Will The IRS Deny Rove's Crossroads Group Tax-Exempt Status?

Oh dear, oh dear. If the IRS rules that KKKarl Rove's Crossroads GPS superPAC is taking part in political campaign activity, not only will they be on the hook for a 70 percent tax bill, they might have to disclose their donors, too. On the

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Oh dear, oh dear. If the IRS rules that KKKarl Rove's Crossroads GPS superPAC is taking part in political campaign activity, not only will they be on the hook for a 70 percent tax bill, they might have to disclose their donors, too. On the bright side, they will be on the hook for a 70 percent tax bill, and they'll have to disclose their donors! Via Dan Froomkin:

WASHINGTON -- A new report from Congress' nonpartisan research arm suggests that the Internal Revenue Service won't have much patience with the argument from groups like Karl Rove's Crossroads GPS that the ads it buys shouldn't be counted as political campaign activity.

The claim that ads attacking candidates aren't political -- as long as they avoid words like "vote" or "elect" -- is key to the empire of shadowy non-disclosing political groups that Rove, the Koch Brothers and other major political players have created.

By insisting that most of their budget goes toward "issue advocacy," rather than influencing elections, these groups exploit a loophole that allows certain non-political groups to keep their donors secret.

The Aug. 30 report from the Congressional Research Service (CRS), first reported by Diane Freda for Bloomberg BNA, reviews IRS rulings on what qualifies as issue advocacy, and strongly indicates that the Rove-style ads wouldn't be a tough call for the agency -- which could revoke an organization's tax-exempt status.

For instance, a recent $4.2 million Crossroads GPS ad buy attacked four Democratic Senate candidates, using the figleaf of calling on them to do such things as repeal health care or "cut the debt" -- as if there was imminent action about to be taken on the Hill.

The CRS report notes, however, that "when there is no pending legislative vote or other non-electoral activity, the IRS rulings suggest it can be difficult for an ad to avoid being classified as campaign activity."

Crossroads GPS publicly released its 2010 and 2011 tax filings in April, claiming tax-exempt status as a social welfare group under section 501(c)(4) of the tax code.

But the IRS has not yet approved its status. Should the IRS conclude that the group is primarily political in nature, the results could be politically explosive. Tax experts tell The Huffington Post that political groups that don't disclose their donations and expenditures to the IRS are subject to a 35 percent penalty on all donations that should have been disclosed but weren't and another 35 percent for the expenditure of that donation.

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