D’Oh! ‘America Is Not Stupid’ Wins IRS Recognition As Tax-Exempt Nonprofit
by Kim Barker, ProPublica.
The IRS has granted nonprofit status to America Is Not Stupid — a so-called dark money group best known for a 2012 election ad featuring a talking baby who compared the smell of his diaper with a Montana senator.
As ProPublica wrote in January, America Is Not Stupid and a related group, A Better America Now, applied for IRS recognition in the run-up to the 2012 election, swearing under penalty of perjury that they would not spend money on elections.
Then both groups went ahead and did exactly that, spending more than $125,000 on mailers and ads opposing Democratic candidates in Texas and Montana.
Despite these disclosures, records show, the IRS gave A Better America Now its stamp of approval as a social welfare nonprofit in April and recognized America Is Not Stupid in late June, decisions that elicited amazement among campaign finance watchdogs.
Marcus Owens, a nonprofit lawyer who ran the IRS Exempt Organizations division from 1990 to 2000, questioned whether a controversy that erupted earlier this year, over the agency subjecting certain conservative nonprofits to extra review, had damaged its ability to fulfill its regulatory functions.
“The oversight has collapsed,” Owens said. “The current people in Exempt Organizations have no tax law enforcement experience and no exempt organization experience in particular. And they’ve been charged with making this particular headache go away.”
Because of the government shutdown, the IRS could not be reached for comment. In the past, the IRS has not commented on stories about specific groups. Talking about individual taxpayers violates the law.
No one from either America Is Not Stupid or A Better America Now responded to emails and phone calls asking for comment.
In May, the IRS admitted that it had flagged the applications of Tea Party and related groups for extra review, dooming many to years of limbo. That admission turned into a firestorm, leading to the immediate resignation of the acting IRS commissioner and the eventual replacement of the top officials in the Exempt Organizations division. Senate and House committees started investigating. The Treasury Inspector General for Tax Administration expanded its initial audit. And the Justice Department announced a criminal inquiry. (Later, records were released showing that the IRS was also flagging liberal groups with “progressive” in their names.)
Since the Supreme Court’s Citizens United ruling in early 2010 opened the door to increased political spending by corporations and unions, nonprofits like America Is Not Stupid have taken on an expanding role in U.S. elections. That’s largely because they do not have to identify their donors, unlike SuperPACs, leading them to be dubbed “dark money” groups.
About 150 of these nonprofits spent more than $254 million in 2012 on ads, phone calls and mailings reported to the Federal Election Commission. Almost all the donors of that money have remained anonymous. Most of that money 2014 more than 85 percent 2014 was spent by conservative groups, according to the Center for Responsive Politics and research by ProPublica.
These groups are allowed to spend limited amounts to influence elections, as long as they can prove their primary purpose is “social welfare.” But ProPublica has shown how dozens of social welfare nonprofits have underreported their political spending, or spent money on elections despite telling the IRS they would not do so.
In its 2012 annual work plan, the IRS recognized the problem, announcing it would take a hard look at nonprofits and “serious allegations of impermissible political intervention.”
If the agency’s exchanges with America Is Not Stupid and A Better America Now are any indication, however, the augmented focus on nonprofits has been less than ferocious.
The IRS sent ProPublica the groups’ applications for recognition last November, even though they had not yet been recognized and the documents were therefore not supposed to be made public. We wrote stories about these and several other pending applications, bringing it to the IRS’ attention that these groups had pledged that they would not spend money on elections, yet did so.
According to IRS records, neither group ever amended its application to reflect its political spending.