The three groups – Americans for Prosperity Foundation, the MacIver Institute for Public Policy and the Heartland Institute – enjoy tax-exempt, nonprofit status under section 501(c)(3) of the Internal Revenue Code. Such status is meant for charitable and educational organizations and they have one purpose under the law – "promotion of social welfare." Federal law prohibits them from using any resources to participate or intervene in political campaigns. The rules also puts strict limits on the time and resources 501(c)(3) groups can devote to issue advocacy to influence legislation.
There are two very good reasons why federal law requires 501(c)(3) charitable groups to steer clear of electoral politics. First, donations to charitable organizations do not have to be publicly disclosed. That means groups that play politics while masquerading as charities can keep their fundraising hidden, and the public's right to know who is behind campaign advertising is thwarted.
Second, charitable donations to 501(c)(3) groups are tax deductible. Political donations are not. When the IRS allows political groups to game the tax code and use tax-deductible donations for overtly political purposes, taxpayers are forced to subsidize the political agendas of millionaires and billionaires who fund these operations.
Americans for Prosperity was created in 2003 by the billionaire brothers David and Charles Koch, owners of Koch Industries which includes companies with operations in Wisconsin like Georgia Pacific. The MacIver Institute was established in 2009 with substantial funding from Milwaukee's Bradley Foundation as well as the Koch family.
The 28-year-old, Chicago-based Heartland Institute also has received major funding from the Bradley Foundation and Charles G. Koch Foundation. It also has received large sums from Exxon Mobil to sponsor scientific "research" purporting to show that climate change is not happening. And Heartland teamed with Philip Morris to question the link between secondhand smoke and health risks.
It's bad enough that the IRS blesses such activity as "promotion of social welfare." But when the agency permits groups like these to cross the clear line drawn in federal law and use undisclosed, tax-deductible donations to engage in electioneering, it makes a mockery of the tax code and of legitimate acts of charity.
Political groups aiming to influence elections should be operating as so-called "527s," named for the section of the IRS code under which they are organized. Donations to 527s have to be publicly disclosed, and they are not tax deductible. Up to now, the IRS has not been enforcing the law that was designed to make political money transparent and spare taxpayers the indignity of subsidizing the private political aims of the likes of the Koch brothers. We hope the complaints we filed might snap the agency out of its stupor.
Our complaints offer dozens of pages of evidence that the three groups are involved in an illegal election intervention. But the strongest proof of all comes straight from the proverbial horse's mouth.
In a fundraising appeal for its "Operation Angry Badger," the Heartland Institute made no bones about the need to get involved in the recall election on behalf of Governor Walker:
The recall elections of 2012 amount to a referenda on collective bargaining
reform at the state level, making them of national interest. Successful recalls
would be a major setback to the national effort to rein in public sector
compensation and union power. Heartland is the largest and most influential
national free-market think tank in the Midwest, so we are in the right place
and with the right resources to help defend and secure Wisconsin's recent
Quoted in a story appearing last month in a Florida newspaper, Americans for Prosperity Foundation board chairman David Koch was equally blunt:
"We're helping him, as we should. We've gotten pretty good at
this over the years," he says. "We've spent a lot of money in Wisconsin.
We're going to spend more."
By "we" he says he means Americans for Prosperity, which is spending about $700,000 on an "It's Working" television ad buy in the state.
"What Scott Walker is doing with the public unions in Wisconsin is
critically important. He's an impressive guy and he's very courageous," Koch
says after a benefit dinner of salmon and white wine. "If the unions win the
recall, there will be no stopping union power."
This is not the first blatant abuse of a section 501(c)(3) charitable organization to further private political ends, but it is a rare instance where a smoking gun is found.
Now the question is whether the IRS will do anything about it.