A former Democratic congressional candidate and a government watchdog are suing the IRS, claiming the agency has allowed political groups to flout campaign finance laws.
In their lawsuit, Citizens for Responsibility and Ethics in Washington (CREW) and David Gill, who lost a razor-thin election in 2012, say that the failure of the IRS to keep so-called 501(c)(4) groups out of politics has allowed a flood of anonymous money into the political process.
“Disgracefully, the IRS has sat on its hands for the last two election cycles while 501(c)(4) groups have been formed expressly to run negative attack ads funded by anonymous donors,” Melanie Sloan, CREW’s executive director, said in a statement.
“When called out, the IRS has said only that it is ‘aware’ of the public’s concern. Now the IRS can explain its deplorable inaction in federal court.”
The suit comes after the American Action Network, which is organized as a 501(c)(4), spent roughly $1.5 million against Gill in the 2012 election — with around two-thirds of that, Gill and CREW say, coming in negative spots in the campaign’s final weeks.
"I ran for office because I believe in the democratic process and public service,” Gill said in a Tuesday statement.
“I am taking this action against the IRS in furtherance of those beliefs — to ensure that anonymous dark money groups cannot continue to taint the political process by operating under the guise of social welfare organization.”
The American Action Network brushed off the suit from what it called a liberal group with ties to George Soros and a candidate who has come up short four times.
“The American Action Network’s significant advocacy efforts for center-right causes are well-established, and the network continues to keep its primary focus on those non-electoral activities, as required by law,” Dan Conston, a spokesman for the group, said in a statement.
“The courts and the IRS have rightfully concluded that a group like ours should have the right in a limited fashion to advocate for candidates that share our beliefs as well as the beliefs themselves.”
Gill’s legal action is the latest wrinkle in a longstanding back-and-forth over 501(c)(4)s, and the question of how involved tax-exempt groups can be in the political process.
Crossroads GPS, the outfit linked to Karl Rove, and Priorities USA, a group founded by former staffers to President Obama, were among the 501(c)(4)s to play prominent roles in the 2012 campaign.
Generally speaking, Republican candidates received more support from 501(c)(4)s and super-PACs in the last campaign.
CREW and Gill said, in filing their lawsuit, that many 501(c)(4)s believe that less than half of their activities can be political, in large part because of an IRS regulation that says those groups must “primarily” be involved in public welfare work.
But the lawsuit asserts that, under federal law, 501(c)(4)s must “exclusively” be focused on the public good.
A group of Senate Democrats pushed the IRS last year to implement tighter controls to ensure that a majority of a tax-exempt group’s work is non-political.
On the other side of the aisle, several congressional Republicans suggested that the IRS might have been unfairly targeting Tea Party groups seeking 501(c)(4) status.