CREW
I
citizensforresponsibilityandethicsinwashington
March8,
2011
Douglas
H.
ShulmanCommissionerInternalRevenueService
1111
ConstitutionAve.,N.W.Washington,DC20224Re:ComplaintAgainstAmericanActionNetwork,Inc.DearCommissionerShulman:CitizensforResponsibilityandEthicsinWashington("CREW")respectfullyrequestsanInternalRevenueService("IRS")investigationintowhethertheAmericanActionNetwork,Inc.,("AAN"),anon-profitorganizationexemptfromtaxationpursuanttosection
SOl
(c)(4)oftheInternalRevenueCode("Code"),isoperatingwiththeprimarypurposeofinfluencingpoliticalcampaignsinviolationoftheCode.
1
DespitethefactthatAANtoldtheIRSonlyaminorportionofitsactivitieswouldbepolitical,AANextensivelyparticipatedinpoliticalcampaignsthroughoutthe2010campaigncycle.Becauseoftheseriousnatureofthetaxlawviolations,theIRSshouldconsiderrevokingAAN'stax-exemptstatusand/orimposeappropriateexcisetaxesandpenaltiesontheorganization.Underthelaw,section
SOl
(c)(4)organizationssuchasAANmustbeprimarilyengagedinthepromotionofsocialwelfare,"whichdoesnotinclude"directorindirectparticipationorinterventioninpoliticalcampaignsonbehalfoforinoppositiontoanycandidateforpublicoffice.:"TheCodedoesnotstatepreciselywhatconstitutespoliticalactivity,butsomeactivitiesunquestionablyarepolitical,suchasexplicitlyadvocatingtheelectionordefeatofacandidateforpublicoffice."Forotheractivities,theIRScurrentlyappliesafactsandcircumstancestesttodeterminewhetheranorganizationhasintervenedinapoliticalcampaign.
5
1
CREWsubmitsthisletterinlieuofForm13909;acopyisbeingsenttotheDallasoffice.226U.S.C.§SOl(c)(4);Treas.Reg.§1.S01(c)(4)-1(a)(2)(i)("anorganizationisoperatedexclusivelyforthepromotionofsocialwelfareifitisprimarilyengagedinpromotinginsomewaythecommongoodandgeneralwelfareofthepeopleofthecommunity").
3
Treas.Reg.§l.S01(c)(4)-1(a)(2)(ii).WhiletheSupremeCourt'slandmarkdecisionin
CitizensUnitedv.FEC,
130S.Ct.876(2010)greatlyexpandedthetypesofpoliticalactivitiesinwhichsectionSO1(c)(4)organizationscouldengage,itdidnotaltertherequirementthatpoliticalactivitymaynotbetheprimaryactivityoftheseorganizations.
4
See
ElectionYearIssues,2002EOCPETextat349,388;
seealso
Rev.Rul.2004-6.
5
Rev.Rul.2007-41.
1400EyeStreet,
NW,
Suite450,Washington,D.C.20005
I
202.408.5565phone
I
202.588.5020fax
I
DouglasH.ShulmanMarch8,2011Page2AANwasawarethat,asasection
SO
1(c)(4)organization,itsprimaryactivitycouldnotbeparticipationinpoliticalcampaigns.Nevertheless,areviewofAAN'sactivitiesdemonstratesthattheorganization'sprimaryactivityin2010wassponsoringexpressadvocacyindependentexpendituresandclearlypoliticalelectioneeringcommunications.
TheAmericanActionNetwork'sRepresentationstotheIRS
AANwasestablishedin2009,andsubmittedunderpenaltyofpeljuryanapplicationforrecognitionundersection
SO
1(c)(4)inFebruary2010.
6
Inalengthystatementinsupportofitsapplication,AANclaimeditsprimarypurposewastopromotesocialwelfarebyadvocatingforarangeofeconomicandnationalsecuritypolicies,andthatonlya"minorportion"ofitsplannedactivitieswouldbepolitical."Specifically,AANidentifiedseveralactivitiesthroughwhichitplannedtopursueitspurportedmission,includingpolicyadvocacy,citizenforums,townhallmeetings,collegetours,policyconferences,trainingprograms,newmedia,directlobbying,andpressandpublicoutreach."AANrepresentedthatwhileitplannedto"primarilyfocus"onlobbyingandeducationalefforts,a"minorportion"ofitsactivitiesmightbeclassifiedaspoliticalcampaignintervention."Thesepoliticalactivitiesincludedendorsingorcriticizingproposalsadvancedbypublicofficials,providingtrainingandmaterialstocandidatesforoffice,and"inunusualcases"distributingcandidatesurveys,voterguides,andvotingrecordsofofficialsandcandidates.
10
AANfurthertoldthe
IRS
that"[i]ncertaincases,andwithinthelimitsallowedbyfederaltaxlawandfederalandstateelectionlaws,itmayalsorunadvertisementsinsupportofcandidates."!'AANpromisedtoadoptappropriateinternalcontrolstoguaranteethatitspoliticalactivity"remainsaminoractivity,anddoesnotbecomeitsprimary
activity.t'"
AANrepresentedthatitexpecteditspoliticalcampaignactivitytobe20percentorlessofitactivity,andclaimedtheamountmightvaryfromyeartoyear.
13
6
See
Form1024,ApplicationforRecognitionUnderSectionSOI(a)("AANForm1024")(attachedasExhibitA).
?
See
StatementinSupportofApplicationforTax-ExemptStatus(ExhibitAtoAANForm1024)at1-2,4.
8
Id.
at2-4.
9
Id.
at4.
10Id.11
See
StatementinSupportofApplicationforTax-ExemptStatus(ExhibitAtoAANForm1024)at4.
12Id.
at
S,8-9.
13Id.
at
S.
DouglasH.ShulmanMarch8,2011Page3
In
furthersupportofitsapplication,AANsubmittedabudgetforthreefiscalyearsbetweenJuly2009andJune2012.14AANrepresenteditstotalexpensesforthe2010electioncyclewouldbenomorethan$2.4million-$715,640forJuly2009-June2010and$1.68millionforJuly201G-June2011.15AlthoughAANassertedinitsapplicationthatitmightrunpoliticaladvertisements,thebudgetitsubmitteddidnotidentifyanyexpectedexpensesrelatedtotelevision,radio,orinternetadvertising.16Basedonthesesubmissions,theIRSgrantedAAN'sapplicationforsection501(c)(4)statusonApril3,2010.17
TheAmericanActionNetwork'sPoliticalActivity
Contrarytoitsswornapplicationfortax-exemptstatus,AANextensivelyparticipatedinpoliticalcampaignsin2010,makingpoliticalactivityitsmajorpurpose,notjustaminorone.Asaresult,AANviolateditstax-exemptstatusundersection501(c)(4).WhiletheexactamountofAAN'stotalspendingonpoliticalactivityin2010cannotbeascertainedfrompublicdata,itunquestionablydwarfedtheorganization'stotalplannedexpendituresof$2.4millionfortheentire2010campaigncycle.
In
fact,withindaysofreceivingtheIRS'sapprovalofAAN'ssection501(c)(4)status,theorganizationacknowledgeditplannedfargreaterpoliticalactivityin2010thanitrepresentedonitsapplication.AANChiefExecutiveOfficer(andformerMinnesotaRepublicanSenator)NormColemanpubliclyannouncedthegrouphopedtobeactivein8-10Senateracesand25Houseracesin2010,andAANreportedlysoughttoraise$25milliontofundapoliticaladvertising"blitz.':"DaysbeforetheNovember
14
See
StatementofRevenueandExpenses(ExhibitCtoAANForm1024).
15
Jd.
AANfurtherprojecteditstotalexpendituresforJuly2011throughJune2012wouldbe$1.73million.
Jd.
16
Jd.
Foreachofthesethreeyears,morethanhalfofAAN'sexpensesweretobeconsumedbycompensationofofficersanddirectors,andothersalaries.
Jd.
AANfurtherrepresentedthatthebulkofthiscompensationwastobepaidtochiefexecutiveofficerNormColeman($250,000peryear)andpresidentRobCollins($200,000peryear).
See
OfficersandDirectors(ExhibitBtoAANForm1024).
17
See
LetterfromtheIRStoAAN,April3,2010(attachedasExhibitB).
18
See
PeterH.Stone,PartyAlliesRaisingMillions,
NationalJournal,
April16,2010(attachedasExhibitC).
Search History:
Result 00 of 00
00 results for result for
p.
Complaint: CREW: IRS: Investigate the American Action Network: 3/8/11
On March 8, 2011, Citizens for Responsibility and Ethics in Washington (CREW) asked the Internal Revenue Service (IRS) to investigate whether the American Action Network (AAN) has violated tax law. While AAN - chaired by former…
(More)
1.6K
Reads
2
Readcasts
0
Embed Views
Recommended
More From This User
Notes
Load more
