3 Anonymous Americans Gave $50 Million to Karl Rove’s Super Pac; 5 Anonymous Donors Funded Most of Pro-Obama PAC

Monday, November 25, 2013
(graphic: Thomas Nast)

It’s tax time for some political groups, and the available details paint a disturbing picture of plutocracy in 21st century America—which the unavailable details only worsen. 


Crossroads GPS, the campaign funding group launched by Republican politico Karl Rove, claimed on its 2012 tax return that it raised $179.7 million last year, more than twice as much as it did in 2010 and 2011 combined, including individual donations of $22.5 million, $18 million and $10 million, 47 more exceeding $1 million, and 291 who gave $5000 or more. Just 3 donors accounted for 28% of the group’s funding, while million-dollar donors gave at least 54% of it. Out of 1,545 donors in 2012, 1,254 donors gave less than $5,000 each, coming to only 0.2% of Crossroads’ total revenue.


Priorities USA, the Democratic-leaning political nonprofit founded last year by some former aides to Barack Obama, claimed a relatively modest $8.4 million of revenue on its 2012 return, including a donation of $2 million, three of $1 million, one of $900,000, and three of $500,000. Thus 89% of the group's revenues came from eight donors.


Because these groups register themselves with the IRS as “social welfare nonprofits” under section 501(c)(4) of the tax code, they are allowed to keep the names of their donors secret from the public. In return, they are required by law to have a predominantly social welfare purpose, with only incidental political activity. About 150 of these nonprofits reported spending more than $254 million in 2012 on ads, phone calls and mailings, more than 85% of it spent by Republican-leaning groups.


The spending reported by both groups illustrates the problems and abuses of nonprofit status.

Crossroads GPS, the largest political nonprofit, applied for nonprofit status in 2010 after the Supreme Court’s Citizens United ruling allowed unlimited corporate spending on elections, telling the IRS that any spending on elections “will be limited in amount, and will not constitute the organization’s primary purpose.” Accordingly, on its 2012 return Crossroads claims it spent a total of $188.9 million, $112 million (59.2%) of it “on activities related to its social welfare,” and $74.2 million (39.2%) “on direct political activities.” 


But in order to arrive at that ratio, the group had to resort to some rather creative accounting. The “social welfare” spending includes $74.5 million on political advocacy for conservative policies and laws, $35 million in grants to conservative organizations in order to aid in their “social welfare and educational missions,” and $3.2 million on research. That first category includes tens of millions spent on political ads criticizing Obama in swing states during the 2012 election campaign. Crossroads gave grants to Americans for Tax Reform (ATR) ($26.4 million), the Center for Individual Freedom ($2.15 million), and Americans for Job Security ($2 million), telling the IRS that the funds were not to be spent on elections.


Nevertheless, at least one of those groups apparently ignored those alleged restrictions. ATR relied on its Crossroads grant for 85% of its $30.975 million budget in 2012, according to its tax filing for the year, yet it spent at least $9.8 million on politics for the year (or $15.8 million, if you believe ATR’s submission to the Federal Election Commission instead). Under either scenario, ATR spent millions of Crossroads dollars on politics despite that group’s assurance to the IRS that the grant money was for nonpolitical purposes. This sort of political money laundering is apparently not uncommon, and tax filings show several cases of conservative groups networking to give exchange money back and forth.

But Democrats are by no means simon-pure on these issues. Priorities USA spent $4.9 million, 57% of its budget, on grants to other nonprofits, including Planned Parenthood Action Fund ($2.2 million), the Unity Fund ($750,000), a group chaired by Obama bundler Lou Frillman that shares an address with the pro-choice group Emily's List, the League of Conservation Voters ($650,000), People for the American Way ($550,000), America's Voice ($500,000), and Occupy Sandy, a Hurricane Sandy relief effort affiliated with the Occupy movement ($255,000). Like Crossroads, Priorities USA told IRS that its grants were “solely to support [the groups’] social welfare mission,” but Planned Parenthood Action reported to the FEC that it spent more than $6.5 million on the 2012 elections.

With the IRS taking a decidedly hands-off approach to the problem—its only significant enforcement attempt was to deny recognition to one small Democratic group in 2011—the tax returns may nevertheless play a role in the federal lawsuit trying to force the IRS to stop social welfare groups from engaging in this sort of overt political spending.

-Matt Bewig


To Learn More:

Crossroads’ Tax Return Shows Big Donors, But Doesn’t Name Them (by Kim Barker, ProPublica)

Priorities USA Relied on Handful of Donors (by Russ Choma and Robert Maguire, OpenSecrets.org)

ATR's Tax Forms Raise Questions About Use of Crossroads Grant, "Social Welfare" Purpose (by Robert Maguire and Viveca Novak, OpenSecrets.org)

Anti-Obama Nonprofit Tells IRS It's Not 'Political' (by Michael Beckel, Center for Public Integrity)


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