Crossroads Grassroots Policy Strategies, the political ad-buying organization cofounded by Republican strategist Karl Rove in 2010, has officially submitted its first tax forms with the Internal Revenue Service, and as expected, the group is formally requesting that the IRS treat it as a nonprofit operating under section 501(c)(4) of the tax code.
But that’s a tricky proposition for a group that spends the vast majority of its money on ads decrying one political candidate or another.
The hitch is that the tax code says 501(c)(4) groups “must be operated exclusively to promote social welfare” — the promotion of which “does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”
Rove depends on Crossroad GPS getting that 501(c)(4) status for one reason. Avowedly political groups, like Crossroads GPS’ sister organization, the American Crossroads Super PAC, have to disclose their donors; 501(c)(4) groups don’t (although that could be changing).
The group insists that most of the ads the organization produces comprise “issue advocacy” rather than political campaign activity. It argues that since less than 50 percent of its budget goes to what it terms “direct” political spending, the group qualifies as being “primarily” a social welfare group.
The big question the IRS will have to address, therefore, is whether the ads that Crossroads GPS and similar groups call “issue advocacy” ads are, in fact, “on behalf or in opposition to any candidate for public office.”
The rise of these independent groups, which can raise unlimited amounts of money from corporations, unions and other wealthy donors and spend it to help their favored candidates, could end up defining the 2012 campaign.
But some of the groups could also pose a threat to established campaigns, which may find it difficult to stop them from wandering off message or committing strategic blunders. One rogue super PAC in Southern California has upended a Republican congressional campaign by producing a cru de video depicting the female Democratic candidate as a stripper giving tax money to gang members.
The Campaign Finance Institute, which tracks money in politics, calculated in a recent study that independent groups spent nearly $300 million in the 2010 elections, more than double the amount spent in 2008. Michael Malbin, the group’s executive director, said the loosened climate is reminiscent of the Watergate era, which led to a series of wide-ranging overhauls.
“If you want to know what the 2012 campaign is going to look like, you have to look back 40 years — to 1972,” Malbin said. “These groups are functioning almost the way party groups used to function.”