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Tuesday, October 25, 2016

New Tax Return Shows Karl Rove’s Group Spent Even More On Politics Than It Said

New Tax Return Shows Karl Rove’s Group Spent Even More On Politics Than It Said

by Kim Barker, ProPublica.

On its 2012 tax return, GOP strategist Karl Rove’s dark money behemoth Crossroads GPS justified its status as a tax-exempt social welfare group in part by citing its grants of $35 million to other similarly aligned nonprofits. (Here’s the tax return itself, which we detailed last week.)

The return, signed under penalty of perjury, specified that the grants would be used for social welfare purposes, “and not for political expenditures, consistent with the organization’s tax-exempt mission.”

But that’s not what happened.

New tax documents, made public last Tuesday, indicate that at least $11.2 million of the grant money given to the group Americans for Tax Reform was spent on political activities expressly advocating for or against candidates. This means Crossroads spent at least $85.7 million on political activities in 2012, not the $74.5 million reported to the Internal Revenue Service. That’s about 45 percent of its total expenditures.

The transaction also provides a window into one way social welfare nonprofits work around the tax code’s dictate that their primary purpose cannot be influencing elections. Grants sent from one nonprofit to another may be earmarked for social welfare purposes, but sometimes end up being used to slam or praise candidates running for office.

“They have a bad grantee here,” said Marcus Owens, the former head of the IRS’ Exempt Organizations division, who looked at the documents at ProPublica’s request. “My question would be, ‘What has Crossroads done to recover that money?’ That’s what the IRS would expect.”

Crossroads spokesman Jonathan Collegio did not respond to questions from ProPublica about Americans for Tax Reform’s use of the grant or whether Crossroads would ask for it to be refunded.

Instead, Collegio wondered whether Americans for Tax Reform could have used resources carried over from 2011 to fund the 2012 election spending, rather than money from Crossroads. “Were resources carried over from 2011?”  he asked in an email to ProPublica.

But after consulting with tax experts, ProPublica determined Americans for Tax Reform couldn’t have used resources from 2011 for the political spending.

“That’s called bullshit with a serving of horseshit on the side,” Owens said.

Americans for Tax Reform reported a total of $10.3 million in assets in the beginning of 2012. Of those assets, $8.2 million was only available on paper, an amount due from a related charity, the Americans for Tax Reform Foundation. The rest — $2.1 million — was a combination of equipment, leasehold improvements, cash holdings, net accounts receivable, prepaid expenses and deferred charges. None of those amounts changed significantly by the end of 2012. In other words, the only known source for the money Americans for Tax Reform spent on politics was donations from Crossroads and others.

Collegio didn’t respond to an email from ProPublica last Wednesday outlining how some of the Crossroads’ grant had to have been spent on election activities.

John Kartch, the spokesman for Americans for Tax Reform, also didn’t respond to ProPublica questions about the use of the Crossroads grant for politics.

Social welfare nonprofits, also known as dark money groups because they don’t have to report their donors, are allowed to spend money on politics as long as their primary purpose is social welfare. The groups often count so-called issue ads that stop short of advocating for or against a candidate and grants toward that social welfare mission. Since the Supreme Court’s 2010 Citizens United decision allowed corporations and unions to spend directly on election ads, these nonprofits have turned into the vehicle of choice for anonymous spending, dumping more than $254 million into the 2012 elections.

Of the 150 or so social welfare nonprofits that reported spending to the Federal Election Commission during the 2012 election cycle, Crossroads was king, the biggest anonymous spender by far. Americans for Tax Reform came in fourth, with $15.8 million.

On its 2012 tax return, made public last week, Crossroads said it gave its biggest grant, $26.4 million, to Americans for Tax Reform for “social welfare.”

In the last part of 2012, Americans for Tax Reform told the FEC it spent repeatedly on ads and mailers, $15.8 million altogether on so-called “independent expenditures,” mostly in the month before the election, opposing Democrats and supporting Republicans running for Congress. (Independent expenditures tell people they should vote for or against a certain candidate.) Most of that money, more than $10.7 million, was for media buys, to purchase air time on TV and radio for various ads. More than $1.6 million went to designing, producing and sending mailers. Most of the rest of the money went to ad production and phone banks. (Here are some examples of those ads.)

Americans for Tax Reform told the IRS in its tax return, obtained and made public by the watchdog group Citizens for Responsibility and Ethics in Washington (CREW), that it raised and spent about $31 million in 2012. Since the group got $26.4 million from Crossroads, only $4.6 million of its revenue came from other donors. At least $11.2 million of Crossroads money had to go toward the political ads reported to the FEC.

That means Americans for Tax Reform spent about 51 percent of its money on political ads reported to the FEC in 2012.

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  • dana becker

    Let us know when he is going to be audited and when he will hopefully be going to jail.

  • Lynda Groom

    Wow! A serial liar was caught lying. New at eleven. Call back when something unforeseen happens.

  • Liberalism Is Nonsense

    Unless an unwavering commitment to liberty is reinvigorated, democratic processes are at risk of being hijacked by a combination of those under the spells of collectivist illusions and those bribed by the spoils of plunder.

    • Independent1

      You describe the GOP exactly!! A collective group of snakeoil salesmen that are leading America down the road to disaster as they do everything in their power to create an illusion that they’re working in the name of God, when in fact, they’re every intent is to rob America’s taxpayers of every cent they have to feed their never ending lust for MONEY!!.

  • itsfun

    These types of groups need to be watched closely and stopped in their tracks. I am sure this is one thing that is bi-partisan. I guess politicians and political groups can agree on one thing, and that is screwing the tax payers.

  • FT66

    Karl Rove was supposed to be behind the bars many years ago. Now, I think he can’t escape this anymore. Let the auditing begin.

    • Independent1

      Let’s hope that the IRS doesn’t just overlook what ProPublica has uncovered on Rove as they appear to have ignored all the potential tax violations Romney has committed with his stashing of money in overseas accounts and the impossible creation of a 401k with over 100 million in value. Which was supposedly accumulated over a 15 year period when during that time the most he legally could have deposited into the 401k was $450,000. No one LEGALLY, turns $450,000 into 100 million in 15 years. Why hasn’t the IRS taken a look already at the tricks Romney must have played with this ruse in his tax returns???

      • FT66

        Good question and it needs clear answers as well.

        • highpckts

          Never happen! The banks get away with all their shady dealings and so will Rove! I have lost faith! No one goes to jail except us peons!!

          • rustacus21

            … if only for no other reason than sitting back & allowing injustice to happen to INNOCENTS!?!?! When was the last time U quoted from the Declaration… “…For imposing ‘taxes’ on us without our consent…”? U do understand that tax cuts for only the wealthy equates to additional taxation on the rest of we, the UNWEALTHY?! Let’s not convince anyone to accept helplessness. I rather think the power of the opening sentence of the Constitution is even more apt, reminding US it’s “…We the People…” in charge of this. B/c think about it: why is Rove actually spending so much? Who do U think is really the political majority, if conservatives are determined to risk illegalities in order to bar legitimate voters from exercising their Constitutional, LEGAL rights to vote? Only to come up dry in so many races in ’12? W/a defeatist mindset, Rove is only emboldened. Instead encourage U’r self. & someone else while U’r at it…

  • Dominick Vila

    What needs to be done is to review the entire issue of tax exempt status for every single entity involved in politics and religion. The only exception should be for institutions such as the Red Cross, Goodwill, and a few others. Every single organization, not focused strictly on charity, should be denied tax exempt status.
    Along the same lines, only countries afflicted by massive natural disasters, famine, and/or epidemics should be eligible to receive foreign aid.
    Interestingly, these simple ways to reduce spending are not even debated by those who claim to be determined to balance the budget by spending cuts alone. I wonder why?

    • Liberalism Is Nonsense

      A better idea is to eliminate the income tax altogether.

    • Allan Richardson

      Actually, the IRS gave in many years ago and allowed the “NO politics” rule actually written into the law to be interpreted as “mostly” non political. If we went back to that rule, both left and right wing “community” organizations would be shut down. Personally, I feel that an organization that is performing a non-profit service of a non-political nature should have the right to DEFEND ITS MISSION and ONLY to do so, through political effort. For example, the Red Cross should be able to run political ads defending blood transfusions if a political figure tries to outlaw them or make them very difficult; or, the League of Women Voters should be able to defend voting rights against voter suppression measures. But general political advertising, or promoting a candidate specifically, no.

      Abolishing the income tax would require depending on other taxes, such as sales taxes, which are by nature REGRESSIVE, meaning that lower income families, which spend almost every penny on living expenses, pay a higher PROPORTION of their incomes in taxes than higher income families, who have so much income left over when they have finished buying almost everything they could possibly want, and only what they spend is taxed.

      Before the 16th Amendment, the federal government was primarily funded by alcohol taxes; so Prohibition was not possible until then.

  • disqus_ivSI3ByGmh

    Wait! You are saying that Karl Rove actually lied? How is that possible? Isn’t he supposed to be the most honest person in America? I am shocked! Shocked, I say, to hear that a political pundit who created a President from a nebbish has actually raised money and spent it on political candidates! Simply inconceivable!