The Internal Revenue Service has granted tax-exempt status to one of the best-known and best-funded politically active nonprofit organizations, Crossroads Grassroots Policy Strategies.
Advised by Republican strategist Karl Rove, once a top aide to President George W. Bush, Crossroads GPS has been waiting more than five years on a decision by the IRS. The agency granted tax-exempt status in November but only recently updated its database to reflect the outcome.
Crossroads GPS President Steven Law said he was “pleased but not surprised” about the IRS’s determination.
“For us in some ways it is a nonevent,” he said. “We expected to get it, but it took a lot longer than we had hoped.”
Crossroads GPS has drawn heavy scrutiny because few nonprofits spend more money on political causes — and critics have said it is taking advantage of what amounts to a loophole in campaign finance rules. Nonprofits do not have to disclose their donors to the public.
Rove’s Crossroads organization also has a super political action committee that reports its donors. Together, those two entities spent about $175 million directly trying to influence the 2012 presidential race and other contests. They’re expected to be major players again this year after the GOP presidential primary is settled.
The group calls itself a “social welfare” nonprofit that focuses on issues. By law it cannot spend a majority of its funds on political races.
However, tax documents leave little question that Crossroads GPS ramps up significantly in election years. For example, the group reported just $2.7 million in contributions in 2013 and almost $70 million in the year that followed, with Senate and congressional seats at stake.
Crossroads officials have said they carefully follow the rules governing its allowable spending.
Campaign finance watchdogs were dismayed to learn that Crossroads GPS had secured its long-sought blessing as a nonprofit, although in the years of limbo, it was allowed to act as such.
“This decision by the IRS belies reality and cannot be justified,” said Fred Wertheimer, founder of Democracy 21. “It is a political organization formed and operated to influence federal elections.”
Crossroads GPS took center stage in a 2013 scandal at the IRS, during which the agency apologized for using phrases such as “tea party” to screen for groups that it thought deserved extra scrutiny in the tax-exemption application process.
Just before the IRS controversy erupted, the IRS was drafting a denial of tax exemption for Crossroads GPS, according to documents shared with the House Ways and Means Committee. Had the IRS followed through, Crossroads GPS would have had to pay taxes on its income, including donations. The donations themselves are not tax deductible for the contributors.
In the years since, the IRS has been under extra scrutiny of its own.