IRS asked to investigate political activity and review groups’ tax-exempt status
March 13, 2012
The Democracy Campaign filed complaints against Americans for Prosperity Foundation, the MacIver Institute for Public Policy and the Heartland Institute asking the agency for an immediate investigation into whether the groups’ activities in recent months violated their 501(c)(3) tax-exempt status. Copies of the complaints below.
IRS rules governing 501(c)(3) status – meant for charitable and educational organizations to promote the “social welfare” – prohibit such groups from using any resources to participate or intervene in political campaigns. The rules also say such groups cannot use a substantial amount of their time or resources on issue advocacy to influence legislation. The three groups’ use of the 501(c)(3) tax exemption has allowed them to hide their fundraising and spending activities as well as grant their wealthy contributors a tax deduction for their support. Federal and state rules governing political organizations require more disclosure of their finances and activities and do not grant their benefactors tax breaks for political contributions.
“These groups are gaming the tax code to play electoral politics while masquerading as charitable organizations,” WDC director Mike McCabe said. “They are doing it to avoid having to disclose the donations that are paying for their electioneering. The real kick in the teeth is that ordinary taxpayers end up subsidizing the political donations of the millionaires and billionaires who are funding these operations. We all pay for the tax breaks they get for using their vast fortunes to influence elections.”
Americans for Prosperity was created in 2003 by billionaire brothers David and Charles Koch, owners of Koch Industries and Wisconsin corporations like Georgia-Pacific. The MacIver Institute was created in 2009 and has ties to numerous funders and backers of right-wing causes, including Milwaukee’s Bradley Foundation and the Koch brothers. The Heartland Institute is a self-described free-market think tank based in Chicago.
If the groups are found in violation of the 501(c)(3) rules, the complaints ask the IRS to impose substantial penalties and revoke the organizations’ tax-exempt status which would require them to report their fundraising activities, donors and spending like other independent expenditure groups if they want to continue operating.
The complaints against Americans for Prosperity and MacIver Institute accuse them of violating IRS rules through a joint project started last October called “It’s Working Wisconsin” that has used advertising, public meetings and other activities to help Walker’s campaign defeat the recall effort. Americans for Prosperity and MacIver spent a reported $1.2 million on three television ads in the Milwaukee, Green Bay, Wausau and La Crosse TV markets urging viewers not to sign recall petitions during the 60-day period they were being circulated.
The complaint against the Heartland Institute said the group violated its tax-exempt status with the IRS through a planned publicity effort to help Walker’s campaign called “Operation Angry Badger.” The group reportedly planned to spend $612,000 on this media advertising, mailing and internet campaign to support Walker by defending the governor’s successful effort last year to slash public employee collective bargaining rights. Documents made public about “Operation Angry Badger” and cited in the complaint said a successful recall of Walker would be a major setback in a national effort to reduce public worker compensation and union power.