Watchdogs urge IRS to crackdown on Crossroads GPS

Holly Bailey

Two campaign-finance watchdog groups are asking the Internal Revenue Service to investigate whether a conservative group linked to former Bush advisers Karl Rove and Ed Gillespie is violating tax laws that limit the political activities of nonprofits.

In a letter sent this morning to the IRS, Democracy 21 and the Campaign Legal Center argue that Crossroads GPS, which is registered as a 501-c4 nonprofit group, is using its tax-exempt status to hide the identities of wealthy donors out to influence the outcome of the 2010 campaign.

"The group was organized to participate and intervene in the 2010 congressional races while providing donors to the organization with a safe haven for hiding their role," the letter reads.

Crossroads GPS is a sister group to American Crossroads, a so-called 527 nonprofit group that discloses its donors to the Federal Election Commission. But as a 504-c4, Crossroads GPS does not have to publicly disclose its contributors.

Both groups are allowed to raise and spend unlimited amounts of cash on the election as long as they don't coordinate with or endorse specific candidates or campaigns. But there are even stricter limits on Crossroads GPS — which, as a 501-c4, is not allowed under the law to have "participation or intervention in political campaigns" be its "primary" function.

But this is where the law gets tricky. Crossroads GPS has been one of the biggest spenders among outside political groups on TV ads this election cycle, but its organizers argue they are within the law because they are pressing specific issues and policies. Those areas fall within the purview of the group's legislative agenda, Crossroads leaders argue, and are not the basis of explicit election-based appeals.

For example, a recent Crossroads GPS ad airing in Nevada slammed Senate Majority Leader Harry Reid for the state's high unemployment and for supporting President Obama's health care plan. The ad was obviously timed to impact Reid's re-election chances in Nevada — but it also made no mention of the 2010 election, instead urging voters to phone Reid's Senate office and express their displeasure.

While critics say the "issues" rationale for Crossroads activities is a transparent dodge, the argument could very well pass muster with the IRS. The agency has previously come under criticism for its lax oversight and broad legal definitions that govern what exactly nonprofits can and cannot do.

(Screenshot of Crossroads GPS ad)