Freedom Frontier, a politically active nonprofit that pumped more than $4.4 million into the 2016 elections, admitted to the Internal Revenue Service (IRS) that political activity accounted for 75 percent of its total spending in 2016, putting the group’s tax-exempt status at risk. As a section 501(c)(4) social welfare nonprofit, Freedom Frontier cannot have politics as its primary activity.
The disclosure that the overwhelming proportion of Freedom Frontier’s 2016 spending was dedicated to political activity was made in the organization’s 2016 tax return. On the return, Freedom Frontier reported spending $5.9 million overall in 2016, including more than $4.4 million in political expenditures in the form of contributions to three super PACs.
The bulk of Freedom Frontier’s political contributions, nearly $4.4 million, went to LG PAC, a super PAC that boosted disgraced former Missouri Gov. Eric Greitens’ 2016 campaign by spending millions to run ads bashing his primary opponents and defending him. Since Freedom Frontier is a section 501(c)(4) social welfare organization, the group is not required to disclose its donors, meaning the ultimate source of the pro-Greitens super PAC’s funding is unknown.
Most of the group’s funding, meaning most of LG PAC’s funding as well, came from a single source. On its schedule of contributors, Freedom Frontier reported that a single unidentified donor gave the group $5 million, accounting for roughly 80 percent of its total revenue in 2016.
As a result of Freedom Frontier’s disclosures, CREW filed a complaint with the IRS today requesting an investigation of whether the group violated its tax-exempt status by spending more than half of its money on politics.
The legal implications of Freedom Frontier’s massive political spending may explain why it resisted filing its tax return at all. The group’s tax return was initially due on May 15, 2017. In March 2018, long after that deadline, CREW filed a complaint with the IRS over Freedom Frontier’s failure to file its 2016 tax return on time, noting that tax-exempt organizations may be penalized up to $100 per day for filing late, with a maximum penalty of $50,000. CREW again discussed Freedom Frontier’s failure to file the tax return in a complaint filed against the group with the Federal Election Commission (FEC) in June 2018. Finally, on July 2, 2018 – three days after CREW’s FEC complaint and more than a year after it was due – Freedom Frontier signed and then filed the tax return.
CREW’s FEC complaint, which has since been updated with new information, alleged that Freedom Frontier and another nonprofit, American Policy Coalition, were used as part of a conduit contribution scheme hatched by Greitens campaign officials and supporters that sought to conceal the identity of donors supporting Greitens’ election. Like Freedom Frontier, American Policy Coalition funded a super PAC, but instead of spending the money on ads, the super PAC simply passed it on to the Greitens campaign, contributing nearly $2 million on the same day it received $2 million from American Policy Coalition.
The newly released tax return confirms for the first time that the two nonprofits are directly tied to each other, further suggesting that they were part of a single effort to boost Greitens with secret money. On the form, Freedom Frontier listed American Policy Coalition as a “related tax-exempt organization,” which it did not do on its 2015 tax return.
American Policy Coalition also listed Freedom Frontier as a related organization on its 2015 tax return covering the period from October 1, 2015 to September 30, 2016, which CREW obtained from the IRS. The nonprofit organization claimed, however, that the two groups “ceased being related on April 5, 2016.” Freedom Frontier did not make a similar claim about ending its relationship with American Policy Coalition in its own tax return. The relationship between the two groups during the time period covered by their tax returns is underscored by the fact that American Policy Coalition disclosed contributing $381,000 to Freedom Frontier.
Like Freedom Frontier, American Policy Coalition’s tax return was filed long after it was due. As CREW noted in a complaint filed with the IRS over American Policy Coalition’s failure to file its 2015 taxes on time, the organization’s tax return was due on February 15, 2017.
It is unclear exactly when American Policy Coalition filed its late return as the box for the date indicating when it was signed was left blank. It was likely filed around the same time that Freedom Frontier filed its return though. The two groups used the same paid preparer to compile their returns, and information from both returns first appeared in the same update of the IRS’s Exempt Organizations Business Master File Extract, which updates monthly with cumulative information on tax-exempt organizations.
American Policy Coalition did not admit to spending as much money on politics as Freedom Frontier did, but it still dedicated a significant portion of its budget to influencing elections. Out of the more than $4.7 million the group spent over all, American Policy Coalition disclosed spending nearly $2.2 million on political expenditures in the form of contributions to three super PACs, accounting for 46 percent of its total spending. Most of that spending is a result of the $2 million American Policy Coalition gave to the super PAC SEALs for Truth, which subsequently passed all but $25,000 of it to Eric Greitens’ campaign.
Freedom Frontier’s delinquent tax return also provides an additional hint about Greitens’ campaign consultant Nick Ayers’ ties to the secretly-funded organization. Ayers, who currently serves as Vice President Mike Pence’s chief of staff, previously disclosed on his federal financial disclosure form that he had consulted for Freedom Frontier through his firm C5 Creative Consulting. The tax return reveals that Freedom Frontier’s top independent contractor was the Clark Fork Group, LLC, which Ayers also reported as a source of compensation on his financial disclosure. Freedom Frontier paid the company $354,000 for “consulting.”
Ayers’ involvement with both the Greitens campaign and Freedom Frontier was cited in CREW’s FEC complaint as evidence of the close ties between the Greitens campaign and the anonymously-funded outside groups backing it. It was also cited in a complaint that Missouri state Rep. Jay Barnes, who chaired a special committee of the Missouri House of Representatives that investigated Greitens, filed with the Missouri Ethics Commission. Rep. Barnes’ complaint alleged, among other things, that evidence obtained by his committee “strongly suggests that Greitens for Missouri engaged in activity purposefully designed to conceal donor identities.”
On their late tax returns, both Freedom Frontier and American Policy Coalition disclosed making contributions, $350,486 and $1.25 million respectively, to another nonprofit, the Government Integrity Fund, that has previously paid Ayers’ consulting firm and has had its own issues filing its tax returns on time. In January 2014, when the Government Integrity Fund filed its 2012 tax return eight months late, the group included a letter from its then-president apologizing for the delay and listing several issues that supposedly caused it. The letter concluded by saying, “[t]here should not be any issued (sic) with filing the returns timely in the future.” Despite that claim, the Government Integrity Fund later filed its 2014 tax return in July 2016, roughly 14 months after it was required to do so.
Freedom Frontier also has had other issues filing its taxes in the past. In 2016, the group initially filed a short form tax return for its 2015 tax year, telling the IRS it raised no more than $50,000. A little over a month after CREW reported on inconsistencies between the initial 2015 tax return and FEC records showing Freedom Frontier had contributed $250,000 to a super PAC in 2015, Freedom Frontier filed an amended 2015 tax return revealing it raised more than $1 million in 2015.
By waiting so long to file their tax returns covering their activity during the 2016 election, both Freedom Frontier and American Policy Coalition denied the public access to one of the few sources of transparency for politically active nonprofits. Without the returns, for instance, it was impossible to know the two groups’ overall spending in 2016, a fact necessary for assessing whether the groups violated their tax-exempt status. Given the controversy surrounding Freedom Frontier and American Policy Coalition’s Greitens-focused political activity in 2016 and how much political spending they ultimately disclosed to the IRS, it’s an open question whether the groups would have ever filed their tax returns without public pressure.