Donald W. Reynolds National Center For Business Journalism

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Political campaign committees vs non-profit entities

June 27, 2012

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The website of the pro-Republican group Crossroads GPS is full of ads and links to social media.

What is a nonprofit entity and what is a campaign committee?

That question is now being put to the Federal Election Commission by Democrats who are taking aim at Karl Rove’s Crossroads GPS, a nonprofit entity which aims to raise $300 million or so to attack President Barack Obama and other Democrats.

Karl Rove
Karl Rove. Photo by Flickr user JD_WMWM

Crossroads may act and sound exactly like a political campaign committee to Democratic ears. But, it has been organized as a tax-exempt social welfare group — a 501(c)4. Under Internal Revenue Service requirements, this means it must not be organized for the “primary purpose” of engaging in political activities but as a charitable organization for the public’s benefit. The increasing use of nonprofits is one of the many ways that large sums of money are entering the Presidential race in the wake of the Citizens United decision, that opened the doors to large contributions from deep-pocketed donors.

As a 501(c)4 organization, Crossroads GPS is not required to disclose its donors, unlike campaign committees, whose donors must be disclosed to the F.E.C, and kept in a publicly-available data base. Even the so-called Super Pacs, which are getting all the attention this campaign season, have some limited disclosure requirements.

Now Mr. Rove’s efforts are being attacked on two fronts: There are signs that the I.R.S. is taking a harder look at groups like Crossroads GPS. And, President Obama’s lawyers have sent a letter to the F.E.C. saying that Crossroads GPS is not a “social welfare” group but a “political committee” and subject to federal reporting requirements.

Already, Republicans have begun to close ranks and are trying to head off the I.R.S. Republican Sen. Orrin Hatch and Senator Minority Leader Mitch McConnell have begun to push back in speeches. In a letter to the I.R.S., Mr. McConnell has called the agency the “speech police” for questions it has raised after a number of Tea-Party related groups have applied for 501(c)4 status.

Just last week, the lawyer for the Obama campaign took the Democrat’s complaint to the F.E.C. In filing the complaint, Obama campaign attorney, Robert Bauer, also wrote to a courtesy letter to Mr. Rove saying it was “obvious to all” that Crossroads is really a political committee.

In his complaint to the F.E.C., Mr. Bauer said that “Under the pretense of charitable activities, Crossroads has tried to shield its donors – wealthy individuals, and corporations who may be pursuing special interest agendas.”

SuperPacs may have gotten all the attention in this election cycle. But a joint investigation http://www.iwatchnews.org/2012/06/18/9147/nonprofits-outspent-super-pacs-2010-trend-may-continue by the Center for Responsive Politics and the Center for Public Integrity shows that when it comes to money, 501(c)4s are not to be ignored.

In the 2010 midterm races, 501(c)4s outspent SuperPacs by a 3 to 2 margin, and that trend may well continue in the current presidential race. The investigation found that the nonprofits spent roughly $95 million in 2010, compared to $65 million for SuperPacs.

Conservative groups 501 ( c) 4s vastly outspent liberal ones – rack up $78 million for the conservatives and $16 million for the ones on the left.

For reporters covering campaign finance, the issues are clear: Not all the action is with SuperPacs. Given the secrecy surrounding 501( c)4s – they do not have to report donors nor their spending – both sides will be fighting hard. Hard, by Mr. Rove and Republicans, to keep Crossroads GPS as it is. Hard by the Democrats to pry open its books.

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