Form

(August 2007)

13909

Department of the Treasury — Internal Revenue Service

Tax-Exempt Organization Complaint (Referral) Form
2912 Highwoods Blvd.

1. NAME OF REFERRED ORGANIZATION:
Blueprint NC Street Address: City/State/Zip Code: Raleigh, North Carolina, 27604 Date of Referral: 2/25/2013 2. ORGANIZATION’S EMPLOYER IDENTIFICATION NUMBER (EIN):
27-2459538 3. NATURE OF VIOLATION: Directors/officers/persons are using income/assets for personal gain Organization is engaged in commercial, for-profit business activities Income/assets are being used to support illegal or terrorist activities

$

Organization is involved in a political campaign Organization is engaged in excessive lobbying activities Organization refused to disclose or provide a copy of Form 990 Organization failed to report employment, income, or excise tax liability properly Organization failed to file required federal tax returns and forms Organization engaged in deceptive or improper fundraising practices

$

Other (describe):

4. DETAILS OF VIOLATION: Name(s) of Person(s) Involved: Sean Kosofsky. Stephanie Bass. Organizational Title(s): Executive Director, Communications Director. Date(s): 2/21/2013 Dollar Amount(s) (if known): Description of activities:
Blueprint NC has improperly engaged in political activities that fall outside the boundaries of a 501(c)(3) organization. The attached written complaint and accompanying exhibits show Blueprint NC to have admittedly engineered, promoted, and distributed a coordinated effort to oppose Republican political candidates, affect voter turnout in favor of Democratic candidates, and influence future election redistricting.

5. SUBMITTER INFORMATION: Name: Mike Rusher Occupation or Business: Chief of Staff, North Carolina Republican Party Street Address: 1506 Hillsborough St, City/State/Zip Code: Raleigh, NC, 27605 Telephone: 919-828-6423 I am concerned that I might face retaliation or retribution if my identity is disclosed. 6. SUBMISSION AND DOCUMENTATION: The completed form, along with any supporting documentation, may be mailed to IRS EO Classification, Mail Code 4910DAL, 1100 Commerce Street Dallas, TX 75242-1198, faxed to 214-413-5415 or emailed to eoclass@irs.gov.
Catalog Number 50614A www.irs.gov Form 13909 (08-2007)

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TAX EXEMPT ORGANIZATION COMPLAINT (REFERRAL) INSTRUCTIONS

General Information
The information provided on this form will help the Internal Revenue Service (IRS) determine if there has been a violation of federal tax law. Submission of this form is voluntary. Upon receipt of this form, the IRS will send you a letter acknowledging receipt of the information you submitted. If at a later date you wish to submit additional information regarding the organization, please attach a copy of the form initially submitted, and send it to the address shown above.

Specific Instructions
1. ORGANIZATION NAME AND ADDRESS: Provide the current name and address of the organization. If the organization has used prior or multiple name(s) or address(es), also provide that information. 2. EMPLOYER IDENTIFICATION NUMBER: Provide the organization’s employer identification number (EIN). The EIN is a nine-digit number, issued by the IRS, that the organization uses for tax purposes (like a Social Security Number (SSN) for an individual). If the EIN is unavailable, include a state nonprofit corporation registration number, if available. 3. NATURE OF VIOLATION: Mark the description that describes the organization’s alleged violation. More than one line may apply. If none of the descriptions appear to apply, briefly state the issue on the Other line. 4. DETAILS OF THE VIOLATION: Provide specific details of the alleged violation including names, actions, places, amounts, dates, and the nature of any evidence or documentation (who, what, where, when, how). Include the names of other organizations, entities, or persons that may be involved with the organization, providing EINs or SSNs, if available. 5. YOUR INFORMATION: Provide your name, address, and business or occupation. Include your daytime telephone number, in case we wish to contact you. The acknowledgement letter will be sent to the address you provide. If you are concerned that you may face retribution if your identity is disclosed, check the appropriate box. You may enter “Anonymous” for Submitter’s Name if you do not want to be identified. 6. SUBMISSION AND DOCUMENTATION: Mail the completed form, including any supporting documentation that you would like for us to review, to the address provided on the form. You may also fax or email the completed form and any supporting documentation to the fax number and email address provided on the form. Include a cover letter describing the documentation or evidence you are providing. If you have already received an acknowledgment letter, include a copy of that letter. If possible, please try to submit all documentation at the same time. If your referral relates to a church please be aware that Congress has imposed special limitations, found in IRC section 7611, on how and when the IRS may conduct civil tax inquiries and examinations of churches. You can find out more about these special limitations in Pub. 1828, Tax Guide for Churches and Religious Organizations, in the section on Special Rules Limiting IRS Authority to Audit a Church. 7. CLAIM FOR REWARD: To claim a reward for providing this information to the IRS, file Form 211, Application for Reward for Original Information. 8. NOTE: Federal law prohibits the IRS from providing you with status updates or information about specific actions taken in response to the information you submit.
Catalog Number 50614A www.irs.gov Form 13909 (08-2007)

REQUEST FOR AN IRS INVESTIGATION OF BLUEPRINT NC
This complaint seeks an Internal Revenue Service investigation into the activities of Blueprint NC, a 501(c)(3) organization in North Carolina. Despite Blueprint NC’s purportedly “non-partisan” mission, a recently leaked political memo, and public statements by Blueprint NC executives, demonstrate that the organization is an arm of the Democratic party that has actively engaged in partisan political activities to further the goals of its preferred political party and political candidates. The Blueprint NC memo discusses strategies covering virtually every aspect of the political campaign and election process—from helping Blueprint NC’s “elected allies” in the Democratic party, to improving voter turnout for Democrats, to affecting “the redistricting process in 2020.” The memo also outlines plans to “cripple” and “eviscerate” Republican candidates and elected officials for the benefit of the Democratic party. Simply put, the political memo demonstrates that Blueprint NC not only lied about its “non-partisan” mission but also violated federal law and cheated the United States government and the American taxpayer. The IRS should investigate the activities of this blatantly political organization masquerading as a “non-partisan” charity. FACTUAL BACKGROUND I. The Leaked “North Carolina 2013 Legislative Strategy: DRAFT”

On February 21, 2013, news media in North Carolina began reporting on a leaked political memo obtained from an attendee at a Blueprint NC event. Blueprint NC is a tax-exempt 501(c)(3) organization that purports to be “non-partisan.” The Blueprint NC website informs the public that “Blueprint activities will not be coordinated with any candidate, political party, or partisan entity.” See www.blueprintnc.org. The Blueprint NC memo, entitled “North Carolina 2013 Legislative Strategy: DRAFT,” is viciously partisan and political. It outlines plans to “weaken our opponents’ ability to govern by crippling their leaders,” expressly referencing the Governor, the Speaker of the House, and the President Pro Tempore of the Senate, all of whom are Republicans. (Exhibit A at 1.) The memo further discusses “opportunities” to create “tension in Republican ranks,” to “eviscerate the leadership and weaken their ability to govern,” and to build a stronger political “base” to oppose Republican elected officials. (Id. at 1-3.) The memo repeatedly references efforts to affect the election and political campaign process, including means to “influence the redistricting process in 2020,” to increase “progressive” voter participation, and to assist Blueprint NC’s “elected allies” in the political “minority” in the state, i.e., the Democratic party. (Exhibit A at 1-3.) In short, virtually every portion of the lengthy memo contains deeply partisan political strategies for opposing elected Republican officials in North Carolina. 1

II.

Blueprint NC’s public admissions concerning the political memo.

The copy of the leaked political memo obtained by the news media was attached to an e-mail from a Blueprint NC employee. That e-mail, sent to Blueprint NC’s “partner” organizations, emphasizes that the attachments (including the political memo) are “CONFIDENTIAL to Blueprint, so please be careful—share with your boards and appropriate staff, but not the whole world.” (Exhibit A at 4.) Responding to media inquiries, Blueprint NC’s executive director initially admitted that Blueprint circulated the political memo together with that e-mail, explaining that “we were just forwarding it on.” See, e.g., Liberal groups lay out blueprint for attack on state leaders, WRAL News, available at http://www.wral.com/ liberal-group-lays-out-blueprint-for-attack-on-state-leaders/12136669. After questions arose concerning the tax-exempt status of Blueprint NC, Blueprint NC changed its story and asserted that it did not e-mail the document to its members. But Blueprint NC’s executive director publicly admitted that the political memo “was distributed at a meeting organized by Blueprint NC” and that he believed it was appropriate for memos like this one to be circulated at Blueprint NC meetings because 501(c)(3) organizations are permitted to “exploit weaknesses of lawmakers.” Id. LEGAL ANALYSIS I. Prohibited Activities under 26 U.S.C. § 501(c)(3)

To qualify as an exempt organization under § 501(c)(3), “an organization must be both organized and operated exclusively” for an exempt purpose. 26 C.F.R. 1.501(c)(3)1(a). “Action organizations” are not operated exclusively for an exempt purpose, and are not exempt under § 501(c)(3). Under IRS regulation 26 C.F.R. 1.501(c)(3)-1(c)(3)(iii), “an organization is an action organization if it participates or intervenes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office.” “The phrase ‘on behalf of or in opposition to’ refers not to the motive of the participant but the reasonable consequences of his or her activities.” Id. As the IRS has instructed, any message that could be construed as favoring or opposing a particular political candidate (including statements favoring or opposing the reelection of sitting elected officials) violates the prohibition on political activities. See IRS Rev. Rul. 200741; see also, 26 C.F.R. 1.501(c)(3)-1(c)(3)(iii). To determine whether particular statements or activities by an exempt organization are impermissible political activities, the IRS considers a series of factors including whether the organization has expressed approval or disapproval of particular political candidates and whether the statement or activity references voting, campaigning, or election issues. See IRS Rev. Rul. 2007-41. II. Blueprint NC has engaged in impermissible partisan political activity.

Applying these legal standards, it is clear that Blueprint NC has engaged in impermissible partisan political activity. The organization admits that it either distributed the political memo described above or hosted a meeting where that memo was distributed 2

to its “partner” organizations. As explained above, the memo included express references to influencing political campaigns, voting, and election redistricting. The memo also includes deeply partisan political strategies and advice, mentions high-ranking Republican office holder by name, and describes strategies to “cripple” and “eviscerate” Republican public officials’ good faith efforts to govern the State. All of these partisan political strategies are expressly intended to advance “progressive” political candidates and their policies. Blueprint NC violated federal law by engaging in this partisan political activity. Congress imposed restrictions on the political activities of tax exempt organizations because it concluded that partisan political activities should not be subsidized with public funds. See Regan v. Taxation with Representation, 461 U.S. 540, 544 (1983). The contents of the political memo, and public statements by Blueprint NC executives, demonstrate that Blueprint NC’s purportedly “non-partisan” mission is a sham; the organization is an arm of the Democratic party and it should not be permitted to advance its partisan political agenda while maintaining its 501(c)(3) status. CONCLUSION Blueprint NC’s memo is a blatantly political roadmap for Democratic party activists to undermine Republican officeholders, influence upcoming elections, and manipulate future election redistricting efforts. It is well-settled that this sort of political activity by “charitable” organizations with privileged tax status is an inappropriate use of taxpayer dollars. As the political memo and the accompanying public statements of Blueprint NC executives demonstrate, the organization is deliberately (and unapologetically) engaged in deeply partisan political activity. Additionally, the sender laid out each part of the email in 3 parts: 1) talking points memo 2) slide deck presentation 3) polling data, all of which are exclusively contained in the email document. (Exhibit A at 4.) The previously mentioned are then described as “Confidential to Blueprint NC” The IRS should conduct a full investigation of the allegations set forth in this complaint and take swift action to ensure that Blueprint NC is held responsible for any violations of its 501(c)(3) status.

3

Liberal groups lay out blueprint for attack on state leaders
By Mark Binker Posted: 7:14 p.m. Thursday Updated: 12:51 p.m. today

Tags: Larry Hall, Blueprint NC, Progress NC

RALEIGH, N.C. — A strategy memo circulated recently among liberal-leaning groups prescribes "crippling" legislative leaders and Gov. Pat McCrory with bad press and pressure tactics. The memo, which was first reported by The Charlotte Observer , details communications strategy, political tactics and polling data that progressive groups can use to push the policy agenda in Raleigh, where Republicans control both the governor's mansion and the legislature. According to documents included with the memo and interviews, the strategy outline was produced by Myers Research and Strategic Services for Project New America. It was originally provided to Progress North Carolina, a liberal nonprofit that has aggressively attacked McCrory during the 2012 campaign and his early term in office. Progress North Carolina shared the memo with Blueprint NC, a nonprofit that coordinates the activities of liberal-leaning nonprofits. In turn, Blueprint NC distributed it to its member organizations. An electronic version of the memo appears to contain at least three separate documents. One is an email from outgoing Blueprint NC Communications Director Stephanie Bass describing the material and emphasizing that it is "CONFIDENTIAL to Blueprint, so please be careful – share with your boards and appropriate staff, but not the whole world." Sean Kosofsky, Blueprint NC's director, said his group did not pay for or commission the research. "We were just forwarding it on," he said. On Saturday, two days after this post originally published, Kosofsky distanced his group from most inflammatory parts of the document, although acknowledged it was distributed at a meeting organized by Blueprint NC. Click here to read more about what Kosofsky says about the controversial memo. The second document is a "talking points memo" that outlines strategies for progressive groups. Policy wins for the political left, the memo said, would

likely be defined as "mitigating" legislation, rather than pushing their own agenda items. "The most effective way to mitigate the worst legislation is to weaken our opponents' ability to govern by crippling their leaders (McCrory, Tillis, Berger, etc...)" the memo reads, referring to the governor, House Speaker Thom Tillis and Senate President Pro Tem Phil Berger. The memo goes on to describe a "potential two-year vision" during which the groups would "eviscerate the leadership and weaken their ability to govern." The bulk of the document is a poll memo that talks about how to frame opposition to conservative tax and education policies. The survey was conducted between Jan. 29 and Feb. 2. It's worth noting that there are both conservative and liberal nonprofit groups that provide similar strategy and research. The conservative Civitas Institute, for example, commissioned a tax plan that tracks closely with ideas offered by Republican legislative leaders in December and January. And they have been part of a drumbeat of criticism against Democratic officials and bureaucrats who served them, most recently focusing on the State Board of Elections. Francis X. De Luca, president of the Civitas Institute, objects to the comparison. "We have always stuck to policy and legislative disagreements. We try and leave the personal attacks to the left," De Luca said. Republican strategists and operatives, some of who talked to WRAL News on background, said the memo puts the lie to liberal criticism of groups like Civitas, which are in large part funded by foundations tied to Art Pope, a former legislator who now serves as McCrory's budget director. Several said it showed Democrats didn't want to cooperate with Republicans leaders. "I think it's shameful," said Ray Martin, caucus director for state Senate Republicans. "This is who is in control of the Democratic Party in North Carolina, radical left-wing zealots." Paul Shumaker, a longtime Republican strategist based in Raleigh, said the document is far from shocking.

"It comes as no great surprise that, now that Republicans are in control, you are going to have those stationed on the left attacking conservatives," Shumaker said. "I'm sure they feel like this is just what was done to them when they were in control." Shumaker pointed out that conservative nonprofits regularly questioned the ethics and conflicts of interest of former House Speaker Jim Black and former Govs. Mike Easley and Bev Perdue. The memo indicates there are close ties between the liberal groups and the Democratic Party itself. For example, a response to McCrory's State of the State address earlier this week delivered by Rep. Larry Hall, D-Durham, tracked closely with slides from the poll shared by the liberal groups. Hall's prepared remarks included this sentence: "Cutting funding for public education is wrong because it hurts our children's ability to succeed and compete for the jobs of the future." A slide from the polling memo includes the phrase, "Cutting funding for public education is wrong because it hurts our children's ability to succeed and compete for the jobs of the future." Hall could not be reached for comment Thursday evening. Casey Wilkinson, chief of staff for the House Democratic Caucus, said the similarities aren't surprising. It is likely, he said, that the polling provided to the left-leaning groups was provided by the same company, or one similar, that the party uses for its research.
Copyright 2013 by Capitol Broadcasting Company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Head of Blueprint North Carolina denies his group sent memo plotting attacks on Republicans
Read more here: http://www.newsobserver.com/2013/02/22/2700064/nonprofit-head-denies-hisgroup.html#storylink=cpy
By Jim Morrill — jmorrill@charlotteobserver.com

The head of a Raleigh nonprofit group on Friday sought to distance his group from a memo laying out ways liberals could attack Gov. Pat McCrory and other Republican leaders. Sean Kosofsky, executive director of Blueprint North Carolina, said he misunderstood a reporter’s questions on Thursday about documents emailed by Blueprint’s former communications director to the group’s partners. The documents, obtained by the Observer from another source, included talking points for progressive policy positions and an issues poll. It also appeared to include three pages of a draft strategy that called for weakening Republican legislators by “crippling their leaders” and working to “weaken their ability to govern.” Kosofsky said on Thursday that the documents, some from other groups, were emailed to supporters by Blueprint. On Friday, however, he said Blueprint did not pass on the controversial three-page draft. He suggested it was appended to the other documents by someone hoping to tarnish his organization. “I misunderstood,” he said Friday. “This is just a bunch of confusion. I think someone has an agenda to deceive people about the connection between these things. … There are things said in there that I might even agree with, but it’s just not us.” He said the three-page draft was circulated in December at a meeting of more than 50 progressive groups. He’s not sure who drafted it. His comments came after the head of one of his group’s major financial backers said Blueprint had exercised “bad judgment” that could jeopardize its funding. Leslie Winner, executive director of the Z. Smith Reynolds Foundation, said she was “surprised and disappointed” by the draft memo. Z. Smith Reynolds “believes in robust debate on issues of public importance; (it) does not support attacking people,” Winner said.

According to tax forms, the foundation provided $425,000 of Blueprint’s nearly $1 million budget last year. Blueprint is a 501(c)(3) nonprofit group that is prohibited under federal tax law from engaging in partisan political activity. The draft strategy memo said that with Republicans controlling North Carolina’s state government, progressives should: • “Eviscerate the leadership and weaken their ability to govern.” • “Pressure McCrory at every public event.” • “Slam him when he contradicts his promises.” It also urged activists to rely on “private investigators and investigative reporting, especially in the executive branch…” “If you want to impact the effectiveness of a lawmaker,” Kosofsky said Thursday, “one way to do that is to find out where they’re weak and use that to your advantage.”

Read more here: http://www.newsobserver.com/2013/02/22/2700064/nonprofit-head-denies-hisgroup.html#storylink=cpy

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