Mystery donor gives $10 million to Crossroads GPS group to run ads against Obama and Democrats

April 13, 2012

An anonymous donor gave $10 million late last year to run ads attacking President Obama and Democratic policies, escalating the money race that is defining the 2012 presidential campaign. And in the new, free-wheeling environment of independent political giving, the identity of this donor, like many others, is likely to remain a permanent mystery.

The donation went to Crossroads GPS, the conservative nonprofit group founded with the support of political strategist Karl Rove. Another donor gave $10 million in the 2010 midterm elections, according to draft tax returns that provide the first detailed look at its finances.

Crossroads GPS would not identify the donors, who could be individuals, corporations or other interest groups, and under tax and campaign laws, it is not required to disclose them. It is possible that both $10 million donations come from the same source.

The huge contributions, which make the donors among the top political givers in recent history, offer new evidence of the altered world of campaign finance: After the Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission, spending by interest groups has risen dramatically. The landmark ruling allowed corporations, unions and nonprofit groups such as Crossroads GPS to spend money directly on electoral politics. Crossroads GPS and its sister group, American Crossroads, hope to spend up to $300 million in the 2012 election cycle,promoting conservative ideas and helping elect Republicans up and down the ballot.

The two groups, which are run by the same Republican operatives and can both collect donations of any size, have become one of the biggest forces attacking Obama and other Democrats. They already have spent more than $11 million on ads against Obama, according to media tracking firm Kantar Media/CMAG.

Crossroads GPS, which made the tax forms available to The Washington Post, is set to file them with the IRS and make them publicly available next week. Jonathan Collegio, a spokesman for both Crossroads groups, said that Crossroads GPS “advocates for free markets, free trade, limited government and personal responsibility” and that donors to the group are “individuals and businesses that support our vision of lower taxes and smaller government.”

“We believe President Obama’s tax and regulatory policies are strangling economic growth through excessive regulation and government spending that is crowding out private investment,” he said in a statement.

The tax returns show that Crossroads GPS has collected the vast majority of its donations from the super-rich. The forms show that nearly 90 percent of its contributions through the end of 2011 had come from as few as two dozen donors, each giving $1 million or more. Overall, the nonprofit group raised more than $76 million since it was founded in May 2010 through the end of 2011.

“That’s certainly not a grass-roots movement,” said Bill Allison, editorial director of the Sunlight Foundation, which advocates for transparency in government and politics.“These donors can have a very disproportionate effect on politics, and the fact that we don’t know who they are and what kind of favors they will ask for is very troubling.” Allison suggested that the big donors to Crossroads GPS could include large public corporations, which for the most part have not donated to super PACs or other groups that disclose donors.

American Crossroads, a super PAC, is required to disclose its donors to the Federal Election Commission. Top donors to the super PAC include Texas billionaire Harold Simmons, who with his company has given $12 million to the PAC in the 2012 cycle. Texan home builder Bob Perry has given $2.5 million to the super PAC.

One $4 million donor to Crossroads GPS is the Republican Jewish Coalition, as reported on that group’s tax return. Crossroads GPS donated $250,000 back to the coalition.

The large donations may renew questions from Sunlight and others about whether Crossroads GPS should be able to file as a nonprofit “social welfare” group under the tax code, allowing it to avoid disclosing donor names. According to IRS regulations, the group’s “primary purpose” cannot be influencing elections, but the group can spend up to half of its money on political campaigning.

The tax documents provided by Crossroads GPS indicate that the IRS is reviewing whether to grant the group tax-exempt status.

Advocates for tighter campaign finance rules have written repeatedly to the agency, asking it to deny tax-exempt status to the group on the grounds that it is a political organization that should be forced to reveal donors.

“We are deeply concerned about the failure of the IRS to take any public steps to show that the agency is prepared to enforce the tax laws,” the heads of the Campaign Legal Center and Democracy 21 wrote to two top agency officials in December.

Crossroads GPS reports in its tax filings spending just over $17 million on direct election spending, which since the Citizens United ruling can include hard-hitting attack ads.

Other spending by the group has focused on issues in the political arena, often a subtle distinction because the ads inevitably help one political figure or party. For instance, Crossroads GPS spent $16 million over the summer on ads pushing against tax increases during the debate over raising the debt ceiling. Overall, it reported about $27 million on that type of “grass-roots issue advocacy,” or about 35 percent of its total budget.

Crossroads GPS also reported giving roughly $16 million to a constellation of like-minded conservative groups, including $4 million to Americans for Tax Reform, the group run by conservative activist Grover Norquist that asks lawmakers to pledge not to vote for tax increases.Other donations included $3.7 million to the National Federation of Independent Business, which advocates for small businesses; and $2 million to the National Right to Life Committee.

Crossroads GPS wrote on its tax return that it sends with its grants a letter “stating that funds are to be used only for exempt purposes and not for political expenditures.” That allows it to count the grants as part of its “primary purpose” of social welfare.

Americans for Tax Reform spent roughly $4 million on political ads in 2010, according to FEC filings.

Melanie Sloan, head of Citizens for Responsibility and Ethics in Washington, said that the $4 million from Crossroads GPS could have allowed the tax group to divert $4 million to election ads.

“It’s the same amount — does that seem likely to be a coincidence to you?” Sloan said.

Asked for comment, Adam Radman, a spokesman for the anti-tax organization, said it was happy to get the Crossroads GPS grant. “Given their strong work opposing tax increases it shouldn’t come as a surprise that they would support the leading group in the fight against tax increases. Their contribution was in support of our work fighting tax hikes,” he said.

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