IRS Should Be Looking Into Rove's Crossroads GPS Scheme

By Robert Maguire, The Daily Beast

03 June 13

When it comes to dark money groups, what really separates Crossroads GPS from its liberal counterparts is tens of millions of dollars in FEC-reported political spending, writes Robert Maguire of the Center for Responsive Politics.

arl Rove, the co-founder of Crossroads GPS, has taken of late to asking why his 501(c)(4) social welfare group has been scrutinized, while "liberal groups have operated for decades in the same way GPS does without Democrats complaining." He singled out the League of Conservation Voters, NARAL Pro-Choice America, unions and the NAACP.

It's true that, as congressional scholar Norm Ornstein put it recently, "hypocrisy is the coin of the realm in politics," and both sides are less vexed when their guys are bending the laws. But when it comes to Crossroads GPS, there really is no comparison.

The group Rove helped found has massively outspent other 501(c)(4)s on political expenditures in the last two national election cycles, while fielding a tiny staff and offering no discernible social welfare purpose.

If Rove and his colleagues intend to make the point that there are liberal groups that emulate the scheme perfected by Crossroads GPS, they are absolutely correct. Priorities USA, a 501(c)(4) organization started by former Obama aides, raised $2.3 million from only 5 donors according to its only tax returns filed to date. Like Crossroads GPS and every other 501(c)(4), Priorities USA doesn't have to tell us who those donors were. Both groups also have a separate, disclosing super PAC-which, for the sake of clarity, do not factor into the data discussed in this article.

While 501(c)(4) organizations are supposed to have social welfare as their primary purpose, it's often hard to tell how they provide for the "common good and general welfare of the people" as the IRS describes it. Priorities USA spent hundreds of thousands on media consultants and television ads that don't appear to have ever run on air. They also gave a grant to another liberal 501(c)(4), American Bridge 21st Century Foundation, which appears to do little more than provide opposition research to liberal and progressive groups making ads in races across the country.

Other liberal groups like Patriot Majority USA and Citizens for Strength and Security have been engaged for years in what appears to be a practice of popping up in one place, spending millions in dark money, then changing their address and shutting down - only to start up anew at the same address.

Rinse and repeat.

Patriot Majority USA has gone through three such transformations, and now it has been removed from the IRS list of exempt organizations, suggesting its status has been revoked. We'll probably never know for sure though, because the IRS does not contact the FEC when a dark-money group's status has been denied, nor is the denial public. The group in question simply pays its federal income taxes and fades away. That means that if Patriot Majority USA's status was revoked, there is no system in place to force disclosure of the $7 million they spent in the 2012 election.

When it comes to liberal dark money groups like this, the only thing that really separates Crossroads GPS, aside from ideology, is tens of millions of dollars in FEC-reported political spending over the last two election cycles. On that count, there is no comparison. In both the 2010 and 2012, Crossroads GPS alone spent more than all liberal dark-money groups combined, according to FEC reports.

And that brings us to the examples Rove and his colleagues at GPS have cited for some time now.

Let's start with the NAACP, whose name is on the Supreme Court case that made it possible for 501(c)(4) organizations to keep donors private. The NAACP has never filed an FEC report for political spending directly from its treasury. In 2000, it did spend $7.8 million against then-governor George Bush through a separate 501(c)(4) called the NAACP National Voter Fund, and the NAACP was later audited by the IRS for possible political activities. However, the Fund's IRS filings in the years since show that it has only once raised more than $1 million, and it has reported no political spending, either to the FEC or the IRS.

By contrast, in just one month during the last election cycle, October 2012, Crossroads GPS spent more than $41 million on negative political ads. That total amounts to about $10 million more than the NAACP's entire budget in 2011 - the most recent year for which tax information is available.

To reiterate, Crossroads GPS spent more on negative political ads in one month than the NAACP spent on every single thing that it did in the most recent year for which tax information is available.

But some of the groups mentioned by Crossroads GPS representatives did spend a good bit of money on politics. Even when compared to these groups, however, Crossroads GPS proves to be an outlier. Among the groups Rove mentioned, the League of Conservation Voters spent, by far, the most on politics in the 2012 election. Yet, not only does their 2012 spending represent a fraction of what Crossroads GPS spent - $11 million and $71 million, respectively - but even adding up all of LCV's FEC-reported direct spending going back to 1996 only adds up to about $21 million. That's less than Crossroads GPS reported spending in the last two weeks of the 2012 cycle.

The other peculiar thing about Crossroads GPS is that, for such a spectacularly well-funded social welfare organization, it has a very small staff. The group that has been the vehicle through which hundreds of millions of dollars have been spent has managed to deliver its social welfare function to the American public with, at last report, only eight employees and not a single volunteer. Compare that to the NAACP, which has 157 employees and five thousand volunteers or the League of Conservation Voters' 62 employees and 80 volunteers. NARAL Pro-Choice, another group mentioned by Rove, doesn't have any volunteers, but it has 80 employees overseeing a mere $8.4 million in overall expenditures, as of their last 990. And they spent $1.7 million in the 2012 election - Crossroads GPS could spend several times that amount in one day.

Crossroads doesn't just stand out among the liberal groups it chooses to compare itself to, but it's also an outlier among conservative groups. Organizations like the National Rifle Association (a recipient of Crossroads GPS money) and Focus on the Family Action- both conservative social welfare organizations that spent millions on political ads - have large staffs, including volunteers, who carry out identifiable social welfare function activities. Even a group like Americans for Tax Reform - which has raised eyebrows by filing its first ever FEC reports in the same year it received more than $8 million from Crossroads GPS and the Phoenix "dark money mailbox" known as the Center to Protect Patient Rights - has 59 employees, a couple volunteers, and clear social welfare agenda.

This brings us to the last type of group mentioned by the Crossroads GPS folks: Unions. Crossroads GPS leadership repeatedly bring up unions as a liberal foil for their operations. Yet, viewed in terms of direct spending from their treasury, union spending on politics has fallen significantly, from $50 million in 2008 to $24 million in 2012.

The union with the most direct political spending in 2012 was AFSCME, with $4.6 million spent on direct advocacy and an additional $813,000 on communications with its members. According to Department of Labor records, AFSCME had about 1.4 million members in 2012. By contrast, we still don't know how many donors Crossroads GPS had in 2012, since 501(c)(4)s aren't required to file detailed, comparably timely financial reports to the DOL like unions are - but we do know that GPS raised $76.8 million in its first 18 months of existence from 96 donors. Even here, since we don't have names, we don't know if this donor list included multiple contributions from the same individual, group or corporation.

So, again, some perspective: An organization with 1.4 million members spent less, much less, directly from their treasury than an organization with eight employees, no volunteers, and around 96 donors.

There is a valid, difficult and heated debate taking place around the country about the worrisome and ill-informed targeting exercised by the IRS and about the growing influence of dark money in our elections. Just as it is troublesome that the amount of undisclosed funds in national elections is growing, it is also undeniable that most of the groups - liberal and conservative - spending dark money have legitimate social welfare activities outside of their political spending. No matter the questions about their political activities, when you look at the League of Conservation Voters or the National Rifle Association, you don't have to dig much to find valid social welfare activities. Whether one agrees or disagrees with the content of those activities is another matter entirely.

That is not the case for Crossroads GPS, and it is also not the case for a slew of other liberal and conservative groups - as we have been reporting on at the Center for Responsive Politics for more than a year now - from Patriot Majority USA on the left to American Commitment on the right.

Put all of the employees and volunteers of these more shadowy groups together, and you could hardly staff a McDonald's. But with hundreds of millions of dollars in dark money stacked up, you'd hardly have space for the customers anyway.