March 29, 2015
Six Facts Lost in the IRS Scandal
Posted on May 26, 2013
By Kim Barker and Justin Elliott, ProPublica
4. Social welfare nonprofits do not actually have to apply to the IRS for recognition as tax-exempt organizations.
With all the furor over applications being flagged from conservative groups—particularly groups with “Tea Party,” “Patriot” or “9/12” in their names—it’s worth remembering that a social welfare nonprofit doesn’t even have to apply to the IRS in the first place.
Unlike charities, which are supposed to apply for recognition, social welfare nonprofits can simply incorporate and start raising and spending money, without ever applying to the IRS.
The agency’s nonprofit wing is mainly concerned about ferreting out bad charities, which are the biggest chunk of nonprofits and the biggest source of potential revenue. After all, the IRS’s main job is to collect revenue. Charities allow donors to deduct donations, while social welfare nonprofits don’t.
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Most major social welfare nonprofits do apply, because being recognized is seen as insurance against later determination by the IRS that the group should have registered as a political committee and may face back taxes and disclosure of donors. A recognition letter is also essential to raise money from certain donors—like, say, corporations.
But some of the new groups haven’t applied.
The first time the IRS hears about these social welfare nonprofits is often when they file their first annual tax return, not due until sometimes more than a year after they’ve formed.
In many cases, the first time the IRS hears about these groups is a full year after an election.
5. Most of the money spent on elections by social welfare nonprofits supports Republicans.
Of the more than $256 million spent by social welfare nonprofits on ads in the 2012 elections, at least 80 percent came from conservative groups, according to FEC figures tallied by the Center for Responsive Politics.
Crossroads GPS, which this week said it believes it is among the conservative groups “targeted” by the IRS, spent more than $70 million in federal races in 2012. Americans for Prosperity, the social welfare nonprofit launched by the conservative billionaire brothers Charles and David Koch, spent more than $36 million. American Future Fund spent more than $25 million. Americans for Tax Reform spent almost $16 million. American Action Network spent almost $12 million.
Besides Crossroads GPS, each of those groups has applied to the IRS and been recognized as tax-exempt. (You can look at their applications here.)
All of those groups spent more than the largest liberal social welfare nonprofit, the League of Conservation Voters, which spent about $11 million on 2012 federal races. The next biggest group, Patriot Majority USA, spent more than $7 million. Planned Parenthood spent $6.5 million. VoteVets.org spent more than $3 million.
None of those figures include the tens of millions of dollars spent by groups on certain ads that run months before an election that are not reported to the FEC.
6. Some social welfare groups promised in their applications, under penalty of perjury, that they wouldn’t get involved in elections. Then they did just that.
Much of the attention when it comes to Tea Party nonprofits has focused on their applications and how the IRS determines whether a group qualifies for social welfare status.
As part of our reporting on dark money in 2012, ProPublica looked at more than 100 applications for IRS recognition. One thing we noted again and again: Groups sometimes tell the IRS that they are not going to spend money on elections, receive IRS recognition, and then turn around and spend money on elections
The application to be recognized as a social welfare nonprofit, known as a 1024 Form, explicitly asks a group whether it has spent or plans to spend “any money attempting to influence the selection, nomination, election, or appointment of any person to any Federal, state, or local public office or to an office in a political organization.”
The American Future Fund, a conservative nonprofit that would go on to spend millions of dollars on campaign ads, checked “No”in answer to that question in 2008. The very same day the group submitted its application, it uploaded this ad to its YouTube account:
Even before mailing its application to the IRS saying it would not spend money on elections in 2010, the Alliance for America’s Future was running TV ads supporting Republican candidates for governor in Nevada and Florida. It also had given $133,000 to two political committees directed by Mary Cheney, the daughter of the former vice president.
Another example of this is the Government Integrity Fund, a conservative nonprofit that ran ads in last year’s U.S. Senate race in Ohio. Its application was approved after it told the IRS that it would not spend money on politics. The group went on to do just that.
For more on the IRS and nonprofits active in politics, read our story on how the IRS’s nonprofit division got so dysfunctional, Kim Barker’s investigation, “How nonprofits spend millions on elections and call it public welfare” and our Q&A on dark money.
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