By Matt Corley
November 19, 2015

On Tuesday, Freedom Partners Chamber of Commerce, the central hub of the Koch brothers’ political network, released its 2014 tax return, revealing that the organization spent $129 million total during the year and handed out more than $87 million in grants to other organizations. For the first time, Freedom Partners also admitted to spending money to influence elections.

Freedom Partners reported that it spent $6.85 million on political activity aimed at supporting or defeating candidates for public office in 2014, including nearly $5.3 million spent directly by the organization and $1.5 million contributed to other organizations focused on electoral politics. The contributions to other organizations covers the $693,289 Freedom Partners gave to its affiliated super PAC and the $885,000 it gave to Citizenlink, the political arm of Focus on the Family. Freedom Partners described the other $5.3 million in political spending as the groups’ “own public education advertising”:

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Freedom Partners did not file any reports with the Federal Election Commission (FEC) indicating that it made direct political expenditures, so it is unclear precisely what advertising is being referred to. The organization did, however, run a series of advertisements targeting Democratic candidates during 2014 that were masked as issue ads since they did not explicitly call for the defeat of the candidates. This meant that Freedom Partners didn’t need to report them to the FEC as independent expenditures. In press releases, Freedom Partners admitted to spending more than $3.1 million to run ads in Alaska, Colorado, Iowa, Louisiana, Michigan, and Oregon. Since all of these ads ran before September 5, Freedom Partners was not required to report them as electioneering communications (ads that refer to a clearly identified federal candidate and air within a certain time period before an election) either.

It appears that Freedom Partners considers these ads political, at least for tax purposes. Even if Freedom Partners is not technically required to disclose the ads to the FEC, the Internal Revenue Service uses different criteria to assess political activity that should capture the candidate-focused ads the group ran. The decision to acknowledge that spending as election-oriented is surprising, but welcome, as it means Freedom Partners considers “issue ads” to be political.

Behind closed doors, Marc Short, the president of Freedom Partners has previously admitted that such advertisements were actually political in nature. At the Koch network’s June 2014 “summit” for donors, Short gave a presentation on the political landscape with Tim Phillips, the president of Americans for Prosperity (AFP), the main field operation in the Koch political network.

During the session, audio of which was posted online, Short and Phillips discussed supposed “issue ads” that AFP was running that tied Democratic candidates to “Obamacare.” Short boasted that the ads were negatively affecting the reelection chances of Democratic senators. Referring to then-Sen. Kay Hagan (D-NC), Short told the donors that “after several months of ads that you helped to fund to remind citizens about her record in support of big spending and support of Obamacare, her disapproval rating climbed from 34 percent to where it stands today at 54 percent.” “Now, that’s not a good place for her to be running for reelection as an incumbent.” Short said the ads had knocked then Sen. Mary Landrieu’s (D-LA) approval rating down to 39 percent. “That’s not a good place to be for a two-term incumbent running for reelection,” Short concluded.

To be sure, the $6.85 million in election-related activity acknowledged by Freedom Partners’ vastly understates the group’s efforts to influence political and policy outcomes at large, especially since many of the recipients of Freedom Partners’ grant money also make political expenditures. For example, AFP, which received $22 million from Freedom Partners in 2014, reported to the FEC that the group spent $5.97 million on independent expenditures during the 2014 election cycle as well as $414,315 on electioneering communications supporting Rep. Mike Pompeo (R-KS) in his primary fight. AFP reportedly disclosed nearly $6 million in electoral spending on its 2014 990, suggesting the group has not included issue ads in its political tally to the IRS. The Wesleyan Media Project estimates that AFP spent roughly $17 million on ads during the 2014 election cycle.

Even if other groups in the Koch network aren’t following Freedom Partners’ example, the organization set an important precedent: so-called “issue ads” that target federal candidates can and often should be reported to IRS as political activity.