In the lingo of the Internal Revenue Services, these groups are known by their filing designation — 501(c)(4).
These nonprofits were little-considered until they became a convenient tool for political campaign operators.
The U.S. system of campaign finance can best be described as a game of cat-and-mouse. Reformers work to connect the names of those writing the big campaign-contribution checks to those receiving the big campaign-contribution checks. The other side — namely the contributors and the recipients — typically do what they can make such transactions murky. An entire industry of phony grassroots groups, policy advocates and other distractions have arisen with the sole purpose of muddying campaign financing. The big winners remain the influencers with deep pockets and the politicians willing to be influenced.
By the middle of the previous decade, 501(c)(4) organizations became convenient in moving political money around. Contributors to 501(c)(4)s are anonymous. That comes in handy when shoveling “dark money” to politicians and their causes. The 2010 Supreme Court “Citizens United” case allowed 501(c)(4)s to make political contributions with two qualifiers: the spending can’t be the primary function of an organization and the group cannot directly endorse candidates.
Fred Wertheimer of government-ethics watchdog organization Democracy 21 recently told The New Yorker that “it is clear that a number of groups have improperly claimed tax-exempt status as section 501(c)(4) ‘social welfare’ organizations in order to hide the donors who financed their campaign activities in the 2010 and 2012 federal elections.”
In 2010, IRS employees began closely examining the 501(c)(4) nonprofit status filings or organizations with “Tea Party” or “patriot” in their names. While politicians from the left and the right have decried this scrutiny, recent reporting from The New York Times reveals that this close inspection, while appearing to only unfairly focus on one side of the political equation, may not have been completely off-base.
In an article this week, The Times reports three quick examples:
• “When CVFC, a conservative veterans’ group in California, applied for tax-exempt status with the Internal Revenue Service, its biggest expenditure that year was several thousand dollars in radio ads backing a Republican candidate for Congress.”
• “The Wetumpka Tea Party, from Alabama, sponsored training for a get-out-the-vote initiative dedicated to the ‘defeat of President Barack Obama’ while the I.R.S. was weighing its application.”
• “[T]he head of the Ohio Liberty Coalition … sent out e-mails to members about Mitt Romney campaign events and organized members to distribute Mr. Romney’s presidential campaign literature.”
These activities are clearly political and are out of line with the “social welfare” mission set aside for 501(c)(4)s.
Congress is zealously looking into the IRS/Tea Party topic. Republicans will do their best to tie the scrutiny of conservative political organizations to President Barack Obama. In all their investigating, Republicans would do well to keep an open mind about what’s at the heart of this scandal.