Cracking Down on Secret Campaign Funding

Tea Party

The I.R.S. is questioning some Tea Party groups about their tax-exempt status. Photo credit: Wikimedia Commons

Super PACs might get all the attention when it comes to secretive political spending, but this week another type of political organization is getting a little (unwanted) time in the limelight: 501(c)(4) groups.

Some groups claim this tax-exempt status, meant to designate groups promoting social welfare, for overtly political activities, including funneling secret money into political advertising. But this week, the Internal Revenue Service (I.R.S.) has sent questionnaires to some Tea Party groups to determine if they really qualify for 501(c)(4) status.

The Huffington Post:

Should any group currently calling itself a 501(c)(4) have its designation denied or revoked, tax experts said the consequences could be severe, including fines of 35 percent or more of the money they raised in secret.

And the groups might have to make donors’ names public.

Even loose talk about donor secrecy no longer being guaranteed could put a screaming halt to the extraordinary flow of money into these groups from deep-pocketed people and corporations that want to buy political ads without leaving fingerprints.

The I.R.S.’s decision was cheered by many, including the New York Times, which editorialized that “taxpayers should be encouraged” by the action:

Such I.R.S. inquiries are long overdue and should be applied across the board to the growing number of organizations, allied with the major political parties, that are also ludicrously posing as “social welfare” groups …. Chief among these groups are American Crossroads, the campaign machine created by Republican guru Karl Rove, and Priorities USA, the Democratic counterpart founded by former White House aides, now openly encouraged by President Obama as he runs for re-election.

Meanwhile, Senate Democrats and the watchdog group Citizens for Responsibility and Ethics in Washington (CREW) have called for further action by the I.R.S. The senators wrote a letter to the I.R.S. asking that it better police these groups. If not, they threatened legislation:

“We urge the I.R.S. to take these steps immediately to prevent abuse of the tax code by political groups focused on federal election activities,” the six senators on a Democratic campaign finance task force wrote. “But if the I.R.S. is unable to issue administrative guidance in this area then we plan to introduce legislation to accomplish these important changes.”


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