Journalism in the Public Interest

D’Oh! ‘America Is Not Stupid’ Wins IRS Recognition as Tax-Exempt Nonprofit

Tax regulators recognize two related dark money groups, even though they appear to have made misleading statements on their applications for tax-exempt status.


A screenshot of the single-page website of America Is Not Stupid, which was recognized as a social welfare nonprofit in late June.

Smart move?

The IRS has granted nonprofit status to America Is Not Stupid – a so-called dark money group best known for a 2012 election ad featuring a talking baby who compared the smell of his diaper with a Montana senator.

As ProPublica wrote in January, America Is Not Stupid and a related group, A Better America Now, applied for IRS recognition in the run-up to the 2012 election, swearing under penalty of perjury that they would not spend money on elections.

Then both groups went ahead and did exactly that, spending more than $125,000 on mailers and ads opposing Democratic candidates in Texas and Montana.

Despite these disclosures, records show, the IRS gave A Better America Now its stamp of approval as a social welfare nonprofit in April and recognized America Is Not Stupid in late June, decisions that elicited amazement among campaign finance watchdogs.

Marcus Owens, a nonprofit lawyer who ran the IRS Exempt Organizations division from 1990 to 2000, questioned whether a controversy that erupted earlier this year, over the agency subjecting certain conservative nonprofits to extra review, had damaged its ability to fulfill its regulatory functions.

“The oversight has collapsed,” Owens said. “The current people in Exempt Organizations have no tax law enforcement experience and no exempt organization experience in particular. And they’ve been charged with making this particular headache go away.”

Because of the government shutdown, the IRS could not be reached for comment. In the past, the IRS has not commented on stories about specific groups. Talking about individual taxpayers violates the law.

No one from either America Is Not Stupid or A Better America Now responded to emails and phone calls asking for comment.

In May, the IRS admitted that it had flagged the applications of Tea Party and related groups for extra review, dooming many to years of limbo. That admission turned into a firestorm, leading to the immediate resignation of the acting IRS commissioner and the eventual replacement of the top officials in the Exempt Organizations division. Senate and House committees started investigating. The Treasury Inspector General for Tax Administration expanded its initial audit. And the Justice Department announced a criminal inquiry. (Later, records were released showing that the IRS was also flagging liberal groups with “progressive” in their names.)

Since the Supreme Court’s Citizens United ruling in early 2010 opened the door to increased political spending by corporations and unions, nonprofits like America Is Not Stupid have taken on an expanding role in U.S. elections. That’s largely because they do not have to identify their donors, unlike super PACS, leading them to be dubbed “dark money” groups.

About 150 of these nonprofits spent more than $254 million in 2012 on ads, phone calls and mailings reported to the Federal Election Commission. Almost all the donors of that money have remained anonymous. Most of that money — more than 85 percent — was spent by conservative groups, according to the Center for Responsive Politics and research by ProPublica.

These groups are allowed to spend limited amounts to influence elections, as long as they can prove their primary purpose is “social welfare.” But ProPublica has shown how dozens of social welfare nonprofits have underreported their political spending, or spent money on elections despite telling the IRS they would not do so.

In its 2012 annual work plan, the IRS recognized the problem, announcing it would take a hard look at nonprofits and “serious allegations of impermissible political intervention.”

If the agency’s exchanges with America Is Not Stupid and A Better America Now are any indication, however, the augmented focus on nonprofits has been less than ferocious.

The IRS sent ProPublica the groups’ applications for recognition last November, even though they had not yet been recognized and the documents were therefore not supposed to be made public. We wrote stories about these and several other pending applications, bringing it to the IRS’ attention that these groups had pledged that they would not spend money on elections, yet did so.

According to IRS records, neither group ever amended its application to reflect its political spending.

In response to IRS questions about their applications, though, the groups acknowledged that they had spent small amounts on elections – a contradiction that apparently did not hobble their chances for recognition.

A month after receiving IRS recognition in April of this year, A Better America Now changed its story again. It filed its 2012 tax return and asserted – again, under penalty of perjury -- that it had spent no money to influence elections. ProPublica reported this in July.

The group’s president, Bob Portrie, lawyer Eugene Peek, and accounting firm LBA Group, all out of Florida, did not return calls and emails for comment.

The IRS told ProPublica that the 2012 tax return for America Is Not Stupid was “unavailable” as of last month. Renae Duncan, the group’s certified public accountant in Texas, said she would pass on an inquiry from ProPublica to Miguel A. Gutierrez, the group’s president, on Monday morning. He has not yet responded.

In replying this May to IRS questions on America Is Not Stupid’s application, Gutierrez provided several examples of the group’s activities as proof that it had a bona fide social welfare mission of improving the good of a community — the critical factor in maintaining tax-exempt status.

He said the group had created a website,, and had authored articles “regarding how underserved communities or minority populations and economically disadvantaged small businesses may be affected by certain U.S. federal rules and regulations in the coming years.” There’s no sign of any such articles on the website or elsewhere, however. (On Monday, one of the website’s top stories was on “CoralActives: Breakthrough Acne Skin Care.”)

To showcase the group’s “educational content,” Gutierrez pointed to the main website for America Is Not Stupid, a single page with 156 words on it.

He told the IRS that the nonprofit conducted polls in Montana, Nevada and Texas, targeting heads of households with Hispanic surnames. But the only poll included in the response didn’t mention Latinos at all. Instead, it asked Montanans about which candidates they planned to vote for in the 2012 election.

The group’s president also said the group held events, including one in San Antonio to “openly discuss topics affecting the Hispanic population in the U.S., including, but not limited to, healthcare, the housing market, jobs and the economy, and various education issues.”

Gutierrez said the event was held on Oct. 26 — just before the 2012 election. The event was free for the first 3,000 people, and billed to the public as strictly entertainment, an evening featuring comedian Paul Rodriguez and the Leslie Lugo Band playing music “to dance into the night.”

But former Bush official Hector Barreto gave the keynote address, Gutierrez told the IRS. One detail America Is Not Stupid didn’t mention: Barreto also happened to be the co-chair of Juntos Con Romney, Republican presidential candidate Mitt Romney’s Hispanic steering committee.

Nothing Gutierrez said in his May 24 response to the IRS seems to have raised any red flags with the IRS, however.

A month after receiving it, the IRS recognized America Is Not Stupid.

How is it not black-and-white that these organizations are violating the rules to be considered tax-exempt non-profits? Am I missing some nuance here, some gray area?

And what is the IRS’s procedure for enforcing compliance? Certainly they must act once the evidence against these ‘social welfare’ organizations becomes so obvious and glaring.

Jonathan: You ask some good questions in your comment.

The answer is rather obvious: the IRS has been cowed and bullied by Darrell Issa and his ilk into allowing it for fear of being called bad names by drive time AM radio talk show hosts.

Any further questions?

Move On

Steve: You may want to get your head out of the sand if you really believe that the IRS does anything out of fear from being called bad names by AM radio talk show hosts. If that was the reality of the situation, the IRS wouldn’t do anything, as AM radio talk show hosts have nothing to say but negative comments about the IRS, in fact the majority Americans are in that camp.

The reality is that the IRS is an institution which must show it’s necessity by performing it’s basic function, and that is all it strives to do. The IRS is a revenue service for the government, it collects money, that is it. As long as it is doing that within a plus or minus percentage of 100% efficiency which the government deems as acceptable, there will be little to no motivation to alter it’s course, or do much else. Public opinion and reactions from a few people does not matter to the IRS, all that does, is if the US Treasury believes it is performing it’s basic function within an acceptable level of efficiency. If the US Treasury is being pressured based on public opinion than yes the IRS will do this and that to oblige the Treasury, other than that, it will not. This is basic common sense based on the praexology of publicly based group action, to thinbk otherwise is to make an argument based on the fallacy of polylogisms and/or belief in a multi tiered governmental conspiracy.

I agree with Steve. This reveals what Issa and the right-wing’s manufactured IRS scandal was all about: the GOP demagogues whipped up public outrage at the IRS, even though the public really didn’t understand the issue. Now the IRS is emasculated. Given the Supreme Court may kill campaign contribution limits, the right-wing can use tax-exempt fictions to raise unlimited direct contributions.

The only bright side to this is the fact that the right-wing spent half a billion trying to oust Obama in the 2012 and wasted their money. Let’s hope they waste more money in the future as they continue their self-disemboweling in Congress.

Bruce J Fernandes

Oct. 8, 2013, 4:19 p.m.

Lerner was forced to retire before being fired.  There is going to be fire there and it would have been uncovered by now if republicans had taken their oversight responsibilities seriously rather than play politics in order to gin up campaign contributions.

Ms. Lerner will have to testify at some point and we will find out this goes higher with the question being how high up in IRS or did this nonsense find its way into the political wing of the west wing.

But make no mistake Lerner’s retirement before being fired is a tell about her misdeeds.

I watched the ad.  Saying “Jon Tester voted for Obamacare and to Cut Medicare,” is not electioneering. 

Almost all 501c3’s use position statements in lieu of advocacy for candidates.

Seems a bit unrealistic…

@Jonathan - A couple of issues involved.  One - it isn’t as black and white as you’d think (what differentiates education from advertising?).  Two - the IRS has been hammered about the accusations of foul play with their approach to address false 501(c)(3) applications.

@Bruce - Lerner was forced to retire the same as much other political situations…there has to be a sacrificial lamb to calm the stupidity.  It is common practice to use key words that are seen to indicate either ill intent or false filings.  The reality is that a lot of political groups tried sneaking in their 501(c)(3) applications using names associated with the tea party…and most were illegal.  Unfortunately, the low level resources that create the list of names to look out for didn’t think through the political reality of our times (i.e. overreaction).

@Tim - BS.  A real 501(c)(3) (I was treasury for one) doesn’t put out any statements of the kind.  When was the last time you saw a statement from Consumer’s Union on a political candidate?  That’s right; they don’t.  The group is relying on people like you to rationalize their behavior as being okay…and is likely why IRS decided to just let them pass through.

Trent Campbell

Oct. 8, 2013, 5:17 p.m.

Kim, Thank you for writing this article. And, thanks for your previous articles in the past about dark money. I am a staunch conservative and reading the actions of conservative groups like this is painful. I would like to see more of this in a back and forth type of setting. Here are the groups on both sides as many in this forum may call this a right wing hit article.. At first I thought that might be the case but then I read some of your other articles on liberal dark money and applaud you on your research and writing. We need more of these fact based (limited opinion) articles. If we can get past the ideology and be willing to call criminal activity exactly what it is, not dependent upon a political spectrum then maybe we can get somewhere in this country. Dark money is a real problem. Then again, money, politics and power has always been the game. Please keep bringing this to light on both sides. All parties, libertarians included, need to be kept in check and an unbiased media is one of the best ways to go about this. I would some more conservatives would step up and call on their officials to put a stop to this. Just as I would love to see liberals do the same. But alas, we will not get out of the name calling business because that sells tickets to the show. Please keep up the great reporting Kim.. I enjoy reading your articles.

Fast and Furious, Benghazi, IRS, ObamaCare, a complicit media… those darn Republicans sure make up a lot of fake scandals… Thank goodness Kim found $125,000 on mailers and ads opposing Democratic candidates in Texas and Montana.  You should be very proud.

Trent Campbell

Oct. 8, 2013, 7:18 p.m.

Clark, I do not disagree each of the items posted in your comment needs a closer look. The issue the GOP has they have tried to make everything the president does a scandal. And this administration has been great at “leaking” parts of a story to get the right win bloggers to jump on it to then release the rest of the details minimizing the effect of the initial leak. You know these guys do nothing by accident. They have succeeding in making the GOP look pathetic. Or in the least getting a good portion of the public to think the GOP is stupid.
But, we need to be as willing to admit there is as much corruption on the right as there is on the left. The dark money definitely shows a sick world to politics. Instead of getting upset at the author, lets hold our own party accountable and tell them to shape up. Don’t stoop to borderline illegal methods. and I say borderline because in other articles here on pp they discuss the exact definition of aiding a campaign which is where this kind of group might not be in violation at all according to campaign finance guidelines and tax exempt status. Lets not stoop to name calling. Lets hold our people to higher standards so articles like this cannot be written.

Byard Pidgeon

Oct. 8, 2013, 7:22 p.m.

@Clark Baker…Thank goodness indeed. You managed to post a fast and furious comment that, except for the inclusion of the letters IRS had nothing to do with the substance of the article.
You should be very proud.

My, my how ProPublica gets the left wing in a lather. Move on.

Susan Winchester

Oct. 9, 2013, 10:04 a.m.

First, I believe that these groups are exempt under IRC Sec 501(c)(4) not (c)(3). If you read the law, neither is allowed to have any expenditures for political activities (for or against candidates). In practice IRS has allowed 501(c)(4)s to have what is supposed to be a de minimus amount for political expenditures. Some groups have expanded this.

Second, tax returns are signed under penalty of perjury. Any one who signed a tax return saying there were no political expenditures by an organization which can be shown to have made political expenditures is, therefore, guilty of perjury and should be prosecuted.

@pgillenw - so glad you think enforcing the law is a waste of time.

I like how the response to a report on an organization trying to use non-profit status (essentially a taxpayer-funded subsidy) to manipulate elections is always “but what about Benghazi!?”  It shows a certain level of political savvy to defend whatever Republicans do with a random sampling of keywords.

Is it possible that dodging taxes and trying to influence elections while claiming (under penalty of perjury) is illegal and unethical, no matter what someone imagines must have really happened in Libya?

(Hint:  Benghazi is sort of a scandal, but not of the magnitude anybody wants it to be, and not a very interesting one.  The dots are pretty easy to connect, if you read the primary sources rather than the angry opinion pieces.  Fast and Furious was a disaster, perhaps even intentional, but also not really related to campaigns using tax-free money.)

Suzie Rivo Solender

Oct. 9, 2013, 11:33 a.m.

I am so totally against what the IRS just did to these two 501(c)(4) organizations.  As a grant writer/consultant for non-profits, it is so obvious to me that they should not have been given this status.  Everyone knows that if you apply for a 501(c)(4) you have two thoughts in mind….........political elections and politicians.

Let us be real!

When Organizing for America is relieved of 501(c)(4) then go after the others.  You guys are just trying to drum up support for a disgustingly politized IRS.
As for the Benghazi BS, it was a first, the first time an American Ambassador was killed on post, and the United States government apologized to the killers.  Yes it is ‘sort of’ a scandal.  Just like we ‘sort of’ have a president who is ‘sort of’ an American.
Just like people who drum up support for the IRS are ‘sort of’ Americans.

Byard Pidgeon

Oct. 9, 2013, 2:33 p.m.

@Dave F
You’re “sort of” off topic, and “sort of” making personal attacks, and more than “sort of” proving that “America Is Not Stupid” doesn’t apply to your Americanism.

Richard Masters

Oct. 9, 2013, 3:34 p.m.

Steve’s right, of course. The wealthy and powerful like to portray the IRS as some sort of punitive arbitrary monster, but this beast’s fangs were drawn a long time ago. Check out PERFECTLY LEGAL by Robert Kaye Johnson to see how the IRS has been emasculated by the rich. You are many times more likely to be audited if you are among the working poor than if you are a millionaire. This latest flap about the IRS targeting 501(c)(4)‘s was just a device for the Republicans and the millionaires they actually represent to bully a cowering federal agency to drop any meaningful regulating of their dirty money groups. Turns out the IRS was looking at liberal groups as well, but that fact never made it into the press until after the “news” that Obama was using the IRS to target Republicans hit the front pages. Now the IRS is so gun shy, it will allow anything - undoubtedly the original aim of the exercise.

I’m so tired of the continued results of Citizens United I could scream!  Now the Supreme Court has another case to allow any and all monies contributed to campaigns.  The Court says “money is speech” and shouldn’t be restricted.  There are millions of Americans who can’t spend big money to “bribe” candidates.  What of our free speech?!

Seems to be no follow-up by IRS to go after all the lying PACS, etc.

Look at the mess the country is in now with all the money floating around to candidates and members of Congress.  Republicans, and I hope to a lesser extent, Democrats don’t want to stand up and do what’s right for America for fear of losing money to support their cushy jobs.  Of course they are not even doing their jobs now!

clarence pest swinney

Oct. 10, 2013, 4:40 p.m.

  Will Sean ever break the record of Rush?
Rush record=over 10,000 lies in 4000 hours.
Rush said, few years ago, “that Media Watch Group FAIR, edited 4,000 hours of my transcripts
and found 45 little errors”.
I got the study from FAIR. 45? He averaged over 2 lies per hour.
Will Sean break that record?

Michael McCarthy

Oct. 11, 2013, 11:47 a.m.

It’s a little easier to understand now how the NFL is an 8.5 billion dollar profit machine that was classified as a “Social Welfare Non-Profit” and, of course, pays no taxes.

This article is part of an ongoing investigation:
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