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The Influence Industry: Challenging the IRS on rules that keep donors secret

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Two advocacy groups have filed a petition with the Internal Revenue Service challenging regulations that allow political organizations such as the conservative Crossroads GPS and the liberal Priorities USA to form as nonprofits under the tax code.

The issue comes down to disclosure of donors: Groups that form as nonprofits are not required to reveal them. By contrast, political groups registered with the Federal Election Commission must list all of their contributors.

The IRS allows political organizations to form as nonprofits as long as their “primary purpose” is something other than working on elections. The advocacy groups say in their petition that the IRS interpretation defies laws passed by Congress and interpretations by the courts.

“Everyone with eyes and a thought process knows that these ads are being run to influence the election,” said Fred Wertheimer, president of Democracy 21, which drafted the petition.

The petition is the latest in a series of moves by advocacy groups pressuring the government to force disclosure of donations to organizations running political ads. The same groups, representing Rep. Chris Van Hollen (D-Md.), sued the Federal Election Commission in April, saying its regulations did not reflect the law.

The IRS has in the past largely ignored the issue of political spending and donor disclosure by nonprofits, focusing instead on whether such groups should pay taxes.

If the tax agency doesn’t “act on the petition, then the next logical step for us would be to look at potentially pursuing this in the courts,” Wertheimer said. “We are going to pursue this in every way we appropriately can.”

The likelihood of the IRS rewriting its regulations is remote, but the agency has indicated some willingness to wade into the issue in the wake of the 2010 elections, which brought massive spending by nonprofit political groups.

The agency wrote in an annual review that it plans to begin looking at political nonprofits, and it recently denied nonprofit status to three groups that were training Democratic political candidates.

All in the family

An invitation to a “Lawyers for Romney Luncheon” in Washington this week reveals another link between the former Massachusetts governor’s campaign and an independent group aiding his presidential bid.

The invitation, acquired by the Sunlight Foundation, shows that the event was organized by a professional fundraiser named Lisa Spies. Her husband is Charles Spies, a lawyer at Clark Hill, who helped found the Restore Our Future PAC aiding Romney.

“Lisa runs a successful fundraising consulting firm with multiple clients,” Charles Spies said. “Her clients are, of course, separate from mine and my law firm’s.”

Mitt Romney’s campaign did not respond to a request for comment.

Restore Our Future is a super PAC, which means it is allowed to raise money without the restrictions put on candidates, but it must keep all of its spending decisions separate from the official campaign. Any coordination on strategy would violate the law.

Three directors of Restore Our Future worked for Romney’s 2008 campaign: Charles Spies was the general counsel, Carl Forti was the political director, and Larry McCarthy was a member of the media team.

On the left, Priorities USA, a new group formed to raise and spend money to further President Obama’s reelection bid, has similar tight connections to the candidate it is supporting. Bill Burton and Sean Sweeney founded the group shortly after resigning from the White House. Burton is a longtime Obama aide and was the national press secretary for his 2008 campaign.

K Street’s spending slump

Congress may be as busy as ever trying to find a way to pass an increase in the debt ceiling, but lobbying spending appears to be continuing a downward trend that began with the sinking economy and has continued with a thin legislative calendar.

The U.S. Chamber of Commerce spent $9 million in the second quarter, the business association disclosed in its latest report. That’s the lowest quarterly total for Washington’s biggest lobbying player in two years.

The city’s two largest lobbying firms reported total contracts that were lower than a year ago. Patton Boggs had $9.5 million in revenue during the second quarter, down 7 percent from a year earlier, and Akin Gump reported $8.9 million, down 6 percent from the second quarter of last year.

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