Bad Rules on Political Activity Lead to a Bad IRS Decision on Crossroads GPS

Feb. 9, 2016

Bad Rules on Political Activity Lead to a Bad IRS Decision on Crossroads GPS

Provision in 2016’s Budget Ensured Vague Rules Remain in Place

WASHINGTON, D.C. – Crossroads GPS, a politically active group that does not disclose its donors, received IRS approval to operate as a 501(c)(4) nonprofit in November, the Center for Responsive Politics (CRP) reported today. According to CRP’s analysis, Crossroads GPS has spent more than $142 million since its founding on political activity, taking blatant advantage of outdated IRS regulations.

Under existing IRS regulations, so-called “social welfare” groups are able to spend up to 49 percent of their money on political activity without disclosing where the money comes from. However, groups like Crossroads GPS use the IRS’ vague definition of political activity to spend much more than that amount on ads and other endeavors carefully designed to influence elections while claiming that the activity is not “political.” Abuses like this are possible because the IRS’ definition of political activity for nonprofits is so vague the rules have been rendered meaningless.

Despite railing against the IRS’ subjective determinations on nonprofit status in public, Congress inserted a provision in the 2016 budget that delayed a rulemaking that set out to make objective and sensible standards for those determinations. The IRS and the U.S. Treasury Department had been engaged in a rulemaking that could have clarified the definition of political activity and driven political spending to entities that disclose their donors.

“The astronomical amounts of political spending at Crossroads GPS were never what Congress intended when social welfare nonprofits were created,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “With this decision, the IRS is sanctioning lawlessness.”

“Because the IRS is failing to implement existing law properly, it’s more important than ever that the service issue rules to avoid this debacle in the future,” said Emily Peterson-Cassin, coordinator of Public Citizen’s Bright Lines Project, an effort to clarify the rules for all nonprofits. “For this reason and others, the IRS’ system of evaluating political activity remains broken, and unless the rider is stripped out of future legislation, its harmful effects will continue.”

Public Citizen has complained to the Federal Election Commission (FEC’s) that Crossroads GPS violated the law by not registering as a political committee. Litigation over the FEC’s dismissal of that complaint because of a 3-3 deadlock among the commissioners is ongoing.

The public is overwhelmingly supportive of objective rules for nonprofit political activity.

Polling (PDF) shows that more than eight in 10 voters agree that clear, objective rules for political activity are a good idea.

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The Bright Lines Project is pushing to change the tax code to include clear definitions and safe harbors for nonprofit political activity. Our expert drafting team has been working for years to create clear, fair rules that would apply to all nonprofits and would encourage nonpartisan civic engagement while removing opportunities for abuse. Read our proposal (PDF).