Quoting mike/:
hello, Jonathan Collegio! applications are public record for all non-profits of any type, as are their annual tax returns!

if you are the 'spokesman' for the group you need to know this from your 'legal department'...


That is incorrect.

The Federal FOIA applies to federal government agencies, not non-profit corporations. However, states have their own FOIAs and many states also have so called "Sunshine Laws" which allow the public to view some documents of 501(c)(3) non-profits. Even here there are exceptions. One such exception is a filed but not yet approved application for 501(c)(3) status.

If you know of any statutes that contradict the above, please post them.
 
 
+3 # dkonstruction 2012-12-17 14:52
The tax exempt status application (IRS form 1023) and the non-profit's financial information (IRS form 990) are public information.

Here's a link to the 1023 form which states right on the form that it is public information.

http://www.irs.gov/pub/irs-pdf/f1023.pdf
 
 
+1 # Diane_Wilkinson_Trefethen_aka_tref 2012-12-17 22:29
This is a perfect example of why people who do not KNOW the law shouldn't claim they do. Instead, say, "I may be wrong but I think that..."

Most of the CAPS below are MY emphasis:

The first instructional words on the document you referenced, Form 1023, are, "Because the IRS is required to disclose APPROVED exemption applications and information returns..."

Also, at the top right of the form itself is this, "Note: IF exempt status is approved, this application will be open for public inspection."

IRS pub "Disclosure of Tax Return Information"
http://www.irs.gov/pub/irs-tege/eotopick93.pdf
"IRC 6104(a) provides for public inspection of approved applications for recognition of exemption (Form 1023 and Form 1024 and supporting documents)… These disclosure requirements apply only to organizations determined to be exempt from tax. APPLICATIONS UNDER CONSIDERATION BY THE SERVICE OR WHICH HAVE BEEN DENIED ARE NOT SUBJECT TO DISCLOSURE UNDER IRC 6104(a).”

Think about it.

If an organization's Form 1023 has not been approved then the organization is not yet a 501(c)(3). If it is not a 501(c)(3), then it cannot be subject to the disclosure requirements of a 501(c)(3).
 
 
0 # Diane_Wilkinson_Trefethen_aka_tref 2012-12-15 06:22
Quoting mike/:
hello, Jonathan Collegio! applications are public record for all non-profits of any type, as are their annual tax returns!

if you are the 'spokesman' for the group you need to know this from your 'legal department'...


That is incorrect.

The Federal FOIA applies to federal government agencies, not non-profit corporations. However, states have their own FOIAs and many states also have so called "Sunshine Laws" which allow the public to view some documents of 501(c)(3) non-profits. Even here there are exemptions. One such exception is a filed but not yet approved application for 501(c)(3) status.

If you know of any statutes that contradict the above, please post them.
 
 
+97 # MainStreetMentor 2012-12-14 16:19
Surely no one - absolutely NO ONE - believes a word Karl Rove or anyone or anybody representing, or associated with, him utters or writes. I doubt if there has ever been a committment made which was intended to be honored. Faux News and the entire entity known as the RepubTeacan Party is in the process of perishing - due, in no small part, to Karl Rove and his insanties of political science practices.
 
 
+53 # Art947 2012-12-15 07:26
May your words result in actions which allow the Repub/Teabag Party to become so small that it can be drowned in a teacup! One of the black marks against Pres. Obama and the Attorney General will always be the fact that the criminals of the Bush II administration were never prosecuted for the many crimes that they committed against the American people.
 
 
+29 # Ralph Averill 2012-12-15 17:16
Wouldn't it be just ducks if Crossroads GPS's tax-exempt status was denied, and they owed taxes on everything they collected, which of course they don't have because they spent it on political propaganda! Would Rove have to go begging his contributors for money to pay taxes after he wasted all the money they already gave him in failed attempts to buy elections?
Hey, I can dream.
 
 
+8 # mdhome 2012-12-15 18:19
Sweet dreams.
 
 
+5 # confoundedbridge 2012-12-17 08:21
It would probably play havoc with the tax returns of those that contributed to Crossroads. They thought that they would not only be able to make an anonymous donation but that they would also be able to take a deduction on their taxes. I hope your dream comes true.
 
 
+36 # ghostperson 2012-12-15 00:34
This article dovetails with the earlier one on RSN about the two-tiered justice system in the country. No infraction to tiny to engrandize to prosecute the non-elite, no crime too large to trivialize or excuse when committed by the self-important elite. Then, what is laughingly called "the government" or "the administration, " insults our collective intelligence by telling us it is for the greater good to let financial uber-crooks pay a fine that is chump change because somehow the entire economy will be threatened by prosecuting one individual or one group of crooks. I never got over Gerald Ford using the excuse that it was for the greater good to let Richard Nixon go unprosecuted. It was not for my greater good. I wanted to see consequences for malfeasance in the highest office in the land. Just as I wanted to see Wall St. executives charged and imprisoned in the 2007-08 collapse of the economy based upon subprime derivative frauds.

Our entire system has been corrupted and has spun out of control. We are to the point that the only thing left to gain control is scrap our bastardized system and start from scratch again.
 
 
+16 # robcarter.vn 2012-12-15 01:52
What a Bloody farce, revoke their Tax exemption, nbext day thgey register a new group same purpose, staff, money purpose and carry on regardless. If they are klegal people put their signature hanbd in jail as you do to any fraud or Ponzi boss even.
 
 
+29 # cordleycoit 2012-12-15 02:54
It is amazing how Rove stays out of jail on the dark side as bag man to the billionaires.It looks like the Feds are bought and paid for.
 
 
+13 # mdhome 2012-12-15 18:23
Nothing new about there being two sets of justice, one for the little guy and one for the big elites, but it seems to have gotten very flagrant in recent years.
 
 
+46 # motamanx 2012-12-15 07:18
Tax exemption for"Enhancing social welfare" by giving money to the campaigns of the most reactionary, unscientific, belligerent candidates the country has ever seen? Crossroads should be forced to reveal the identities of its donors. And Rove should go to jail (again).
 
 
+5 # mdhome 2012-12-15 18:25
I will find a very deep fast moving river to drop the key in, if anyone can get him locked up.
 
 
+34 # Robert B 2012-12-15 09:15
This application has been pending for more than TWO YEARS? How many election cycles are these guys allowed to influence before somebody approves or rejects the application? Maybe by 2014 or 2016, or maybe 2036.
 
 
+16 # ghostperson 2012-12-15 13:08
Obviously someone is sitting on it. If Rove can do what he is doing without approval, imagine what he would do with it.
 
 
+11 # ghostperson 2012-12-15 13:09
To cordleycoit, nice handle "bag man to billionaires."
 
 
+10 # reiverpacific 2012-12-15 12:11
I hesitate to comment knowledgeably on subject matter so subject to tax regulations (we have an accountant for that sort of thing) but the telling phrases seem to me encapsulated in the following.
[Quotes from article first].
"its efforts would focus on *public education, research and shaping legislation and policy". Suggested addition "Destruction of"*.
"recognition as a social welfare nonprofit*" Suggested addition*"disma ntling apparatus*".
"any such activity will be limited in amount, and will not constitute the organization's primary purpose*." Suggested addition, *"which will be to raise unlimited funds to eliminate the foregoing on behalf of the takeover of our beloved Corporate State" by those who have bought the mastery".
It seems like, as in the case of churches who influence their "Flocks", they are self-contradict ory and show much justification for why they should be taxed out of existence.
 
 
+6 # bingers 2012-12-16 20:04
Any organization that spends so much as one cent for political campaigning should lose their exemptions and pay their taxes in full including the name of every single person who contributed more than $20.

(And then the leaders should be imprisoned for not less than 20 years)
 
 
+1 # dovelane1 2012-12-17 13:19
A working man robas a bank, and there is a manyhunt. A baqnker robs a working man, and there is a bailout. Two-tiered justice indeed.

Perhaps the IRS was waiting to see who won the election. Must be time for a legal and financial monkey pile on Rove and his cohorts.
 

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