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IRS Denies Tax Exempt Status To Political Non-Profit, Sends Signal To Similar Groups

This purely political ad was prepared by the American Energy Alliance, which has a 501(c)4 tax exemption from the IRS. This exemption allegedly means it engages in charitable and community action and is not engaged in politics. The AEA is funded

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This purely political ad was prepared by the American Energy Alliance, which has a 501(c)4 tax exemption from the IRS. This exemption allegedly means it engages in charitable and community action and is not engaged in politics. The AEA is funded by the Koch brothers. It's bad enough groups like this are destroying democracy - but they're tax exempt, too?

I'm glad that the IRS is looking at this, but forcing people to disclose after the election may be far too late. They may have bought the election by then:

An Internal Revenue Service decision revoking the tax-exempt status of a small political nonprofit organization may foreshadow an investigation into groups such as Crossroads GPS and Priorities USA that spend millions on the 2012 U.S. presidential election.

At risk would be the groups’ nonprofit status, which lets them collect millions of dollars from individuals and corporations while keeping donors anonymous.

President Barack Obama and Republican challenger Mitt Romney are benefitting from such nonprofits.

Crossroads GPS was started with help from former President George W. Bush’s chief political strategist, Karl Rove. Priorities USA was co-founded by Bill Burton, a former Obama aide.

The recent IRS decision sends a signal that it may turn its attention after November’s election to major nonprofits involved in this year’s election, said Marcus Owens, a lawyer and former IRS director who oversaw nonprofits.

“The message is groups like Crossroads need to be prepared to explain to the IRS why they’re entitled to tax-exempt status,” said Owens.

Why wait? It won't make much difference after the election.

The IRS decision released last month involved a so-called campaign school in which a partisan group trained candidates.

“You are not operated primarily to promote social welfare because your activities are conducted primarily for the benefit of a political party and a private group of individuals, rather than the community as a whole,” said the IRS letter telling the group it was losing its exempt status.

While the nonprofit wasn’t named, it was Emerge America, its president, Karen Middleton, told Bloomberg News. The national organization is based in San Francisco and works with nine state affiliates that train Democratic women candidates.

Middleton said in an e-mail that the national and state organizations are now incorporated under Section 527 of the tax code, which requires them to disclose their donors.

Critics of political nonprofits such as Crossroads and Priorities USA said the same IRS reasoning should apply to those groups. The organizations are incorporated under Section 501(c)(4) of the tax code, giving them exempt status as social- welfare organizations and barring political activity as the primary focus.

“There’s a boatload of groups that they should looking at,” said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a watchdog group. “When you look at the budgets of these groups, it’s clear that their primary purpose is political activity.”

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