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No Tax Returns for You, Dark Money Groups Say

Some politically oriented social-welfare nonprofits dodged ProPublica’s requests for IRS filings or refused to provide them as required

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Eighteen of 106 social-welfare nonprofits that we identified as having spent money on elections in 2010 would not provide us with tax documents.

It was mid-July and I had come to Hilltop Public Solutions because Jessie Bradley, a partner with the consulting firm, appeared to run two social-welfare nonprofits out of its Washington, D.C., office.

ProPublica was preparing a story about how such groups – also known as 501(c)(4)s for their section of the tax code – were pouring money into elections. The nonprofits run by Bradley, Economy Forward and the Citizens for Strength and Security Action Fund, or CSS Action Fund, had spent more than $3 million supporting Democrats in 2010, records showed.

I wanted the groups’ tax returns and the applications they had submitted to get IRS recognition of their tax-exempt status. The law requires 501(c)(4)s to make these forms available for inspection immediately if someone requests them in person or to provide them by mail within 30 days.

When I reached the office suite listed as Hilltop’s headquarters, however, it turned out to be a law firm.

The firm’s receptionist said Hilltop was located in an inaccessible area of the building and called Bradley to convey my request. 

Bradley said she was busy.

The receptionist asked if I could meet with someone else. “She hung up on me,” the secretary said, putting down the phone.

Bradley wasn’t the only one who refused to provide ProPublica with these crucial records, in which social-welfare groups set down, under penalty of perjury, their revenue, spending and involvement with political activities.

Eighteen of 106 social-welfare nonprofits that we identified as having spent money on elections in 2010 would not provide us with these documents, despite repeated requests and reminders that they were legally obligated to do so.

Some groups promised to provide the records, but never did. Others wouldn’t even tell us their addresses, so we couldn’t ask for them in person. (ProPublica got the tax returns from CSS Action Fund and Economy Forward from the IRS. Available records show they never applied to the agency to be recognized as tax-exempt.)

Several groups offered reasons why they couldn’t gather the documents, at least not right away: A death in the family. A wife with cancer.

“It’s the middle of August,” said Neil Corkery of The Annual Fund. “Everyone’s on vacation.”

Corkery later had the group’s tax return sent to ProPublica, but it was missing a breakdown of the group’s $2.7 million in grants, some of which went to other social-welfare nonprofits heavily involved in politics. Corkery never responded to a request for The Annual Fund’s application for recognition, or to questions about whether the group filed one. Though listed as the person keeping the group’s records on its tax return, Corkery said he was no longer really involved with The Annual Fund.

Thorney Lieberman of the West Virginia Conservative Foundation said he couldn’t provide records for the group right away because he was out of town.

“If it’s a public record, then shouldn’t it be available online?” he asked.

Sure—if the nonprofit or Guidestar, which tracks charities, puts it there. Guidestar had a copy of the West Virginia Conservative Foundation’s tax return but not its application for recognition. Regardless, the group is required to provide documents when requested.

Lieberman asked me to send an email requesting the records. He never responded. Or supplied the address of the West Virginia Conservative Foundation, which reported spending more than $630,000 on political ads in 2010 to the Federal Election Commission. (That’s 97 percent of the group’s expenditures in 2010, according to its tax return.)

The Foundation for a Secure and Prosperous America—which spent more than $111,000 on ads in 2010—also didn’t respond to a request for its application for IRS recognition. Lawyer Scott Thomas, a former FEC chairman who is now with Dickstein Shapiro LLP in Washington D.C., said the associate that advised the group on the filing had just left the firm. Thomas said he couldn’t find a copy of the group’s application.

“I’ve explained the obligation to make a copy available if requested,” Thomas wrote in an email. Neither he nor the group responded to a follow-up email.

Chris Carmouche of GrassTops USA said in mid-May that he was out of the country but would be willing to “talk about” ProPublica’s request for records when he returned later in the month.

But Carmouche never called or responded to a note left at his front door. The IRS couldn’t locate 2009 or 2010 tax returns for GrassTops, which says in daily emails that its mission is to “wage web warfare against the liberal establishment.”

The IRS says that citizens who are rejected from seeing tax returns or applications should write to complain about the offending nonprofit, which can be fined $20 a day, up to $10,000 maximum, as long as the failure continues.

And we’re considering it.

But despite all the rejection, ProPublica has a message for the groups that have not yet supplied us with tax returns and applications for recognition: You have one more chance. Feel free to send them along.

If they are legally obligated to provide the tax returns why aren’t they forced to put them online?

“the offending nonprofit, which can be fined $20 a day, up to $10,000 maximum [13], as long as the failure continues.”

1. $20 a day is a joke
2. Does this mean if 100 people ask for tax returns they are treated as separate incidents and can be fined $1,000,000 (100 x $10,000)?

Edward Dylan Goff

Aug. 22, 2012, 11:14 a.m.

Back in May of this year, I tried to get my head around the specifics of the tax exemption status of 501(c)3 and 4 groups.
One things seems fairly clear is the consistent pattern of violations.
For example:
Under section 501(c)(3) of that code, churches are exempt from income tax and are entitled to receive tax-deductible contributions from members and other donors. As 501(c)(3) organizations, churches must comply with IRS rules One IRS rule specifically states that an organization under its provisions:

. . . does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

And yet earlier in the year, Family Research Council president Tony Perkins made statement that would seem to have been in direct violation of this, after evangelical groups met in Texas to decide which candidate to endorse:

“After three rounds of balloting this morning, and vigorous and passionate discussion, there emerged a strong consensus around Rick Santorum as the preferred candidate for this group,” Perkins said on a conference call Saturday.
Perkins expressed surprise the group was able to come to a consensus, but said what resulted would be a stronger chance of beating President Barack Obama.

And on another occasion,

Gary Bauer, president of American Values, was one of Santorum’s supporters who told the New York Times said that he will now support Romney.
“Going to the general election, I will do everything I can for Governor Romney,” Bauer said. “But his campaign has got to make it easy for me to help them, and not make it hard by being tempted to pull back on conservative issues.”

Since these were not statements made as representatives of organizations and not personal views, there seems to be a good case for the removal of their tax exempt status.

http://nomadicpolitics.blogspot.com/2012/05/loophole-questions-about-tax-exemption.html

It’s not very surprising that they’re looking to avoid scrutiny, given the likelihood that they’re only small parts of a scheme to obscure where money is coming or going.

Mind you, if any of us tried to do something like this, it’d be money laundering (a fine up to the greater of double the amount laundered or half a million dollars, and up to twenty years in Federal prison).  But in the service of a politician, it’s a twenty dollar per day fine, which I’m sure they can contest with a set of excuses and rhetoric.

(Moral:  If you’re laundering money, advertise supporting a political candidate.  Racking up avoidance fines for 68 years is still less than half a million.)

But worry not, I’m sure they’ll send their paperwork on November 7th or so…

Gary Brownell

Aug. 22, 2012, 2:35 p.m.

Your reference to the IRS seems to indicate that the penalty is assessed against a responsible person, not the organization:

What are the penalties for failure to comply with the disclosure requirements for exempt organizations tax documents, and who must pay them?

Responsible persons of a tax-exempt organization who fail to provide the documents as required may be subject to a penalty of $20 per day for as long as the failure continues. There is a maximum penalty of $10,000 for each failure to provide a copy of an annual information return. There is no maximum penalty for the failure to provide a copy of an exemption application.

Keep their feet to the fire ProPublica (though I wouldn’t hold your breath). It doesn’t seem like any other media agency particularly cares to do it. We’d be lost if if not for the few investigative journalists out there. Keep doing what you’re doing.

Maybe it is time for a little civil action.  Once ProPublica publish a list of all the groups who fail to comply, they should also publish the contact details of those groups.

Then, as a community, we should all make the same request of these groups.  Once they fail to respond, we should all report them to the IRS.  This will make their fines substantialy more.

Caroline Leopold

Aug. 22, 2012, 3:31 p.m.

I’ve spent a good chunk of my life (or so it seems) on Guidestar reading public 990s. I am a professional grant writer (and a busy body), so I am always checking on foundation giving patterns.

One thing I’m continually amazed is that many non-profits are able to “hide in plain sight” with their public reporting. The limitations with public reporting on Guidestar is that non-profits, c3 and c4’s alike can be engaged in illegal practices obscured by vague 990 data. I read the public tax return of the West Virginia Conservative Foundation that you discussed in the article. Sure enough, the foundation’s 990 information for 2010 was vague (listing 95% of its expenses in the “other” category). And as you reported on this and other supposed non-profits, the address was a PO box.

I have read Guidestar-posted 990s of non-profits whose leadership were arrested for fraud. The CEO is dragged off in handcuffs, yet 990 data tells an incompatible story about noble missions and sound fiduciary practices.

The take away message from your article is that it is not enough to read a public 990. And those stubborn 501c4’s, who can’t produce a bland 990, clearly have something to hide - that many aren’t legal organizations.

That is insane, but I’ve been looking into SEVERAL of these groups, including the Breitbart-nspired National Blogger’s Club, Engage America, and a few others based out of Texas associated with Foster Freiss (he attends their events, that’s no secret.)

When they refuse to answer you, refuse to return phone calls and email, and refuse to provide accountability, it’s time to fill out the whistleblower form on the IRS site. I find it incredibly frustrating and creepy how they circumvent tax law. :(

I’m shocked!

Even more so because the parties and politicians that the groups support have such high ethical and legal standards!

Al, The Plumber of the Depths of Lunacy!

@Caroline Leopold, who emoted:  “The CEO is dragged off in handcuffs, yet 990 data tells an incompatible story about noble missions and sound fiduciary practices.”

A big wheel being busted?  That suggests that those particular non-profits were immorally- and unethically-challenged in that they lacked a designated Scooter Libby.

Of course, the fact that their 990 data suggests “noble missions” in turn suggests that they were not politically-oriented, which might - in turn - explain the lack of expertise.

(As a side note:  When writing this, I googled “ethically-challenged definition” to ensure that I was indeed implying a lack of skills in unethical and/or immoral behavior.

The first result?

Definition for ethically challenged:
</i>Web definitions:  politician or criminal.</i>

The third result, pulled in turn from Yahoo! Answers?

What’s the meaning of “ethically challenged”? - Yahoo! Answers

Top answer: It means they’re corrupt, dishonest, unscrupulous. It can also mean they’re Republicans.

Yup, I spit coffee on my keyboard in laughter.)

The economy is not going back to Medieval system - no tax, no rules of governments but some free royal lunches once in a while.
It’s an evolving, electronically connected newer world of 21st century where a royal prince of Arabian desert and a laborer in the US gas-field, both have to play by the same tax rules.
It takes all of us, who are AWARE of things like this ProPublica, to make the change.

$10,000 on a million dollar budget sounds like a pretty small price to pay if you’d just as soon not be monitored. Is that a per-incident fee by any chance? Is there any repercussions to granted tax-exempt status for failure to comply? If not I don’t see why any organization of sufficient means wouldn’t just chalk that up as a comparatively small operating expense. It’s not even $1000 a month.

Go ProPublica! Rock on! This is why we (or at least I) love you! Thank you.

It would seem that the IRS has updated its site, and the link in the story above for one to “write to complain” to the IRS has changed.  The new URL is http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-General-Issues:—Complaints-about-Activities-of-Exempt-Organizations and it refers to IRS form 13909 (http://www.irs.gov/pub/irs-pdf/f13909.pdf).

This article is part of an ongoing investigation:
Buying Your Vote

Buying Your Vote: Dark Money and Big Data

ProPublica is following the money and exploring campaign issues in the 2012 election you won't read about elsewhere.

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