Watchdog: Koch-Backed Group Bending Tax Code

Citizens for Responsibility and Ethics in Washington asks the IRS to clarify rules governing a section of the tax code that a group tied to the Koch Brothers has used in an unusual way to advance its agenda.

 The Internal Revenue Service Building is shown July 22, 2013 in Washington, DC.
National Journal
Alex Seitz Wald
Add to Briefcase
Alex Seitz-Wald
Nov. 5, 2013, 7:04 a.m.

Cit­izens for Re­spons­ib­il­ity and Eth­ics in Wash­ing­ton, the cam­paign fin­ance watch­dog, is call­ing on the IRS to in­vest­ig­ate Free­dom Part­ners, a fund tied to the Koch Broth­ers that quietly doled out $235 mil­lion in grants to con­ser­vat­ive groups last year.

As we re­por­ted in Septem­ber, when news of the group’s ex­ist­ence first broke, Free­dom Part­ners made fairly nov­el use of a sec­tion of the tax code — 501(c)(6) — re­served for trade as­so­ci­ations, like the Na­tion­al Beer Whole­salers As­so­ci­ation, or cham­bers of com­merce. Free­dom Part­ners calls it­self a cham­ber of com­merce, but it seems to be driv­en by polit­ic­al ideo­logy rather a com­mon busi­ness in­terest.

“I haven’t seen a situ­ation like this, and we watch that area pretty closely,” Jim Clarke, the seni­or vice pres­id­ent of pub­lic policy at the So­ci­ety of As­so­ci­ation Ex­ec­ut­ives, a sort of trade as­so­ci­ation of trade as­so­ci­ations, told Na­tion­al Journ­al at the time. Most “dark money” polit­ic­al groups are or­gan­ized as “so­cial wel­fare” or­gan­iz­a­tions un­der Sec­tion 501(c)(4) of the tax code, but 501(c)(6) status makes it easi­er for busi­nesses to write off dona­tions and may in­su­late groups from reg­u­lat­ory pres­sure.

Now, CREW is call­ing on the IRS to look in­to the Koch-backed group’s use of this tax des­ig­na­tion, writ­ing in a com­plaint to the tax agency that “it is clear the or­gan­iz­a­tion’s activ­it­ies do not meet [the] cri­ter­ia” of a 501(c)(6) or­gan­iz­a­tion. Free­dom Part­ners’ only activ­ity last year was to dis­trib­ute money to oth­er groups. “How does op­er­at­ing as a pass-through for an­onym­ous sources to in­flu­ence our elec­tions mesh with the concept of a busi­ness league?” CREW Ex­ec­ut­ive Dir­ect­or Melanie Sloan asked in a state­ment.

CREW is also ask­ing the IRS to is­sue new rules cla­ri­fy­ing what 501(c)(6) or­gan­iz­a­tions can and can’t do ahead of next year’s elec­tion.

“If the IRS fails to act, Amer­ic­ans should ex­pect to see an in­crease in the num­ber of so-called ‘busi­ness leagues’ cre­ated to fun­nel money in­to our elec­tions while cloak­ing the iden­tit­ies of their donors,” Sloan said. “With the 2014 elec­tion cycle get­ting un­der­way, it is im­per­at­ive for the IRS to cla­ri­fy its reg­u­la­tions and nip ab­use of 501(c)(6) status be­fore it gets out of hand.”

After Cit­izens United, Speech Now, and oth­er re­cent court rul­ings, wealthy people of all polit­ic­al stripes seek­ing to in­flu­ence elec­tions have been in an arms race with reg­u­lat­ory agen­cies as well as out­side watch­dog groups and journ­al­ists seek­ing more trans­par­ency. CREW and oth­ers worry that Sec­tion 501(c)(6) could be a brand new class of weapons in this battle.

UP­DATE (4:55 p.m.): James Dav­is, the spokes­per­son for Free­dom Part­ners, re­spon­ded to the com­plaint in a state­ment to the Na­tion­al Journ­al: “It’s not sur­pris­ing the Sor­os and Demo­cracy Al­li­ance fun­ded CREW is at­tack­ing an or­gan­iz­a­tion that sup­ports free-mar­kets. Free­dom Part­ners Cham­ber of Com­merce fol­lows all IRS reg­u­la­tions as a non-profit, non­par­tis­an busi­ness league that ad­vances our mem­bers com­mon busi­ness in­terests by pro­mot­ing free-mar­ket policies. All of our activ­it­ies are de­scribed in our tax Form 990 which is pos­ted on our web­site.”

What We're Following See More »
LOFTY GOALS
White House Proposes New Tax Plan
14 hours ago
BREAKING

The White House on Wednesday laid out its plan for tax reform, with Treasury Secretary Steven Mnuchin saying it would be "the biggest tax cut and the largest tax reform in the history of our country." The tax code would be broken down into just three tax brackets, with the highest personal income tax rate cut from 39.6 percent to 35 percent. The plan would also slash the tax rate on corporations and small businesses from 35 percent to 15 percent. "The White House plan is a set of principles with few details, but it’s designed to be the starting point of a major push to urge Congress to pass a comprehensive tax reform package this year," said National Economic Council Director Gary Cohn.

Source:
EMERGING BUDGET FRAMEWORK?
Dems Proposes Obamacare-for-Defense Deal
1 days ago
THE LATEST

"An emerging government funding deal would see Democrats agree to $15 billion in additional military funding in exchange for the GOP agreeing to fund healthcare subsidies, according to two congressional officials briefed on the talks. Facing a Friday deadline to pass a spending bill and avert a shutdown, Democrats are willing to go halfway to President Trump’s initial request of $30 billion in supplemental military funding."

Source:
WHITE HOUSE BLOCKING DOC REQUEST
Michael Flynn Remains A Russian-Sized Problem
1 days ago
BREAKING

The Michael Flynn story is not going away for the White House as it tries to refocus its attention. The White House has denied requests from the House Oversight Committee for information and documents regarding payments that the former national security adviser received from Russian state television station RT and Russian firms. House Oversight Chairman Jason Chaffetz and ranking member Elijah Cummings also said that Flynn failed to report these payments on his security clearance application. White House legislative director Marc Short argued that the documents requested are either not in the possession of the White House or contain sensitive information he believes is not applicable to the committee's stated investigation.

Source:
SENATE JUDICIARY HEARING
Sally Yates to Testify on May 8
1 days ago
THE LATEST
MESSAGE TO PUTIN
U.S. To Conduct Exercises In Estonia
1 days ago
THE DETAILS

The U.S. deployed "F-35 joint strike fighters" to Estonia on Tuesday. The "jets will stay in Estonia for several weeks and will be a part of training flights with U.S. and other NATO air forces." The move comes at a time of high tension between the U.S. and Estonia's neighbor, Russia. The two nations have been at odds over a number of issues recently, most of all being Vladimir Putin's support of Syrian President Bashar al-Assad in light of Assad's chemical weapons attack on his own people in the midst of a civil war.

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login