Thursday, December 30, 2010

Reformers' crystal ball fails again with Crossroads GPS

Original Link:

By Sean Parnell

In early October, the self-styled reform community was up in arms over the activities of Crossroads Grassroots Political Strategies (Crossroads GPS), a 501(c)(4) organization linked to the 527 group American Crossroads, even demanding an IRS investigation into the group's spending.

As a 501(c)(4) organization, Crossroads GPS is not required to disclose its donors, but it also cannot have the "primary activity" of engaging in political activities. After apparently plastering and examining newspaper advertisements on their office walls in order to decode secret messages concerning the funding and spending details of Crossroads GPS, the speech scolds at Democracy 21 and Campaign Legal Center, among others, decided that Crossroads GPS had a primary purpose of political activity. They penned a letter to the IRS demanding an investigation.

As we discussed back in October, there were ample reasons to believe the "reformers" were oblivious to basic principles concerning 501(c) tax law:

Crossroads GPS formed in July of this year... CLC/D21 could not possibly know whether or not Crossroads GPS will meet the "primary purpose" standard for this calendar year [later in the letter, CLC/D21 says that the IRS should apply the primary purpose test to Crossroads GPS according to its activity in this calendar year, based on an unrelated standard for the lobbying expenditures of 501(c)(3) groups]. But to apply a calendar year test to a nascent group that formed in the latter half of an election year doesn't make much sense.

Tax experts consulted by CCP note that the IRS has never spelled out this standard, but many tax professionals use the fiscal year standard. Contrary to what CLC/D21 claim, the fiscal year test is the test used by 501(c)(3) organizations choosing Section (h) status, which allows them to engage in some level of lobbying. Section 501(h) repeatedly notes that it is based on a "taxable year," not the "calendar year" as CLC/D21 claim...

Even if it is the case that, so far, Crossroads GPS has spent a majority of its expenditures on political activity, it does not follow that the group is violating tax law. Crossroads could presumably spend a significant amount of resources lobbying Congress during the lame duck session and the next legislative session. Indeed, it has indicated that it plans a significant legislative advocacy effort over the next few months and recently ran a policy-focused ad (on S. 3773, the Tax Hike Prevention Act) in Capitol Hill newspapers.

Considering this evidence, the allegation by CLC/D21 that the group is "engaged primarily, if not exclusively, in activities to promote and support Republican candidates and to oppose and attack Democratic candidates in the 2010 congressional elections" [emphasis added] seems demonstrably false—or at the very least premature...

Well, the pile of evidence that the "reformers" were chasing conspiracy theories untethered to the real world continues to add up. Last week I posted here regarding the overblown fears peddled by "reformers" about corporate funds overwhelming the 2010 election cycle, relying in good part on a report published by the Center for Responsive Politics (CRP) on Tucked at the end of the CRP post was the following:

Jonathan Collegio, the spokesman for American Crossroads, told the Washington Post on Thursday that Crossroads Grassroots Policy Strategies—a sister organization of American Crossroads that is not required to disclose information about its donors—raised an additional $43 million this year.

Crossroads GPS, legally defined as a 501(c)4 nonprofit designed to promote "social welfare," spent $17 million on political messages and advertisements this election cycle...

It doesn't take a degree in math, or for that matter more than a 6th grade education, to realize that the $17 million spent by Crossroads GPS on political activity is well less than half of their funds raised. Even given the uncertainty over whether Crossroads GPS will be filing their IRS reports based on calendar or fiscal year, the group has plenty of funds for activities other than election-related purposes.

I guess we can chalk this up as yet another example of "reformers" issuing dire warnings and making hysterical predictions that ultimately are seen to be little more than bluster, paranoia, and a cracked crystal ball.

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