New Tax Return Shows Karl Rove's Group Spent Even More On Politics Than
On its 2012 tax return, GOP strategist Karl Rove's dark money behemoth Crossroads GPS justified its status as a tax-exempt social welfare group in part by citing its grants of $35 million to other similarly aligned nonprofits. (Here's the tax return itself, which we detailed last week.)
The return, signed under penalty of perjury, specified that the grants would be used for social welfare purposes, "and not for political expenditures, consistent with the organization's tax-exempt mission."
But that's not what happened.
New tax documents, made public last Tuesday, indicate that at least $11.2 million of the grant money given to the group Americans for Tax Reform was spent on political activities expressly advocating for or against candidates. This means Crossroads spent at least $85.7 million on political activities in 2012, not the $74.5 million reported to the Internal Revenue Service. That's about 45 percent of its total expenditures.
The transaction also provides a window into one way social welfare nonprofits work around the tax code's dictate that their primary purpose cannot be influencing elections. Grants sent from one nonprofit to another may be earmarked for social welfare purposes, but sometimes end up being used to slam or praise candidates running for office.
"They have a bad grantee here," said Marcus Owens, the former head of the IRS' Exempt Organizations division, who looked at the documents at ProPublica's request. "My question would be, What has Crossroads done to recover that money?' That's what the IRS would expect."
Crossroads spokesman Jonathan Collegio did not respond to questions from ProPublica about Americans for Tax Reform's use of the grant or whether Crossroads would ask for it to be refunded.
Instead, Collegio wondered whether Americans for Tax Reform could have used resources carried over from 2011 to fund the 2012 election spending, rather than money from Crossroads. "Were resources carried over from 2011?" he asked in an email to ProPublica.
But after consulting with tax experts, ProPublica determined Americans for Tax Reform couldn't have used resources from 2011 for the political spending.
"That's called bullshit with a serving of horseshit on the side," Owens said.
Americans for Tax Reform reported a total of $10.3 million in assets in the beginning of 2012. Of those assets, $8.2 million was only available on paper, an amount due from a related charity, the Americans for Tax Reform Foundation. The rest 2013$2.1 million 2013 was a combination of equipment, leasehold improvements, cash holdings, net accounts receivable, prepaid expenses and deferred charges. None of those amounts changed significantly by the end of 2012. In other words, the only known source for the money Americans for Tax Reform spent on politics was donations from Crossroads and others.
Collegio didn't respond to an email from ProPublica last Wednesday outlining how some of the Crossroads' grant had to have been spent on election activities.