New blood, new controversy: GOP-allied group spends $4 million in one week in key Senate races

By Jim Kuhnhenn, AP
Tuesday, October 5, 2010

GOP-allied group weighs in with $4 million in ads

WASHINGTON — A deep-pocketed alliance with ties to top Republicans Karl Rove and Ed Gillespie is pumping more than $4 million into key Senate races in a single week of advertising, a crucial infusion to counter a surge in Democratic Party spending as Election Day draws near.

The new wave of ads by Crossroads Grassroots Policy Strategies and its affiliate, American Crossroads, comes during the final, most intense weeks of the congressional campaign. The money, together with that of other groups aligned with the GOP, represents a new beachhead in this year’s less regulated world of money and politics.

For the two Crossroads groups, the new spending means they have poured nearly $14 million into fiercely competitive Senate races in eight states — Florida, Illinois, Kentucky, Missouri, Pennsylvania, Nevada, Colorado and Washington — since August.

Overall spending this year in House and Senate races by candidates, outside groups and the political parties had reached $220 million as of mid-September, according to a Wesleyan University analysis of ad data from Kantar Media/CMAG. Most was by candidates, but nearly one-fifth came from interest groups, a vast majority favoring Republicans.

Crossroads’ efforts are among the most prominent examples in the increased political activity by tax-exempt nonprofit groups, illustrating new terrain in campaign finance. A landmark Supreme Court case, Citizens United v. Federal Election Commission, opened the way early this year for corporations and unions to spend money in elections. New FEC guidelines and lower court rulings have also contributed to a more freewheeling environment.

As a result, the Internal Revenue Service has come under increasing pressure from Democrats to act against conservative or GOP-allied groups, placing the tax agency in an awkward position of being dragged into a political fight that it can’t possibly address until well after the Nov. 2 elections are over.

On Tuesday, two organizations that advocate for tougher campaign finance rules filed a complaint with the IRS asking it to investigate the tax-exempt status of Crossroads GPS.

“If we are correct, then tax laws are being abused to hide donors,” Democracy 21 President Fred Wertheimer said in an interview.

Together, Crossroads GPS and American Crossroads have raised $32 million this year. American Crossroads, created as a political organization under a separate section of the tax code, has to disclose its donors. But Crossroads GPS, formed as a tax-exempt group, does not. Crossroads spokesman Jonathan Collegio said the group has carefully followed laws governing such corporations.

The new ads by Crossroads GPS target Senate races in Florida, Illinois, Kentucky, Missouri, Pennsylvania and Washington state. The biggest spending is more than a $1 million in Florida assailing Gov. Charlie Crist, the former Republican who is running for the Senate as an independent. American Crossroads is airing ads in Nevada and Colorado.

The ads differ slightly. American Crossroads ads make a more direct appeal to voters to oppose Democrats; Crossroads GPS tell viewers to contact candidates to tell them they oppose their stand on issues. The difference is significant because Crossroads, as a tax-exempt organization, could argue it is airing issue ads and does not directly intervene in an election.

Every election cycle uncovers a new trend or loophole that is exploited by either party in hopes of gaining an advantage. Much of the activity taking place this year occurred to a lesser extent before. But campaign finance lawyers contend the Citizens United decision made it easier for corporations to agree to give to groups involved in politics.

“It reduced a sort of psychological barrier that may have been holding back some corporate money,” said Marcus Owens, a lawyer and former head of the IRS division overseeing tax-exempt organizations.

Under the tax code, those organizations have the right to conduct political campaign activity as long as it is not the primary mission of the group. According to the IRS, what constitutes political activity is determined by the “facts and circumstances” of each case.

Last week, the chairman of the Senate Finance Committee, Democrat Max Baucus of Montana, called on the IRS to investigate all tax-exempt groups involved in political activity. In recent weeks, President Barack Obama and top White House aides have also denounced the rise of conservative nonprofit groups that have been airing ads against Democrats in House and Senate battlegrounds.

In August, the Democratic Congressional Campaign Committee asked the IRS look into Americans for Prosperity Foundation, founded by billionaire conservative David Koch.

“It’s obvious they have had a planned attack from the highest levels of the White House,” said Cleta Mitchell, a campaign finance lawyer who has represented a number of conservative groups. “You have Democrats in office seeking to use the IRS to punish their political enemies.”

Crossroads spokesman Collegio called the complaint against his organization baseless, and said it was filed by a partisan group that “files baseless complaints for its living.”

“Liberal groups spent more than $400 million in undisclosed campaign money in 2008 alone, with nary a peep of protest from any of these groups,” he said.

Democracy 21 and the Campaign Legal Center have long called for tougher rules on campaign money and have filed Federal Election Commission complaints against groups allied with both parties. The Campaign Legal Center’s president and general counsel is Trevor Potter, who was the top lawyer for Republican Sen. John McCain’s presidential campaign.

Campaign finance lawyers said using the IRS to tackle questions of political money may prove difficult. Owens pointed out that, with extensions, a corporation formed in 2010 would not have to file a return with the IRS until as late as November 2011 — “Long after the election and quite possibly long after the organization went out of business.”

“The IRS mechanism,” he added, “is designed to collect taxes, not regulate political campaigns.”

Lawrence Noble, a former FEC general counsel, said regulating tax-exempt organizations represents a small fraction of IRS activities. What’s more, he added, “People get very nervous about the IRS getting involved in politics.”

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