Introduction

Thom Tillis, speaker of the state House in North Carolina and a Republican U.S. Senate candidate, as shown in an advertisement sponsored by conservative nonprofit Carolina Rising. YouTube

Political watchdog group Citizens for Responsbility and Ethics in Washington wants the Internal Revenue Service to punish a nonprofit group that spent millions of dollars on advertisements boosting Sen. Thom Tillis, R-N.C., ahead of his election victory last year.

The IRS complaint follows a Center for Public Integrity investigation into Carolina Rising’s political activities, which CREW cites several times.

Carolina Rising provided “a vehicle for donors to make unlimited secret contributions to benefit candidates, and that is not permitted under the law,” the organization’s Executive Director Noah Bookbinder argues. “While the public is kept in the dark, the candidate or official almost certainly knows who made the often-large contributions.”

In the complaint, Bookbinder asks the IRS to consider stripping Carolina Rising of its nonprofit status, hitting the group with excise taxes and treating it as a taxable corporation or political group.

But CREW faces major headwinds: The IRS has shown little interest in pursuing politically active nonprofits, particularly in the aftermath of a 2013 scandal in which staffers singled out conservative groups for enhanced scrutiny.

In North Carolina’s bitterly fought U.S. Senate contest last year, Carolina Rising ran nearly 4,000 TV ads.

In August 2014 alone, it ran more ads than either then-Sen. Kay Hagan, the Democratic candidate, or Tillis, her Republican challenger who ultimately won the seat.

Carolina Rising, a nonprofit “social welfare” group organized under Sec. 501(c)(4) of the tax code, doesn’t reveal its donors. Dallas Woodhouse, the group’s founder and president, said it spent roughly $4.7 million on the ads, which praised Tillis.

Woodhouse, who last month was chosen to lead the North Carolina Republican Party, could not immediately be reached for comment.

But last year, he insisted Carolina Rising’s ads weren’t political.

“Those are issue ads. Those are not political ads,” Woodhouse told the Center for Public Integrity after the election.

The legal distinction between issue ads and political ads is important because nonprofits such as Carolina Rising can’t, by law, make politics the primary purpose for their existence.

Under federal law, issue ads, known as “electioneering communications,” name a candidate and run during a certain time frame. But they don’t overtly direct voters to vote for or against a candidate even if the ads might substantially help or hurt a candidate in the same way a straight-up political ad could.

Issue ads don’t generally count as “political activity” under IRS rules, and therefore, nonprofit groups sponsoring the ads aren’t required to disclose information about their cost or production like a political committee must.

CREW describes itself as “dedicated to promoting ethics and accountability in government and public life by targeting government officials who sacrifice the common good to special interests.”

It has pursued both Democrats and Republicans in the past, although last year, liberal political activist and top Hillary Clinton supporter David Brock became the group’s chairman after an internal shakeup.

On Tuesday, the group also filed a complaint with the IRS against Conservative Solutions Project, Inc., a “social welfare” nonprofit that’s supporting the presidential campaign of Sen. Marco Rubio, R-Fla.