Organizing for Action, Obama's Group, Has Yet to Apply to IRS

The IRS monitors a tangled web of political groups and tax exemptions.

President Barack Obama looks at his supporters after speaking at an Organizing for Action dinner. Though ostensibly a non-profit, the group has yet to apply for tax-exempt status with the IRS.

President Barack Obama looks at his supporters after speaking at an Organizing for Action dinner. Though ostensibly a non-profit, the group has yet to apply for tax-exempt status with the IRS.

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As revelations about how extensive the Internal Revenue Service scrutiny of conservative groups applying for a certain tax-exempt status continue, some have asked about the status of President Barack Obama's campaign arm-turned grassroots lobbying group.

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Organizing for Action, as it's now called, has not yet filed for tax-exempt status. Officials with the group say they are only in their fourth month of existence and federal law says it has two years to file paperwork with the IRS, though they plan on operating in the same manner as the targeted groups.

"In carrying its work, OFA will operate as a 'social welfare' organization within the meaning of section 501(c)(4) of the Internal Revenue Code," the group's website states.

But the nature of tax-exempt political groups is complicated when it comes to the IRS, experts say. The specific designation that tea party groups who were targeted applied for is called 501(c)(4), a loosely defined category that's existed since the tax code's 1913 creation.

"They have never been really clearly defined; they are supposed to do something called social welfare for the people of the community," says Fran Hill, professor at the University of Miami School of Law. "Then the IRS began to interpret social welfare as too difficult to interpret … they began to call 501(c)(4) a catchall and so anything that didn't fit anywhere else but they thought was kinda, sorta okay they would just shove into 501(c)(4)."

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Hill says the decision gained more relevance as another tax-exempt category used by political groups, 527s, received greater regulation in terms of where money was being raised and how it was being spent.

"People looked for ways around those rules and slowly c4 began to be used in that way," she says, adding that part of the allure of the c4 designation was the ability to keep donors anonymous.

Another factor in the proliferation of use of the designation was a Supreme Court ruling on campaign finance in 2010, commonly known as Citizens United. The court said it was legal for c4's to accept unlimited corporate donations.

"Before [Citizens United] they could do independent expenditures if they didn't take corporate money and if they had a history of engagement with issues," Hill says.

Organizing for Action, however, has said it is voluntarily opting not to accept money from corporations and disclose all donors giving more than $250 on their website on a quarterly basis.

Paul Ryan, senior counsel at the Campaign Legal Center, a nonpartisan, nonprofit group that analyzes campaign finance and elections, says what's most troubling is the IRS' lack of follow up on groups that receive the 501(c)(4) designation.

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"Reviewing applications really should be only the first step in the IRS' monitoring of 501(c)(4) group activity because what really matters from our perspective and in terms of compliance with tax laws are what these groups actually do once they get up and running," he says.

While the groups targeted by the IRS for increased scrutiny were by and large small, local operations of limited means, Ryan says its emphasis should be on the larger, more established fundraising powerhouses.

"We've seen groups say they will stay out of candidate elections, and then [go and] spend a great deal of money on candidate election ads," he says. "So where the center thinks the IRS should be investing its resources is monitoring the groups that are up and running, the big spenders that we know about."

Obama condemned the IRS actions Tuesday and Attorney General Eric Holder announced that the FBI has begun an investigation into whether or not any laws were broken by those involved.

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  • Updated 5/15/2013: This story has been updated to include Organizing for Action donor information.