TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, December 18, 2012

Karl Rove, Crossroads GPS, and the IRS

Crossroads GPSPro Publica:  Karl Rove’s Dark Money Group Promised IRS It Would Spend ‘Limited’ Money on Elections:

In a confidential 2010 filing, Crossroads GPS — the dark money group that spent more than $70 million from anonymous donors on the 2012 election — told the IRS that its efforts would focus on public education, research and shaping legislation and policy.

The group's application for recognition as a social welfare nonprofit acknowledged that it would spend money to influence elections, but said "any such activity will be limited in amount, and will not constitute the organization's primary purpose."

Political insiders and campaign-finance watchdogs have long questioned how Crossroads, the brainchild of GOP strategist Karl Rove, had characterized its intentions to the IRS.

Now, for the first time, ProPublica has obtained the group's application for recognition of tax-exempt status, filed in September 2010. The IRS has not yet recognized Crossroads GPS as exempt, causing some tax experts to speculate that the agency is giving the application extra scrutiny. If Crossroads GPS is ultimately not recognized, it could be forced to reveal the identities of its donors.

The tax code allows groups like Crossroads to spend money on political campaigns — and to keep their donors private — as long as their primary purpose is enhancing social welfare.

Crossroads' breakdown of planned activities said it would focus half its efforts on "public education," 30 percent on "activity to influence legislation and policymaking" and 20 percent on "research," including sponsoring "in-depth policy research on significant issues."

This seems at odds with much of what the group has done since filing the application, experts said. Within two months of filing its application, Crossroads spent about $15.5 million on ads telling people to vote against Democrats or for Republicans in the 2010 midterm elections.

(Hat Tip: Donald Tobin.)

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Is there any penalty for someone publishing someone else's tax return? Presumably there's a penalty for whoever at the IRS gives at to them, but can a document obtained illegally be published legally? (Maybe that's the Pentagon Papers decision--- does it apply to tax returns?)

Posted by: Eric Rasmusen | Dec 18, 2012 7:02:21 AM

Good question, Eric. The real issue here is the provenance of the document, not the dozens of lies contained therein. Your Fox News consulting expert gig awaits....

Posted by: Anon | Dec 18, 2012 1:55:21 PM

You can't judge how Crossroads GPS will average its allocations of money by looking at one year --it's first one, which was an election year in which expenditures peak in one area, but rather over a longer period of time.

Posted by: Woody | Dec 18, 2012 2:01:04 PM

Woody - please report to Fox news immediately. You are on after Eric.

Posted by: Anon | Dec 18, 2012 2:17:08 PM

Anon, I'm not saying that the magazine should be prosecuted; I'm only wondering if they broke the law. Personally, I would not mind if an IRS employee released someone's tax return because it showed tax fraud but the IRS was unwilling to go after the taxpayer. I wouldn't want the prosecutor to go after the leaker. Other people, who value privacy higher, might think that it is always bad to release somebody's confidential information.

Posted by: Eric Rasmusen | Dec 18, 2012 2:34:05 PM

According to Pro Publica, the application was obtained from the IRS pursuant to a FOIA request.

Posted by: Anonymous | Dec 19, 2012 1:58:13 PM