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Karl Rove group, other tax-exempt orgs under fire for alleged political activities

October 5, 2010

You've got to love the theater that is U.S. politics even if you don't like the actual results.

As the Nov. 2 midterm election day nears, mud (and other organic material) definitely is being slung. And some folk are worried that not only are aspersions being cast, but that they're being done so improperly.

So they asking the IRS to look into suspected improper political activities.

Democracy 21 and the Campaign Legal Center contend that Crossroads GPS, a conservative group back by Karl Rove, is violating tax laws meant to limit political activity by nonprofit groups.

In a letter to IRS Commissioner Douglas Shulman and Lois Lerner, director of the agency's Exempt Organizations Division, the campaign finance watchdog groups allege that Crossroads GPS is using its tax-exempt status to enable donors to evade the public disclosure requirements that apply to groups organized specifically for political purposes.

This latest complaint follows a letter sent last week by the Senate Finance Committee chairman about such possible nonprofit improprieties.

In that missive, Sen. Max Baucus (D-Mont.) called on Shulman to open an investigation into certain political advocacy groups that have tax-exempt status. 

Baucus did not name names. Rather, he's seeking a review of "major 501(c)(4), (c)(5) and (c)(6) organizations involved in political campaign activity." 

The Finance Committee chairman wants the IRS to:

  • Determine if these organizations are operating for the organization's intended tax exempt purpose,
  • Ensure that political activity is not the organization’s primary activity, and
  • Determine if they are acting as conduits for major donors advancing their own private interests regarding legislation or political campaigns, or are providing major donors with excess benefits. 

Baucus' request was prompted by recent media reports of nonprofits being backed by folks with political agendas. (Ya think?)

Such action, wrote Baucus, raise a basic question: Is the tax code being used to eliminate transparency in the funding of our elections? (Duh!)

"With hundreds of millions of dollars being spent in election contests by tax-exempt entities, it is time to take a fresh look at current practices and how they comport with the Internal Revenue Code’s rules for nonprofits," he told Shulman.

Baucus wants the IRS to send the Finance Committee a report on its findings ASAP.

I appreciate Baucus following protocol to get the ball rolling.

And I applaud the effort to ferret out such illegal political activities by tax-exempt groups.

I am skeptical, however, as to just how quickly any such investigation can be conducted. The midterm election is just a month away.

And I'm even more dubious that any real punishment will be handed out if and when such tax-law violations are found.

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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