This is the fifth story in an exclusive series about the funding behind politically active tax-exempt organizations that don’t publicly disclose their donors. You can read the other stories in the series here.

It’s Tax Day, and that means two things: Most Americans must send their Form 1040 returns to the Internal Revenue Service by midnight or risk a penalty; and Grover Norquist will relish the opportunity to tell us that our taxes, however much they may be, are too high.

Norquist is the inimitable helmsman of Americans for Tax Reform (ATR) and the architect of a phenomenally successful effort to get lawmakers and candidates to pledge never to raise taxes. During last summer’s debt ceiling debates, the number of Republican lawmakers who wouldn’t budge on taxes led former Republican Sen. Alan Simpson to call Norquist “the most powerful man in America.”

But Norquist doesn’t have to worry much about his own group’s tax bill. ATR is a 501(c)(4) organization under the internal revenue code, and thus tax-exempt.

And while ATR retains that tax status by agreeing not to operate primarily as a political group, it is nevertheless extremely active on that front.

In fact, while ATR has been a fixture in Washington for more than two decades, a review of its tax filings and reports to the Federal Election Commission by OpenSecrets Blog suggests that the organization’s fundraising and spending ramped up dramatically in the 2010 midterm elections. From 2008 to 2010, contributions to ATR increased 124 percent, from $5.5 million to $12.4 million. ATR’s expenditures totaled nearly $11.4 million in 2010, more than doubling the $5.7 million it spent two years earlier. The increased spending was reflected in its payments to vendors: In 2008, ATR paid over $100,000 to only two contractors, HSP Direct and Meridian Strategies LLC, for fundraising services and advertising, respectively, according to its Form 990. In 2010, nine companies crested that mark, totaling at least $8.2 million. The top five were all reported as providing “advertising” services. “Advertising,” for ATR, refers to political advertising. That’s not a foreign concept for the group, but a fundamental change took place in 2010: For the first time, ATR ran ads explicitly opposing and supporting candidates in their campaigns for the House and Senate.

Citizens United v Federal Election Commission case, along with a subsequent decision in a lower court. The decisions meant that corporations — including nonprofits such as ATR — could spend money directly for or against candidates, as long as they did so independently of any campaign. The change coincided with the upheaval in the campaign finance legal landscape brought about by the Supreme Court’s 2010 decision in thecase, along with a subsequent decision in a lower court. The decisions meant that corporations — including nonprofits such as ATR — could spend money directly for or against candidates, as long as they did so independently of any campaign.

ATR’s rapid growth in 2010 receipts and expenditures was shared, even outpaced, by other 501(c)(4) groups, especially ones that favored conservatives. Americans for Prosperity , for instance, the group started by conservative billionaire David Koch of Koch Industries , increased its receipts in 2010 by 214 percent over 2008, to $22.1 million, and boosted its expenditures by a nearly identical percentage.

The American Future Fund took in $23.3 million in 2010, about 211 percent more than it received in 2008, and spent 268 percent more than it did two years before. The 2010 intake of the 60 Plus Association , the conservative seniors’ group, was $16 million, a whopping 734 percent more than in 2008, and it spent 510 percent more.

Citizens United decision had made a difference for the group’s fundraising, though he also said that “the increased visibility and success of ATR over the last several years has been the main factor” in the group’s growth. John Kartch, ATR’s communications director, acknowledged that thedecision had made a difference for the group’s fundraising, though he also said that “the increased visibility and success of ATR over the last several years has been the main factor” in the group’s growth. At any rate, flush with cash, ATR jumped into advertising for and against 2010 candidates in a big way. But it would be hard to figure out exactly how much it spent based on the group’s reports to the FEC and the IRS. ATR filed reports with federal election authorities indicating it had spent $4.1 million on political ads and mailings.

Its tax return for 2010, however, shows nothing on the page where such groups are supposed to record any political expenditures. On a different part of the return, though, ATR lists $1.9 million as political expenditures.

And in yet another section of the filing, a supplemental note on “Advertising and Promotion,” ATR says that in 2010, it “spent over $8 million in election related advertisements. Over $4 million of the advertisements supported specific legislation or candidates. The remaining advertisements were program-related advertisements.”

The discrepancies in the numbers on ATR’s Form 990 filing and its reports to the FEC were the basis for a complaint in March by Citizens for Responsibility and Ethics in Washington, asking the IRS to investigate ATR.

Other 501(c)(4) groups, mostly conservative ones, also reported differing numbers to the FEC and IRS. No political spending shows up on the Form 990 of the 60 Plus Association, for instance, but according to the FEC it spent $6.7 million in independent expenditures directly supporting or opposing a political candidate, and nearly $400,000 in electioneering communications. (It’s possible that all of 60 Plus’ political spending occurred after the June 30 end of its tax year). On the other hand, the Republican Jewish Coalition — the receipts and expenditures of which increased in 2010 by almost 2,000 percent over 2008 — reported about three times more political spending to the IRS than it reported to the FEC.

The instructions and definitions for FEC filings on the one hand and IRS filings on the other are not identical,” said Kartch . For the IRS, groups need to report “direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office” — in other words, directly opposing or supporting a candidate. ATR says differing rules and definitions of political activity at the two agencies account for the different figures. “





and But the FEC requires outside organizations to report both independent expenditures that expressly advocate for the election or defeat of a candidate, electioneering communications — all ads that appear within 30 days before a primary or 60 days before a general election and merely show or refer to a federal candidate.

Political activity by 501(c)(4) groups falls in a nether world between election and tax regulators. Groups that are identified as “ social welfare organizations ” by the IRS must be “primarily engaged in promoting in some way the common good and general welfare of the people of the community,” according to the agency’s rules.

Political activity doesn’t qualify as social welfare, say the rules. But the agency also decided long ago (see p. 434) that as long as social welfare is an organization’s “primary” purpose, some less-than-primary political activity will not threaten the group’s tax status. The resulting situation subverts the goal of preventing corruption in politics by exposing spending to the light of day. Groups such as ATR are laying out millions of dollars, often for ads that directly attack a candidate, like its hit on Kentucky Democratic Rep. Ben Chandler for allegedly “voting over and over again to raise your taxes,” despite having signed ATR’s pledge. But, unlike virtually every other organization that spends money to influence federal elections, ATR and other 501(c)(4)s don’t have to disclose their donors.

The 501(c)(3) arm of ATR, Americans for Tax Reform Foundation, doesn’t disclose its donors either, yet shares directors, employees and facilities with ATR, as OpenSecrets Blog reported is the case with FreedomWorks’ 501(c)(3) and 501(c)(4)

OpenSecrets Blog has revealed a few: Though neither of Norquist’s groups is required to disclose its donors, research byhas revealed a few:

Donor 2010-Cycle Grants & Donations Crossroads GPS* $4 million Lynde & Harry Bradley Foundation $325,000 Donors Trust $87,500 Pharmaceutical Rsrch & Mfrs of America* $75,000 American Petroleum Institute* $50,000 John William Pope Foundation $50,000 American Natural Gas Alliance* $25,000 National Christian Charitable Foundation $25,000 United Parcel Service $25,000 * Denotes donations to 501(c)(4) A March 30 federal court ruling in the case Van Hollen v. FEC could require all groups, including 501(c)(4)s, that run electioneering communications — those within the 30-and-60-day windows — to disclose donors, but the case will likely be considered by an appellate court before that requirement would go into effect. So far in this cycle, ATR has not run any political ads. Kartch, the group’s spokesman, said the organization “does anticipate spending money on political ads this year,” but is not yet releasing any details. Clarification: We have added a sentence to the story indicating that 60 Plus may have done all its political spending after the July 1 start of its tax year, which could account for the fact that the group reported no such spending on its most recent Form 990.



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