Monday, June 11, 2012

IRS Denies Tax Exemption To Political Group

The Internal Revenue Service (IRS) has revoked the tax exemption of a small political nonprofit, sparking speculation about the future of organizations that are already spending big dollars on the 2012 presidential race.

The name of the nonprofit wasn't revealed in the IRS's original announcement, but Bloomberg News learned that it was Emerge America from its president, Karen Middleton. Based in San Francisco, Calif., the group works with nine state affiliates that train women candidates for the Democratic Party.

In the letter to Emerge America, the IRS wrote that group could no longer be exempt from property taxes because it was not "operated primarily to promote social welfare." Middleton told Bloomberg in an e-mail that the organization now falls under tax code Section 527, which requires them to release the names of its donors.

The IRS's decision has led some to wonder whether prominent political groups, such as the liberal Priorities USA and the conservative Crossroads GPS, could be next. Critics of these groups claim that since their motives are just as political as Emerge America's, they should also not be exempt from property taxes. Washington, D.C.-based Citizens for Responsibility and Ethics in Washington has already asked the IRS to determine whether the American Action Nonprofit should have tax exempt status. The nonprofit is best known for raising $26 million to help elect Republican candidates during the 2010 midterm elections.

Political nonprofits have been increasing their spending on campaigns since the controversial Citizens v. United decision by the Supreme Court in 2010. The ruling removed restrictions on corporate and union expenditures for political campaigns. The decision had an impact almost immediately, as groups that were allowed to keep their donors hidden spent $138 million during the 2010 midterms, according to the Center for Responsive Politics. This was down from $1.3 million in the 2006 midterm elections.

You can read the full story in Bloomberg News.

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