So how can groups like Crossroads GPS, the Karl Rove-crafted 501(c)4 that has poured millions upon millions into campaign ads in the past several election cycles, qualify? The answer, given the plain language of the law, is that they should not. The appropriate ISR classification for groups like Crossroads GPS is under section 527 of the IRS Code, for political organizations. So why opt instead for 501(c)4 status? Because 527s have to disclose their donors—and 501(c)4s do not. Bingo!
To be sure, the ability of sham social-welfare organizations like Crossroads GPS to apply for 501(c)4 status stemmed from a bureaucratic decision by the IRS decades ago to redefine “exclusively” as “primarily,” a step taken to give a tiny bit of flexibility and discretion to the agency. But as dark money proliferated in the aftermath of Citizens United, campaign-finance lawyers pushing the envelope of the law decided that they could use a standard of 50 percent of the organizations’ funds going for social welfare to meet the standard of “primarily,” knowing that an understaffed and beleaguered agency would probably not intervene.
In 2010, the IRS was hit with a veritable flood of applications for 501(c)4 status, overwhelming its resources. Career employees, seeking to separate real social-welfare organizations from those that were political ones, developed a set of keywords and terms, including many conservative and some (but fewer) liberal ones, in part because the lion’s share of the applications came from conservative groups. The terms included “Tea Party.” Why? A Tea Party organization—built around the term “party”—was openly political in nature, a clear 527 group, not exclusively or even primarily a social-welfare organization.
No question, the IRS officials handling this application process were naïve and ham-handed, and they inappropriately left many organizations, whether they should have qualified or not, twisting in the wind for months or years. But the problem itself stemmed from an illegitimate effort by many political consultants and their consiglieres to evade disclosure.
The Republican reaction to the IRS bungling was a clever and sustained effort to use the hated agency as a way to mobilize an angry constituency on the right, to enhance turnout in subsequent elections, and to raise money. The effort already succeeded at intimidating the agency—including Koskinen—from developing a new clear and appropriate standard, a bright line test, for achieving 501(c)4 designation, and even got the IRS, in a move that defies the law and common sense, to accept Crossroads GPS as a social-welfare organization.
There is a broader motive here, coming from radical forces that want to blow up all of government as we know it. Intimidating, undermining, and destroying the IRS’s capacity to carry out its role, to collect all the tax money that’s owed, to starve government, makes all agencies perform more poorly, and leads to a backlash against government. The poor service that results from cutting personnel also alienates taxpayers, frustrates their efforts to keep up with tax law, and makes it easier to evade the law.