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Karl Rove’s Dark Money Group Promised IRS It Would Spend ‘Limited’ Money on Elections

Crossroads GPS, which has spent tens of millions from secret donors on elections, told the IRS in its 2010 application that its efforts would focus on education, policy-making and research.

Crossroads GPS, the brainchild of GOP strategist Karl Rove that has spent tens of millions from secret donors on elections, told the IRS in its 2010 application that its efforts would focus on education, policy-making and research. (J. Scott Applewhite/AP Photo)

In a confidential 2010 filing, Crossroads GPS — the dark money group that spent more than $70 million from anonymous donors on the 2012 election — told the Internal Revenue Service that its efforts would focus on public education, research and shaping legislation and policy.

The group's application for recognition as a social welfare nonprofit acknowledged that it would spend money to influence elections, but said "any such activity will be limited in amount, and will not constitute the organization's primary purpose."

Political insiders and campaign-finance watchdogs have long questioned how Crossroads, the brainchild of GOP strategist Karl Rove, had characterized its intentions to the IRS.

Now, for the first time, ProPublica has obtained the group's application for recognition of tax-exempt status, filed in September 2010. The IRS has not yet recognized Crossroads GPS as exempt, causing some tax experts to speculate that the agency is giving the application extra scrutiny. If Crossroads GPS is ultimately not recognized, it could be forced to reveal the identities of its donors.

The tax code allows groups like Crossroads to spend money on political campaigns — and to keep their donors private — as long as their primary purpose is enhancing social welfare.

Crossroads' breakdown of planned activities said it would focus half its efforts on "public education," 30 percent on "activity to influence legislation and policymaking" and 20 percent on "research," including sponsoring "in-depth policy research on significant issues."

This seems at odds with much of what the group has done since filing the application, experts said. Within two months of filing its application, Crossroads spent about $15.5 million on ads telling people to vote against Democrats or for Republicans in the 2010 midterm elections.

"That statement of proposed activities does not seem to align with what they actually did, which was to raise and spend hundreds of millions to influence candidate elections," said Paul S. Ryan, senior counsel for the Campaign Legal Center, who reviewed the group's application at ProPublica's request.

Officials with Crossroads GPS would not answer specific questions about the material in the application or whether the IRS had sent a response to it.

"As far as we know, the Crossroads application is still pending, in which case it seems that either you obtained whatever document you have illegally, or that it has been approved," Jonathan Collegio, the group's spokesman, said in an email.

The IRS sent Crossroads' application to ProPublica in response to a public-records request. The document sent to ProPublica didn't include an official IRS recognition letter, which is typically attached to applications of nonprofits that have been recognized. The IRS is only required to give out applications of groups recognized as tax-exempt.

In an email Thursday, an IRS spokeswoman said the agency had no record of an approved application for Crossroads GPS, meaning that the group's application was still in limbo.

"It has come to our attention that you are in receipt of application materials of organizations that have not been recognized by the IRS as tax-exempt," wrote the spokeswoman, Michelle Eldridge. She cited a law saying that publishing unauthorized returns or return information was a felony punishable by a fine of up to $5,000 and imprisonment of up to five years, or both. The IRS would not comment further on the Crossroads application.

"ProPublica believes that the information we are publishing is not barred by the statute cited by the IRS, and it is clear to us that there is a strong First Amendment interest in its publication," said Richard Tofel, ProPublica's general manager.

ProPublica has redacted parts of the application to omit Crossroads' financial information.

With its sister group, the super PAC American Crossroads, Crossroads GPS has helped remake how modern political campaigns are financed.

American Crossroads, which does identify its donors, spent almost $105 million on election ads in the 2012 cycle. For its part, Crossroads GPS poured more than $70 million into ads and phone calls urging voters to pick Republicans — outlays that were reported to the Federal Election Commission. It also announced spending an additional $50 million on ads critical of President Barack Obama that ran outside the FEC's reporting window.

Based on the extent of Crossroads GPS' campaign activities, Obama's re-election campaign asked the FEC in June to force it to register as a political action committee and disclose its donors. The FEC has yet to rule on the request.

Politically active social welfare nonprofits like Crossroads have proliferated since the Supreme Court's Citizens United decision in January 2010 opened the door to unlimited political spending by corporations and unions.

Earlier this year, a ProPublica report showed that many of these groups exploit gaps in regulation between the IRS and the FEC, using their social welfare status as a way to shield donors' identities while spending millions on political campaigns. The IRS' definition of political activity is broader than the FEC's, yet our investigation showed many social welfare groups underreported political spending on their tax returns.

It's impossible to know precisely how Crossroads has directed its efforts, but the breakdown of expenses on its tax returns from June 2010 to December 2011 gives some indications.

During those 19 months, Crossroads spent a total of $64.7 million, of which $1.4 million — or just 2 percent — was identified as being spent on research. That compares with the 20 percent of effort Crossroads said it would devote to research in its application.

A tax return covering this year isn't due until November 2013.

The IRS rarely pursues criminal charges against nonprofits based on statements in their applications. It's more common for the agency to deny recognition or revoke a group's tax-exempt status.

In a letter to Congress in September, the IRS said it was engaged in "more than 70 ongoing examinations" of social welfare nonprofits. Earlier, in its work plan for the 2012 fiscal year, the agency said it was taking a hard look at social welfare nonprofits with "serious allegations of impermissible political intervention."

Campaign finance watchdog Fred Wertheimer, who runs Democracy 21 and has filed several complaints to the IRS about Crossroads, said the group's application for recognition showed why more aggressive enforcement is needed.

"When you read what they say on their application, there are a lot of words there. But I find them to be disingenuous and to have little to do with why Karl Rove founded this organization," Wertheimer said. "If you believe this is a social welfare organization, I have a rocket that can get you to the moon very quickly and at very little cost."

clarence swinney

Dec. 14, 2012, 12:05 p.m.

CLEAN HOUSE
Federal employees cannot accept promises or anything with an actual monetary value
Pass this law will be best thing to clean out Congress and White House.
It will close K Street Bribery.
No campaign money.
Fed funds campaigns over 6 months (3 primary-3 general)  with free equal tv time and a debate a week =12 =adequate to evaluate candidates.

True Progressive tax system. Burn tax book. Start anew. Must justify need for exemptions in public hearings.  Keep Koch type out of influencing our officials.

The law needs to be changed and made crystal clear. Not one cent of tax-exempt money should be spent on elections. It’s an absurd loophole that must be closed.

clarence swinney

Dec. 14, 2012, 1:52 p.m.

TAXES—WHO PAY MOST OF THEIR INCOME
———————1%——middle class
Income——23%———-8%
Payroll——2%————10%
(state sales7%————10%
property
excise)

Peter Snowden

Dec. 14, 2012, 3:56 p.m.

Pro Publica once again to the rescue.  Nice work.  I’m a republican who thinks Karl Rove is a serious piece of slime.  The weak performance of the republican party that we saw in the last election is a direct result of Rove engineering the sale of the party’s social agenda to the “Christian right” to help W get elected.  Rove just doesn’t seem to understand everyone in the country but him clearly sees the hypocrisy in the party of less government using government to cram religious beliefs down our throats.  Until republican leadership says adios to any religious platform, the party will be further and further marginalized.  And that is bad because somebody needs to control the checkbook, and outlaw bribery.

I say outlaw bribery, because our out of touch Supreme Court legalized it in spades with Citizens United.  No case has done more damage to our democracy.  Big money, whether it is the Koch brothers, Wall Street, or public employee unions, makes our votes worthless.

For example, we would not have the fiscal cliff if politicians had the courage to adopt Simpson Bowles.  Politicians don’t have the courage because their moneyed constituencies (the only ones that count to them in the end) would be hurt by Simpson Bowles.  So, it doesn’t happen and we lose.  Shame on you Supreme Court.  You’re as bad as congress.  What can you do, Supremes?  You can on your own motion rehear the case and take judicial notice of how your first amendment protection schemes DO NOT WORK IN THE REAL WORLD and limit contributions to citizens and limit amounts to something inconsequential on its own, like $100 adjusted for inflation.  No more Supreme Court approved moneyed super citizens versus the rest of us.  Lack of faith in our government ruins us, and you are the cause.  This is what causes revolutions.

Stephanie Palmer

Dec. 14, 2012, 5 p.m.

All of the money collected by Rove and ALEX needs to be taxed at a higher rate than normal due to fraud.

Anything coming from rove is likely to be a big line of B.S. The man (and I use that term loosely) hails from “Never, never land”

Johhny Blevins

Dec. 14, 2012, 7:14 p.m.

I like the comment “serious piece of slime” .

To be fair and seemingly not biased an investigation by you of Democratic PAC’s should be done.

I too like the statement about Rove “a serious piece of slime”.

Apparently the term, “fair share” when applied to taxes doesn’t seem to catch on—especially among the monied.  So why don’t we spend a bit of time talking about the fair share of income.  Since W, the upper layers of wealthy have done quite well while the average Joes and Janes have fallen behind.  And while some are almost losing it about the muchly overpaid public employees—I am sure the teachers have caused the ruin of the economy, why don’t we look into the organization of doctors—the AMA and whatever the organization of pharmacies.  They seem to be doing quite well since we now have pharmacies on many, many street corners.  There must be money in drugs.

But it is the same old story.  The W years with a don’t tax but spend
make the Republicans come to the conclusion that their sins need to be paid by the old folks and the children.  In the words of Paul Wellstone, “We all do better when we all do better.”  Come on, you GOP leaders—take some responsibility for what you did in the W years and figure out how those who profited so largely can now pay it back.

KEVAN SCOTT05@GMAIL.COM

Dec. 14, 2012, 10:48 p.m.

ONE WONDERS WHY YOU ARE STILL IN THE REPUBLICAN PARTY.  THEYOBVIOUSLY DON’T MIRROR YOUR BELIEF SYSTEM ANYMORE, NOR MINE, WHICH IS WHY I LEFT IT YEARS AGO.  ONLY UNTIL THE PARTY SHRINKS TO MARGINAL STATUS WILL IT CHANGE, AND I DOUBT EVEN THEN FOR THE TEABAGGING MORONS HAVE TAKEN IT OVER, AND THOSE TRUE BELIEVERS WOULD SINK THE PARTY TO FURTHER THEIR BELIEFS, WHICH IS WHAT THEY HAVE DONE, ARE DOING, AND WILL CONTINUE TO DO.  rEQUIREING A RELIGIOUS TEST WASN’T A GOOD IDEA FOR OUR FOUNDERS AND IT IS ALSO NOT A GOOD IDEA FOR A NATIONAL PARTY.  I HAVE MY RELIGIOUS BELIEFS BUT DON’T THINK THAT THEY OUGHT TO BE A TEST FOR SOMEONE TO CALL THEMSELVES A REPUBLICAN OR DEMOCRAT.  cARL ROVE WILL BE THE DEATHOF THE REPUBLICAN PARTY AND YET THEY STILL WANT HIM TO PARTICIPATE IN THE PARTY.  nO, I COULD NO MORE BELONG TO THE REPUBLICAN PARTY THAN JESUS COULD HAVE BEEN A SADUCEE.

Kevan, thanks for the thoughtful query.  And for inducing me to find out what a Sadducee is. 
I’m still a republican because I have a hankering for efficient government.  I’m one of those less government is better government types.  Some of the things I like don’t sound very republican, e.g., I think Canada has a far better health system than we do, and I believe the US government has not, after over a half century, met the requirements of Brown v. Board of Education.  Blacks do not get an equal education.  You don’t see the democrats doing anything about that, or the republicans, and certainly not the teachers unions. 
By and large, government agencies do not do as good a job as private enterprise in those situations where you could use both.  One of the recent examples is TSA.  They are all federal employees except one airport, San Francisco, is operated by a private company.  They regularly run their employees against the feds in contests to see who can actually find the real gun in the baggage.  the private company costs less, and its employees score better in skills and customer (that’s us, the flyers) interaction. 
And we need a healthy 2 party system.  As soon as a party becomes dominant, corruption and inefficiency escalate no matter what party is in power.  It is just human nature.  People like to help their friends, and especially when it isn’t their money.  So, we need a good republican party, one not dominated by ding dongs living in the 50’s or by Taliban wannabes—you know, anti-science god forbid we use stem cells, right to lifers, etc. 
But right now, more than anything else, I am ballistic about how the sequestered acolytes of the Supreme Court have screwed us with their big money gets their own class of citizenship policy of Citizens United.

THANKS PETER,  WHILE I AM NOT SAYING THAT YOU HAVE TO LEAVE THE REPUBLICAN PARTY JUST BEWARE BECAUSE SOMETIMES WHEN YOU DON’T ABANDON SHIP, THE SHIP ABANDON’S YOU.  IF YOU DO CHOOSE TO STAY IN THE PARTY, GOOD LUCK, YOU’LL NEED IT, BECAUSE OF THE TEABAGGING MORONS WHO WILL COST YOUR PARTY ELECTIONS AND THEY WILL BE THE FIRST TO BLAME IT ON PEOPLE LIKE YOU WITHIN THE PARTY.  sAD, BUT TRUE ENOUGH!

Peter Manning

Dec. 15, 2012, 4:55 p.m.

If he sent out any mail saying Crossraods GPS is a Tax exepmt organization and contributions rae tax-deductible, he is subject to prosecution for mail fraud.

Would that someone at the doj would actually prosecute, but I wouldn’t put any money on that happening.  There is still a class of the 1% er’s who are above prosecution, if that were you or me they would prosecute us in a new york minute.  When I do see the likes of people like rove and others actually being investigated and prosecuted then i will once again believe in a america that believes in justice for all regardless of whether they are in the 1 % or the 99%.

Well….....Carl did limit his spending. 70 million, after all, is just chump change.

off topic but could you folks at pro publica consider an investigation at how the blind and print disabled are still being discriminated against by most of the internet sites, including some that say they are accessible, not being accessible at all.  I tried to sign up for my hometown newspaper tonight and of course it asked for the characters in the box to be put into the next textbox but since there was no audio link, no sign up.  I’m getting very tired of this, and by the way thanks for your site being very accessible.    As i said I’m very tired of this happening in 2012 some 25 years after the internet first appeared.  you’d think in that time there would be some requirements on private web sites to actually be accessible but no, we still love to think there are no disabled trying to just be like everyone else using the internet.  I often feel like a 2nd class citizen, and my feelings won’t change soon until i see some real change in the way people seem to just disregard the disabled.  Sigh.

clarence swinney

Dec. 16, 2012, 2:07 p.m.

REFORM TAX RATES
Total Income Tax Rates-1M+ Incomes
1993=31%
2002=28%
2007=17%
Top 400 Income Tax Rates
1992=28%
2002=22%
2007=17%
Income growth 1979-2007
Upper 0.1%=363%
upper 1%=156%
Bottom 90%=17%
We need fiscal justice

Peter Snowden

Dec. 16, 2012, 3:41 p.m.

Hi Gang, its the republican again.  Yes, we need fiscal justice.  Income disparity in the US has accelerated over the last 20 years.  When the majority of people feel in their gut that it is really really unfair for some CEO to make 100+ times what the assembly line worker makes (are their any assembly lines left in the country?—another subject), and no one in government seems to give a shit, people get depressed, and they lose civility. 
And when I say people in government don’t give a shit, I’m not talking about what they say but what they do.  Obama, for example, regularly likes to stir people up with talk about income inequality.  But what does he do?  Look at hedge fund managers.  They are that “upper 0.1%” group who has had the fastest income growth.  Would it surprise you to know that Obama has already taken in more campaign contributions from Wall Street than W did in both terms combined?  Hedge fund managers show up at the office every day and they trade stocks.  They get compensated with an interest in the fund that they manage.  So, for day to day work, they get paid in stocks.  They have talked or campaign financed or bribed, whatever you want to call it (it fits the legal definition of bribery), congress into classifying this income as capital gains taxed at 15%, instead of being taxed at the top federal rate of 35%. 
Obama does NOTHING ZIP NADA about this, the most egregious inequality producer in the tax code. 
And that is because he has accepted the bribe/contribution to not do anything about it.  In other words, the root cause of everything that pisses you off about our government, and there is no difference here between democrats and republicans, is the overriding influence of big money bribery, bribery that has been legalized by the Supremes.
If you want fiscal justice, you need to end our system of campaign finance bribery.  That’s right, YOU! You’re going to have to get off your ass and do something.  Congress, Obama, Mittens, none of them will.  They are all fat and happy with all the big contributions they get that keeps them in power.  YOu have to find candidates who will have the courage to support laws and possibly an amendment to the constitution to end bribery.  Right now, there aren’t very many people taking this position.  As things get worse and worse, our lame media will start to focus on this issue.  In the last presidential election there was virtually no discussion of legalized bribery by big money interests.  Ron Paul was the only candidate who talked about this core issue.  There will be more but you need to go find them in your district.
If you look around the world at other economies, there are some good and easy to implement solutions to income inequality.  One good one is to raise the minimum wage.  With our minimum wage, you have to work at least 60 hours a week to break out of poverty. That does not work.  Australia has a much higher minimum wage than we do and their economy does just fine.  Good luck getting something like that done now.

I mostly agree with Peter.  The solution to the campaign spending issue (among others) should have been to vote for any of the third-party candidates, yet nobody did.

I don’t blame anybody, since the media largely did everything it could to avoid mentioning them.  If even a quarter of us pulled support for the major parties by voting for someone else, it would send a strong message that spending billions of dollars isn’t the way to win an election.

You might think your vote is wasted cast on someone who won’t win, but I’d argue that your vote is wasted voting for the winner.

Kevan, it’s hit or miss, but I might recommend contacting the webmasters to politely explain when you’re having problems.

I say this because I’ve been on that side of things and frustrated that there wasn’t time or money in the schedule to handle accessibility, and would have been thrilled with any leverage to reopen the issue.

There are also many web people who have never considered how their site manifests anywhere outside their desktop and phone, and a friendly note can push them in the right direction.

Of course, there are also people who don’t care and will get defensive, but that’s unavoidable.

You might include a link to usability.gov, run by the Department of Health and Human Services, which has a lot of good advice for people who feel lost on the issue.

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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