Tax-Exempt Political Groups Probed by NY Attorney General

Photograph by Fred R. Conrad/The New York Times via Redux

New York State Attorney General Eric Schneiderman

Tax-exempt nonprofit groups account for some of the biggest, yet most mysterious, spending in the presidential election. And now they’ve attracted the attention of New York’s attorney general.

Eric Schneiderman, a Democrat, has asked two dozen nonprofits to explain how they raise and spend political money, Bloomberg’s David Voreacos and David McLaughlin write this morning.

Groups including Crossroads Grassroots Policy Strategies, guided by former Preisdent George W. Bush strategist Karl Rove, and Priorities USA, run by former President Barack Obama spokesman Bill Burton, have received letters of inquiry from Schneiderman, according to an unnamed source cited in the story.

Those and other nonprofits claim tax-exempt status by spending less than 50 percent of their money on politics. The majority of their budget goes into issues advocacy, the groups say. They operate under the 501(c)(4) section of the tax code. Aside from the tax break, the nonprofit status enables them to keep their donor lists private — something super-political action committees and candidates cannot do.

The Internal Revenue Service recently indicated it, too, has questions about the 501(c)(4) groups, writing in a letter to campaign-finance watchdogs that it will “consider proposed changes” to the section of the tax code. The IRS did not give a timeline for any action.

ProPublica reported recently that Crossroads GPS and Americans for Prosperity, a nonprofit founded by billionaire industrialists David and Charles Koch, have spent an estimated $60 million in TV ads — more than all of the super-PACs combined.

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