CREW v. Internal Revenue Service
On February 19, 2013, Citizens for Responsibility and Ethics in Washington (CREW) and former congressional candidate Dr. David Gill filed a lawsuit against the Internal Revenue Service (IRS) in the United States District Court for the District of Columbia challenging an IRS regulation that authorizes 501(c)(4) organizations to engage in political activity, even though the Tax Code bans such activity for these groups.
Groups such as the American Action Network (AAN) have relied on an IRS-created tax loophole to spend hundreds of millions of dollars on electioneering activity without disclosing their donors. AAN, which received substantial financial contributions from the health insurance giant Aetna and the Pharmaceutical Research and Manufacturers of America, funded false and misleading ads against Dr. Gill, apparently targeting him because of his support of a single-payer, national health care plan. After leading in reputable polls throughout the campaign, Dr. Gill lost his race by 0.3 percent of the vote.
Federal law states 501(c)(4)s must operate “exclusively for purposes beneficial to the community as a whole.” In contrast, IRS regulations allow a group “primarily” engaged in activities that promote the public welfare to take advantage of 501(c)(4) status. The lawsuit alleges the IRS regulation is invalid because it creates a loophole that allows 501(c)(4) organizations to flood elections with dark money.
On April 22, 2013, in CREW v. U.S. Dep’t of Treasury, the IRS filed a motion to dismiss the lawsuit brought by CREW and former congressional candidate Dr. David Gill and his campaign committee, Friends of David Gill. Plaintiffs are challenging as contrary to law an IRS regulation that recognizes tax-exempt status for groups under section 501(c)(4) of the Tax Code even if they engage in political activities that consume up to 49 percent of their yearly expenditures. Dr. Gill was a candidate for the 13th Congressional District of Illinois in 2012, and was defeated in one of the closest elections due to the expenditure of anonymous money by the American Action Network. The motion by the IRS alleges all plaintiffs lack standing to bring this suit because none has suffered a concrete ongoing injury caused by, or traceable to, the actions of the IRS, and a favorable ruling would not address the alleged injuries.