Statement of Democracy 21 President Fred Wertheimer Raising Concerns about New 501(c)(4) Tax-Exempt Group Formed by Former Obama White House Officials
Bill Burton, former White House deputy press secretary to President Obama and Sean Sweeney a former top aide of previous White House Chief of Staff Rahm Emanuel have announced the creation of two new groups, Priorities USA, a 501(c)(4) tax-exempt group and Priorities USA Action, a section 527 political organization.
The two groups clearly have been formed to make expenditures in support of the re-election of President Obama in 2012.
The two pro-Democratic groups mirror two pro-Republican groups formed in 2010, American Crossroads and Crossroads GPS, which were the brainchild of political operative Karl Rove and were created to make expenditures to support Republican candidates in the 2010 congressional races.
Priorities USA, like Crossroads GPS, was formed as a 501(c)(4) organization in order to provide donors with the opportunity to make secret contributions that the organization will spend to influence federal elections.
On October 5, 2010, Democracy 21 and the Campaign Legal Center sent a letter to the Internal Revenue Service asking for an investigation of whether Crossroads GPS "is operating in violation of its tax status because it has a primary purpose of participating in political campaigns in support of, or in opposition to, candidates for public office."
We expect to send a similar letter to the IRS in the near future asking for a similar investigation of whether Priorities USA is operating in violation of its section 501(c)(4) tax status because it has a primary purpose of participating in political campaigns in support of, or in opposition to, candidates for public office.
Democracy 21 strongly opposes the practice of tax-exempt groups being used as conduits to spend secret contributions to influence federal elections.
In 2010, more than $135 million in secret contributions were laundered into the congressional races through tax-exempt organizations. Absent any new disclosure requirements or better enforcement of existing laws by the IRS and the FEC, the amount of secret contributions will dramatically increase in the 2012 presidential and congressional elections.
History has shown us that secret contributions in American elections are a formula for scandal and corruption.
Democracy 21 is pursuing a multi-prong effort involving litigation, legislation and administrative rulemaking to ensure that the gaping loopholes being used by tax-exempt organizations to spend secret contributions in federal elections are closed.
Last week, the Democracy 21 legal team filed a lawsuit on behalf of Representative Chris Van Hollen (D-MD) against the Federal Election Commission challenging as contrary to law an FEC regulation that has improperly allowed nonprofit 501(c)(4) advocacy groups and 501(c)(6) business associations to keep secret the donors whose funds are being used to pay for “electioneering communications” in federal elections.
The Democracy 21 legal team also filed a rulemaking petition at the FEC on behalf of Representative Van Hollen requesting the Commission to revise an existing FEC regulation that is contrary to law and has improperly allowed non-profit groups to keep secret the donors whose funds are being used to pay for “independent expenditures” in federal elections.
The success of these two actions would ensure that nonprofit groups are not able in the future to keep hidden from the American people the donors funding their campaign expenditures.
Democracy 21 also strongly supports the Executive Order under consideration by the Obama Administration that would require government contractors to disclose funds they provide to tax-exempt organizations that are spent to influence federal elections.
