Pro Publica reports:
To see how easy it is for a dark money group to ignore the Internal Revenue Service, look no further than the loftily named Government Integrity Fund.
The Fund, an Ohio nonprofit, spent more than $1 million in 2012 on TV ads attacking Ohio Sen. Sherrod Brown and praising his Republican opponent, Josh Mandel. The group spent most of its money on politics — even though IRS rules say nonprofits like the Fund aren’t allowed to do that.
The Fund’s return highlights the ways such nonprofits, known as dark money groups because they are not required to disclose their donors, can skirt IRS rules designed to limit their political activities. Such groups are playing an increasingly prominent role in elections, spending more than $256 million on election activity in 2012.
Dark money groups can spend money on politics as long as they can persuade the IRS that their primary purpose is social welfare. This can lead to quite creative accounting on tax forms, with groups describing ads that should qualify as political under IRS rules as “education” or “issue advocacy.”
Unraveling what the Government Integrity Fund spent in 2012 wasn’t possible until recently because the group didn’t file its tax return until January of this year, when it was two months overdue. The long wait highlights one of the major problems with regulating dark money groups and their spending: The IRS typically doesn’t look at these groups until a tax return is filed, often more than a year after an election has been decided.
Even with the return in hand, several aspects of its operations remain confusing.
In one spot, the group says $4.6 million of its $5.2 million in expenditures were made as grants “and similar amounts paid.” But it doesn’t identify which groups received the grants, as the IRS requires, or what the “similar amounts paid” might have gone toward. At the end of the form, the group says only $1.1 million went toward grants — again, without saying who received the grants — with the rest of the $4.6 million going to its sister super PAC and what it classifies as “public education.”
The group offers no details on what the $1.5 million attributed to education included — mathematically, though, it would have to include the ads it bought related to the Brown-Mandel race.
Experts scoffed at the idea that the ads qualified as education.
“There’s no way you can claim these are education. If this is public education, then everything is public education,” said Donald Tobin, a law professor at Ohio State University who specializes in the intersection of tax and campaign finance law. “These are clearly designed to be political ads to benefit or oppose a candidate. And that’s not social welfare activity.”
It’s an open question how vigorously the IRS, which doesn’t comment on individual taxpayers like the Fund, will pursue groups for irregularities. The agency has revoked the nonprofit status of only one social welfare nonprofit, a liberal group, and its affiliates since the Supreme Court’s Citizens United decision in 2010 paved the way for dark money groups to pour hundreds of millions of dollars into outside election ads.
Experts on nonprofits say the IRS has taken an even more hands-off approach since top officials admitted the agency had targeted applications from conservative groups for extra scrutiny, sparking a scandal and investigations.
