The Shadowy World of ‘Dark Money’ Campaign Spending

http://www.thefiscaltimes.com/Articles/2014/04/26/Shadowy-World-Dark-Money-Campaign-Spending

By Kim Barker and Theodore Meyer,ProPublica
April 26, 2014

To see how easy it is for a dark money group to ignore the Internal Revenue Service, look no further than the loftily named Government Integrity Fund.

The Fund, an Ohio nonprofit, spent more than $1 million in 2012 on TV ads attacking Ohio Sen. Sherrod Brown and praising his Republican opponent, Josh Mandel. Now the Fund's tax return, which ProPublica obtained from the IRS this week, indicates that the group spent most of its money on politics — even though IRS rules say nonprofits like the Fund aren't allowed to do that.

The Government Integrity Fund was founded in May 2011 and applied later that year for IRS recognition of its tax-exempt status, swearing under penalty of perjury that it would not engage in politics but would instead "promote the social welfare of the citizens of Ohio." Within two months, the IRS had recognized the group.

It then devoted much of its resources to backing Mandel's unsuccessful bid to unseat Brown. As previously detailed by ProPublica, the Fund was linked to a former top Mandel staffer.

The Fund's return highlights the ways such nonprofits, known as dark money groups because they are not required to disclose their donors, can skirt IRS rules designed to limit their political activities. Such groups are playing an increasingly prominent role in elections, spending more than $256 million on election activity in 2012.

Dark money groups can spend money on politics as long as they can persuade the IRS that their primary purpose is social welfare. This can lead to quite creative accounting on tax forms, with groups describing ads that should qualify as political under IRS rules as "education" or "issue advocacy."

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The ads stopped short of telling people how to vote, but three nonprofit experts who reviewed them for ProPublica said they all qualified as election ads under IRS rules. "There's no question," said Brian Galle, a Boston College associate professor of law who has written about political activity by nonprofits. "It's not even close. They're blatantly political advertisements."

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Unraveling what the Government Integrity Fund spent in 2012 wasn't possible until recently because the group didn't file its tax return until January of this year, when it was two months overdue. The long wait highlights one of the major problems with regulating dark money groups and their spending: The IRS typically doesn't look at these groups until a tax return is filed, often more than a year after an election has been decided.

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The agency has revoked the nonprofit status of only one social welfare nonprofit, a liberal group, and its affiliates since the Supreme Court's Citizens United decision in 2010 paved the way for dark money groups to pour hundreds of millions of dollars into outside election ads.

Experts on nonprofits say the IRS has taken an even more hands-off approach since top officials admitted the agency had targeted applications from conservative groups for extra scrutiny, sparking a scandal and investigations. [As usual in reporting on this, the fact that liberal groups were also targeted is totally ignored.]

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