Letter to IRS Commissioner Charles O. Rossotti Concerning the Bush-Cheney Recount Fund

August 1, 2002

The Honorable Charles O. Rossotti
Commissioner, Internal Revenue Service
U.S. Department of the Treasury
1111 Constitution Avenue, NW
Washington, D.C. 20224

Via fax

Dear Commissioner Rossotti:

We are writing to make you aware of what appear to be thousands of violations of the 527 group disclosure law by the Bush-Cheney 2000, Inc-Recount Fund. The violations are contained in the recount fund’s 8872 disclosure reports filed with the IRS on July 15, 2002. These are serious infractions that undermine the purpose and intent of holding 527 groups accountable and open to the sunlight of public scrutiny.

The recount fund’s filings – a statement of organization (form 8871) and five contribution and expenditure reports (form 8872) – were submitted on the last day of the IRS’s "amnesty" and compliance program. Public Citizen’s analysis of the 8872 reports found that they contain thousands of instances where the fund did not disclose the employer and occupation of individual contributors and recipients of expenditures, as is required by law. Also, the recount fund apparently did not disclose to the IRS hundreds of donors who are listed on the Bush-Cheney campaign Web site as having contributed to the fund. Specifically, Public Citizen’s examination of the recount fund reports shows:

  • The Bush-Cheney recount fund did not list the employer and occupation for 2,456 contributors who gave more than $200. These omissions totaled $2 million, and, as you know, the IRS can fine the fund 35 percent of these disclosure failures. Potential IRS fines for these omissions total $711,000.
  • The Bush-Cheney recount fund did not list the employer and occupation for 143 expenditures totaling $272,050. The IRS requires groups to disclose this information for expenditures of more than $500 made to individuals. The IRS can levy fines of 35 percent on these disclosure omissions, which could total $95,000.
  • The fund’s disclosure reports filed with the IRS show 6,806 contributors who gave more than $200. But a database of contributors provided on the Bush-Cheney campaign Web site lists 7,421 different contributors who gave more than $200. This leaves a disparity of 615 contributors that the fund apparently did not report to the IRS, if the database is accurate. Fines of $43,000 could be assessed if each contributor gave the $200 minimum.

Public Citizen calculates that potential IRS fines for the Bush-Cheney recount fund’s disclosure omissions could reach $850,000 – 35 percent of the total "to which a failure relates." The IRS in its announcement on May 2, 2002 of the amnesty and compliance program said that, "failure to meet the filing requirements by July 15, 2002 could result in the assessment of taxes, penalties and interest." We believe the IRS ought to make good on this notice and use the Bush-Cheney recount fund as an example to send a strong signal to other 527 groups that violations of the law will not be tolerated.

Public Citizen has been studying 527 groups to learn how these organizations are influencing elections, raising money and meeting compliance requirements. We also have been examining the role of the IRS as an enforcer of the 527 disclosure law.

On May 22, 2002, we wrote you to convey our report, Déjà Vu Soft Money, which documented the difficulty of navigating the IRS’s website to find information concerning 527 groups and the lack of IRS enforcement in ensuring compliance with the law. The research showed that many political groups were skirting the law by filing late or not at all, omitting critical information about sources of contributions, failing to identify related entities and stating overly vague or inaccurate purposes.

Again, we encourage you to institute a strong enforcement effort to ensure that political groups stop flouting this important campaign finance disclosure law, as well as make urgently needed improvements to the web-based disclosure system.

Thank you for taking these recommendations and views into consideration. We have, in the course of preparing these reports, come to understand the huge task of monitoring 527 groups and making their disclosure reports quickly available to the public. Know that we appreciate your efforts and would like your comments on these issues. Please do not hesitate to contact us should you have any questions.

Sincerely,

Joan Claybrook
President

Frank Clemente
Director, Public Citizen’s Congress Watch

cc: Steven T. Miller, Director, Exempt Organizations