CREW Sues IRS Over Dark Money

Says agency has been sitting on its hands while 501(c)(4) groups spend millions on attack ads

By John Eggerton -- Broadcasting & Cable, 2/19/2013 11:59:03 AM

Citizens for Responsibility and Ethics in Washington (CREW) has filed a lawsuit against the IRS, saying its inaction has allowed 501(c)(4) groups (tax-exempt nonprofits) to spend hundreds of millions on attack ads and other activity, even though it says a federal law bars them from political activity.

Unlike PACs, the 501(c)(4) groups do not have to identify their donors.

CREW is complaining that while federal law states that 501(c)(4) groups must operate "exclusively for purposes beneficial to the community as a whole," IRS regs have interpreted that to mean that groups "primarily" engaged in activities that promote public welfare qualify. That means, says CREW, that some groups can spend up to 49% of their funds on political activities.

The suit claims that "primarily" does not square with the law's requirement of "exclusively." It wants to prevent 501(c)(4) from engaging in political activity, thus cutting off an avenue for corporations and others to funnel so-called "dark money" into attack ads through the nonprofits.

The lawsuit, however, alleges the IRS regulation is invalid because "exclusively" and "primarily" are not synonymous and wants 501(c)(4) groups barred from engaging in political activities.