The same IRS office that deliberately targeted conservative
groups applying for tax-exempt status in the run-up to the 2012
election released nine pending confidential applications of conservative
groups to ProPublica late last year.
The IRS did not respond to requests Monday following up about that release, and whether it had determined how the applications were sent to ProPublica.
The IRS did not respond to requests Monday following up about that release, and whether it had determined how the applications were sent to ProPublica.
On Friday, Lois Lerner, the head of the division on tax-exempt organizations, apologized to Tea Party and other conservative groups because the IRS’ Cincinnati office had unfairly targeted them. Tea Party groups had complained in early 2012 that they were being sent overly intrusive questionnaires in response to their applications.
That scrutiny appears to have gone beyond Tea Party groups to applicants saying they wanted to educate the public to “make America a better place to live” or that criticized how the country was being run, according to a draft audit cited by many outlets. The full audit, by the Treasury Department’s inspector general for tax administration, will reportedly be released this week. (ProPublica was not contacted by the inspector general’s office.)
Before the 2012 election, ProPublica devoted months to showing how dozens of social-welfare nonprofits had misled the IRS about their political activity on their applications and tax returns. Social-welfare nonprofits are allowed to spend money to influence elections, as long as their primary purpose is improving social welfare. Unlike super PACs and regular political action committees, they do not have to identify their donors.
In 2012, nonprofits that didn’t have to report their donors poured an unprecedented $322 million into the election. Much of that money — 84 percent — came from conservative groups.
As part of its reporting, ProPublica regularly requested applications from the IRS’s Cincinnati office, which is responsible for reviewing applications from nonprofits.
Social welfare nonprofits are not required to apply to the IRS to operate. Many politically active new conservative groups apply anyway. Getting IRS approval can help with donations and help insulate groups from further scrutiny. Many politically active new liberal nonprofits have not applied.
Applications become public only after the IRS approves a group’s tax-exempt status.
On Nov. 15, 2012, ProPublica requested the applications of 67 nonprofits, all of which had spent money on the 2012 elections. (Because no social welfare groups with Tea Party in their names spent money on the election, ProPublica did not at that point request their applications. We had requested the Tea Party applications earlier, after the groups first complained about being singled out by the IRS. In response, the IRS said it could find no record of the tax-exempt status of those groups — typically how it responds to requests for unapproved applications.)
Just 13 days after ProPublica sent in its request, the IRS responded with the documents on 31 social welfare groups.
One of the applications the IRS released to ProPublica was from Crossroads GPS, the largest social-welfare nonprofit involved in the 2012 election. The group, started in part by GOP consultant Karl Rove, promised the IRS that any effort to influence elections would be “limited.” The group spent more than $70 million from anonymous donors in 2012.
Applications were sent to ProPublica from five other social welfare groups that had told the IRS that they wouldn’t spend money to sway elections. The other groups ended up spending more than $5 million related to the election, mainly to support Republican presidential candidate Mitt Romney. Much of that money was spent by the Arizona group Americans for Responsible Leadership. The remaining four groups that told the IRS they wouldn’t engage in political spending were Freedom Path, Rightchange.com II, America Is Not Stupid and A Better America Now.
The IRS also sent ProPublica the applications of three small conservative groups that told the agency that they would spend some money on politics: Citizen Awareness Project, the YG Network and SecureAmericaNow.org. (No unapproved applications from liberal groups were sent to ProPublica.)
The IRS cover letter sent with the documents was from the Cincinnati office, and signed by Cindy Thomas, listed as the manager for Exempt Organizations Determinations, whom a biography for a Cincinnati Bar Association meeting in January says has worked for the IRS for 35 years. (Thomas often signed the cover letters of responses to ProPublica requests.) The cover letter listed an IRS employee named Sophia Brown as the person to contact for more information about the records. We tried to contact both Thomas and Brown today but were unable to reach them.
After receiving the unapproved applications, ProPublica tried to determine why they had been sent. In emails, IRS spokespeople said ProPublica shouldn’t have received them.
“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 one 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.
In response, ProPublica’s then-general manager and now president, Richard Tofel, said, "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.”
ProPublica also redacted parts of the application to omit financial information.
Jonathan Collegio, a spokesman for Crossroads GPS, declined to comment today on whether he thought the IRS’s release of the group’s application could have been linked to recent news that the Cincinnati office was targeting conservative groups.
Last December, Collegio wrote in an email: “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.”
This year, the IRS appears to have changed the office that responds to requests for nonprofits’ applications. Previously, the IRS asked journalists to fax requests to a number with a 513 area code — which includes Cincinnati. ProPublica sent a request by fax on Feb. 5 to the Ohio area code. On March 13, that request was answered by David Fish, a director of Exempt Organizations Guidance, in Washington, D.C.
In early April, a ProPublica reporter’s request to the Ohio fax number bounced back. An IRS spokesman said at the time the number had changed “recently.” The new fax number begins with 202, the area code for Washington, D.C.
http://www.propublica.org/article/irs-office-that-targeted-tea-party-also-disclosed-confidential-docs
Karl Rove’s Dark Money Group Promised IRS It Would Spend ‘Limited’ Money on Elections
In 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."
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 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."
http://www.propublica.org/article/what-karl-roves-dark-money-nonprofit-told-the-irs
Attorney for Tea Party group: IRS told me a year ago about ‘secret working group’
An attorney for a Tea Party group that believes the IRS targeted it for special scrutiny while applying for nonprofit status said an IRS analyst told him over a year ago that the agency had a “secret working group” devoted to investigating conservative organizations.
Attorney Dan Backer, whose client TheTeaParty.net has been trying to obtain tax-exempt status since 2010, said an IRS analyst mentioned the alleged working group during a phone conversation about one of Backer’s other client organizations.
“More than a year ago, one of these guys, really a slip of the tongue, [said] ‘Yeah we have this new working group that’s really looking at all these conservative organizations,’” Backer said. “And that’s when we knew it was gonna be a problem.”
The IRS apologized for singling out organizations with conservative-sounding names and missions for scrutiny on Friday, days before the agency’s inspector general is expected to release the results of its investigation into the matter.
The IRS says low-level staffers in its Cincinnati, Ohio office, conducted the inappropriate targeting. However, Backer and other conservatives say they doubt this excuse and believe the targeting was approved higher up in the agency.
Backer said IRS staffers at the Cincinnati determinations unit were singling out conservatives because “that’s where they have this secret working group.”
He said these staffers were most likely following orders from above.
“Nobody wipes their own ass in the government without a lawyer clearing it,” Backer said. “The idea that this is not at least a few layers up is nonsense.”
Lois Lerner, the director of the IRS’s Exempt Organizations Division, said she first started looking into whether conservative groups were being unfairly singled out by the division last fall.
But a timeline from the inspector general indicated that Lerner and other high-level officials became aware of the matter as early as 2011.
TheTeaParty.net’s Scottie Nell Hughes said her group was asked to turn over an unreasonable amount of information to the IRS after it applied for tax-exempt status in 2010.
Once the group submitted the first round of documents to the IRS, “they came back and asked for all of our donors and their contact information, as well as a list of all of the previous events … and everything in the future we would do, including the details of who, what, when, where, and how; who was gonna be on the guest list, what interactions we had with congressmen, senators, elected people,” Hughes said.
“We still turned in all the paperwork and thought maybe that was gonna be it. Then round three happened, which was about six months ago,” Hughes added. “They wanted a list of every single email, every single fundraising and marketing email, as well as ever social media post that we’d ever done from the very beginning, which is basically three-and-a-half-to-four years work, which is ludicrous.”
Hughes said TheTeaParty.net was fortunate to have a strong legal team, including Backer, who objected to the unusual requests. But she said she was concerned that smaller conservative organizations may have been intimidated into turning over information about their financial backers—information that Hughes believes could be used to target smaller conservative donors.
Hughes said she has already received complaints from conservative donors about suspicious audits.
“My inbox, my mailbox, and my messages on Facebook have been filled with people saying, ‘You know what’s funny? I’ve never been audited in my life, but two years ago, I actually got audited for no real reason. Nothing had changed on my taxes,’” she said. “Yes, random audits do happen. [But] I think it would be interesting to see how many of these groups actually turned in their donor lists and how many of those people actually got audited.”
The House Ways and Means Committee will hold a hearing on the IRS actions this Friday.
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