Blog — Campaign Finance Reform

November 08, 2013

Freedom Partners Begrudgingly Discloses Limited Contribution Information

By Adam Rappaport

Dark MoneyFreedom Partners, the Koch brothers-linked nonprofit being used to funnel hundreds of millions of dollars to politically active groups, is using a questionable interpretation of tax law to avoid disclosing its financial backers to the IRS and basic information about the sources of its revenue to the public, a document obtained yesterday by CREW shows. 

Freedom Partners initially refused to provide the document, a previously undisclosed part of its tax return called the Schedule B, to CREW, but changed its mind a few days after CREW filed a complaint with the IRS alleging the group was violating the law by withholding it.  The information Freedom Partners left off its Schedule B and its initial refusal to provide the document shows the extraordinary steps the group is taking to keep secret information about the source of its money.

While most tax exempt organizations are not required to disclose to the public the names of their donors under tax law, they must identify those who contributed more than $5,000 in a year for the IRS on Schedule B.  Nonprofits must provide their Schedule B to the public upon request, but can redact the names and addresses of the contributors.  The IRS also is barred from disclosing identifying information.  This leaves the amount contributed, which can, among other things, show how many of a group’s donations were very large.  Crossroads GPS’s Schedule B, for example, showed that nearly 90 percent of its donors in 2010 and 2011 gave more than $1 million each.  Freedom Partners claims it has more than 200 members who paid more than $100,000 each in membership dues, but there is no other information available about them or the money they provided.

The Schedule B Freedom Partners released to CREW yesterday reveals yet another attempt to avoid disclosing any information about its real financial backers under the guise that nearly all of their members’ payments are dues, not contributions.  The group’s tax return shows it had more than $255 million in revenues between November 2011 and the end of October 2012.  The group said it received $936,673 in contributions, but also received nearly $149 million in membership dues as well as more than $105 million through an unexplained “SA fund.”  The Schedule B only listed a little less than $1 million in contributions, mostly in $25,000, $50,000, and $75,000 amounts, meaning Freedom Partners is treating the $254 million in membership dues and SA fund revenue as something other than contributions.  The IRS’s instructions on filing tax-exempt organization tax returns explain the difference between contributions that need to be disclosed and membership dues and assessments that do not, and the funds provided to Freedom Partners clearly are contributions.

Freedom Partners’ attempt to interpret the law to avoid disclosing its donors names to the IRS is likely why it chose to organize as a section 501(c)(6) “business league” rather than a section 501(c)(4) social welfare group, as most other politically active nonprofits have.  In an email reported on by the Huffington Post, the Koch brothers’ operative who organizes their biannual donor meetings told a large group of financial supporters in September that Freedom Partners was set up as a business league to take advantage of the “additional safeguards” provided by section 501(c)(6) because “members’ names are not disclosed to the IRS.”

Freedom Partners’ belated and begrudging disclosure of its redacted Schedule B again shows the group’s true purpose is to anonymously channel money to other like-minded groups.  Just as Freedom Partners cannot hide behind section 501(c)(6) to claim it is a business league entitled to tax-exempt status, it should not be able to use tax law to avoid even the most basic disclosure of the sources of its funds.

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