Washington—The Internal Revenue Service should investigate a dark money group that appears to have violated its tax-exempt status by spending 99.6% of its funds on political expenses, mostly to support a suspected spoiler candidate running for state office, despite being registered as a social welfare organization, according to a complaint sent today by Citizens for Responsibility and Ethics in Washington to the IRS. It is apparent from its tax documents that the appropriately named Broken Promises failed to properly disclose its political contributions and served to primarily influence political campaigns.
Documents show that in 2018, Broken Promises made seven political contributions to political committees in Florida. According to its 2018 tax year documents, the dark money group spent a total of $161,010, though it failed to disclose that $160,470 of it went towards political activity. Most of the money was in-kind contributions of advertising or direct mail provided to the political committee Friends of Charles Goston, which supported an independent candidate whose state Senate race candidacy was directly backed by donations from Republican lobbyists, raising suspicions that it was part of a spoiler effort “to split the Democratic vote to help Republicans.”
Rather than disclosing this spending, Broken Promises told the IRS that it did not engage in any “direct or indirect political campaign activities on behalf of or in opposition to candidates for public office” and failed to file relevant documents related to its political expenditures and grants. With more than 99 percent of the group’s total spending going toward political activity, Broken Promises is in clear violation of its tax-exempt status.
“Broken Promises blatantly misled the IRS about its primary activities and exploited our federal tax laws to get the benefits nonprofits are entitled to while secretly acting as a political organization,” said CREW Executive Director Noah Bookbinder. “The law is clear that tax-exempt organizations that receive tax benefits and do not disclose donors cannot spend the majority of their money on politics, but that is exactly what Broken Promises did.”
Nonprofits like Broken Promises are allowed to spend money on elections, though it cannot be their primary activity, which is commonly understood to be more than 50 percent of its total spending. Tax-exempt organizations like Broken Promises also must report information about their political campaign activity for or against candidates to the IRS. Contributions to political action committees, like the ones Broken Promises made in 2018, clearly meet the IRS’ definition of political expenditures, which includes “[a]ll activities that support or oppose candidates for elective federal, state, or local public office.”
CREW has previously filed complaints against other 501(c)(4) organizations for failing to report political activity and providing misleading information about their operations to the IRS. In 2019, dark money group Freedom Vote, Inc. paid a penalty to the IRS following a complaint CREW filed in June 2018 alleging that the group was primarily operating in violation of its tax-exempt status to influence political campaigns.
“For far too long, dark money groups have secretly wielded their influence to overshadow the voices and interests of the American public, and it is past time for the IRS to ensure that nonprofit groups do not abuse their tax status to improperly influence politics,” said Bookbinder. “The IRS should open an investigation into Broken Promises’ behavior and should they be found in violation of the law, act swiftly to reconsider their tax status.”