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Robert Faturechi and Derek Willis: IRS Grants Nonprofit Status to ‘Dark Money’ Group Founded by Karl Rove

Crossroads GPS gets declared a nonprofit five years after applying, meaning that its donor list can remain private.

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Karl Rove.
Image from National Constitution Center on Flickr.

By Robert Faturechi and Derek Willis
By arrangement with ProPublica

Donors to the nonprofit group Crossroads GPS, founded by Republican strategist Karl Rove, no longer have to worry about their identities being disclosed. After a five-year wait, the IRS has approved the organization’s application for tax-exempt status.

Crossroads had been the most active of the nonprofits that are funneling cash into politics—often called dark money because the original source of the funds may be kept secret if the organizations have social welfare as their primary purpose. During the 2012 cycle, Crossroads reported spending almost twice as much on political ads as the next most-active nonprofit, Americans for Prosperity, which is backed by conservative billionaire brothers Charles and David Koch.

So far, during the 2016 cycle, the Rove group seems to be dormant. It has not filed any reports with the Federal Election Commission since January 2015, and has not reported any TV ad spending with the Federal Communications Commission. During the 2012 campaign, the group didn’t start spending on TV ads until July, after Mitt Romney had locked up the GOP nomination.

Past, present, and future donors to the Rove group can now feel assured that they will remain anonymous.

The IRS decision on Crossroads came in November but was first reported today by the Center for Responsive Politics. Unless new facts arise or circumstances change, past, present, and future donors to the Rove group can now feel assured that they will remain anonymous. That gives Crossroads a leg up over other dark money groups that lack IRS approval and could be vulnerable to having that status challenged by the federal government at any time.

Crossroads GPS, also known as Crossroads Grassroots Policy Strategies, was created after the Supreme Court’s 2010 Citizens United ruling helped pave the way for unlimited corporate and union spending on elections, super PACs and hundreds of millions of dollars in anonymous money.

As ProPublica previously reported, in the group’s 2010 application for nonprofit status, it told the IRS that while it planned to spend money on elections, “any such activity will be limited in amount, and will not constitute the organization’s primary purpose.” A copy of the Crossroads application was sent from the IRS to ProPublica in late 2012, although under the agency’s rules it isn’t permitted to release applications from groups that haven’t yet earned tax-exempt status.

Marcus Owens, the former director of the IRS’s Exempt Organizations Division, said that… he was surprised the group was granted a status reserved for organizations supporting the general public good.

Critics had argued that Crossroads was spending so much on politics it should be treated instead like a political committee that’s required to disclose its donors. In 2013, the IRS became engulfed in a scandal over allegations that it gave more scrutiny to nonprofit applications from conservative groups. One top IRS official, Lois Lerner, was accused of singling out Crossroads and pushing for its application to be denied.

Marcus Owens, the former director of the IRS’s Exempt Organizations Division, said that based on what has surfaced about Crossroads’ political activity in support of a single political party, he was surprised the group was granted a status reserved for organizations supporting the general public good.

“Operating for the benefit of one particular candidate or party, it’s hard to say that’s not private benefit,” he said.

Owens said he could envision corporations now being allowed to outsource various business functions to tax-exempt nonprofits. “Undertaking the marketing of General Motors, for example. Why not? If it’s OK to market the principles of a particular party or candidate, why leave it at that?” Owens asked.

Republicans aren’t the only ones benefitting from nonprofits that are allowed to keep their donors anonymous. During the 2014 cycle, non-disclosing groups with a conservative viewpoint spent almost $125 million, and those with a liberal viewpoint spent almost $35 million, according to the Center for Responsive Politics. The biggest liberal spender was union-backed Patriot Majority USA.

In a statement, the president of Crossroads GPS, Steven Law, said that the organization takes compliance seriously, so it was not surprised by the IRS approval.

“What we were surprised by was how long it took and how people outside the IRS improperly tried to influence and politicize the process, not just against us but against many other law-abiding advocacy groups,” Law said.

Robert Faturechi covers campaign finance for ProPublica.

Derek Willis is a news applications developer at ProPublica, focusing on politics and elections.

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