CREW: IRS: Regarding Records Provided to Senate Finance Committee Chairman Max Baucus: 11/7/2011 - FOIA Exhibits | Citizens United V. Fec | 501(C) Organization

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Description
On November 7, 2011, CREW sent a Freedom of Information Act request to the Internal Revenue Service (IRS) seeking records the IRS provided to Senate Finance Committee Chairman Max Baucus (D-MT) in response to his September 2010 letter asking the agency to survey major section 501(c)(4), (c)(5) and (c)(6) organizations involved in political activity. Sen. Baucus requested the IRS determine whether these organizations are being operated their intended tax exempt purpose, and asked the agency to report back its findings and recommendations as soon as possible. These kinds of tax-exempt groups reported spending at least $134 million on the 2010 elections, and their spending is expected to increase dramatically in the 2012 election cycle. The records CREW seeks are likely to contribute to the public’s understanding of the IRS’s oversight of these organizations and inform the public of the agency’s recommendations for addressing potential violations of the tax code.
Transcript
  EXHIBIT A  Moi\X 9AUCUS, MONTANA, CHA IRMANJOHN 0. ROCKEFHLER IV , W!:ST VIRGINIA KENT CONRAD , NORTH DAKOTA JEFF Bll'iGAMAI'i, NEW MEXICO JOHI'i F KERRY, MASSACHUSETTSBLANCHE L LINCOLN , ARKANSAS RON wYOEI'i, OREGON CHARLES E. SCHUMER, NEW YORKDEBBIE STABENOW, MICHIGAN MARIA CANTWELL. WASHINGTONBILL NELSON, FLORIDA ROBERT MENENDEZ. NEW JERSEY THOMAS R CAAPfR. DELAWARECHUCK GRASSLEY, I OWA ORRIN G. HATCH, UTAH OLYMPIA J. SNOWE, MAINEJON KYL. ARIZONAJIM RUNNING, KENTUCKYMIKE CRAPO, IDAHOPAT ROBERTS . KANSAS JOHN ENSIGN, NEVADAMICHAEL B. ENZI ,WYOMINGJOHN CORNYN , TEXASRUSSELLSULLIVAN . STAFF DIRECTOR KOLAN OA\115 , REPUBLICAN STAFF DIRECTOR AND CHIEF COUNSEL The Honorable Douglas H. ShulmanCommissionerInternal Revenue Service IIII Constitution A venue, N. W. Washington, DC 20224 Via Electronic Transmission Dear Commissioner Shulman: tinitcd ~tatrs ~rnatr COMMITIEE ON FINANCE WASHINGTON, DC 20510-6200 September 28, 20 I 0The Senate Finance Committee has jurisdiction over revenue matters, and theCommittee is responsible for conducting oversight of the administration of the federal taxsystem, including matters involving tax-exempt organizations. The Committee hasfocused extensively over the past decade on whether tax-exempt groups have been usedfor lobbying or other financial or political gain.The central question examined by the Committee has been whether certaincharitable or social welfare organizations qualify for the tax-exempt status providedunder the Internal Revenue Code.Recent media reports on various 50I(c)(4) organizations engaged in politicalactivity have raised serious questions about whether such organizations are operating in compliance with the Internal Revenue Code.The law requires that political campaign activity by a 50I(c)(4), (c)(5) or (c)(6)entity must not be the primary purpose of the organization. If it is determined the primary purpose ofthe 50I(c)(4), (c)(5) and (c)(6)organization is political campaign activity the tax exemption for that nonprofit can beterminated.Even if political campaign activity is not the primary purpose of a 50 I (c)(4 ), (c)(5), and (c)(6) organization, it must notify its members of the portion of dues paid due to political activity or pay a proxy tax under Section 6033(e).  Also, tax-exempt organizations and their donors must not engage in privateinurement or excess benefit transactions. These rules prevent private individuals orgroups from using tax-exempt organizations to benefit their private interests or to profitfrom the tax-exempt organization's activities.A September 23 New York Times article entitled Hidden Under a Tax-ExemptCloak, Private Dollars Flow described the activities of the organization Americans forJob Security. An Alaska Public Office Commission investigation revealed that AJS,organized as an entity to promote social welfare under 501(c)(6), fought development in Alaska at the behest of a local financier who paid for most of the referendumcampaign. The Commission report said that Americans for Job Security has no otherpurpose other than to cover money trails all over the country. The article also noted that membership dues and assessments ... plunged to zero before rising to $12.2 million forthe presidential race. A September 16 Time Magazine article examined the activities of WashingtonD.C. based 501 (c)(4) groups planning a $300 million ... spending blitz in the 20 I 0elections. The article describes a group transforming itself into a nonprofit under501(c)(4) ofthe tax code, ensuring that they would not have to publically disclose anyinformation about its donors. These media reports raise a basic question: Is the tax code being used to eliminatetransparency in the funding of our elections- elections that are the constitutional bedrock of our democracy? They also raise concerns about whether the tax benefits of nonprofitsare being used to advance private interests.With hundreds of millions of dollars being spent in election contests by taxexempt entities, it is time to take a fresh look at current practices and how they comportwith the Internal Revenue Code's rules for nonprofits.I request that you and your agency survey major 501(c)(4), (c)(5) and (c)(6)organizations involved in political campaign activity to examine whether they areoperated for the organization's intended tax exempt purpose and to ensure that politicalcampaign activity is not the organization's primary activity. Specifically you shouldexamine if these political activities reach a primary purpose level- the standard imposedby the federal tax code -and if they do not, whether the organization is complying withthe notice or proxy tax requirements of Section 6033( e). I also request that you or youragency survey major 501(c)(4), (c)(5), and (c)(6) organizations to determine whether theyare acting as conduits for major donors advancing their own private interests regardinglegislation or political campaigns, or are providing major donors with excess benefits.Possible violation of tax laws should be identified as you conduct this study.Please report back to the Finance Committee as soon as possible with yourfindings and recommended actions regarding this matter.  Based on your report I plan to ask the Committee to open its own investigationand/or to take appropriate legislative action.Sincerely, }4.~ MaxBaucus Chairman
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