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  •   Use of Tax-Exempt Groups Integral to Political Strategy

    By Charles R. Babcock
    Washington Post Staff Writer
    Tuesday, January 7 1997; Page A01

    The heart of the ethics committee case against House Speaker Newt Gingrich (R-Ga.) involves his use of charitable organizations to subsidize his partisan political activities -- a practice he suggests he could have avoided had he consulted a lawyer and not been so "naive" about the intricacies of the tax code.

    But over the years Gingrich and his top advisers have tried repeatedly to use tax-deductible donations to help promote their political goals, a review of his record shows. Indeed, the availability of groups that could take tax-deductible donations was integral to his ultimately successful plan to wrest control of the House from the Democrats.

    "Gingrich has a long history of skirting the edge of tax-exempt law for political activity," said Ellen Miller, outgoing director of the Center for Responsive Politics, which produced a report on the subject in 1987.

    Gingrich was in a position to know the dangers of mixing tax-deductible dollars and politics as long ago as the late 1980s, when the Internal Revenue Service took the unusual step of denying a tax exemption requested by the American Campaign Academy, a group formed by some Gingrich advisers to train political operatives. One of those who set up the academy, Joseph Gaylord, went on to become Gingrich's top political lieutenant in the period covered by the ethics charges.

    In a 1989 ruling, a U.S. Tax Court judge upheld the IRS, saying that the academy was partisan because it served "the private interests of Republican party entities rather than public interests exclusively."

    A House ethics subcommittee last month used similar language in finding that Gingrich failed to ensure that two charity-financed projects -- a college course he taught and a televised town hall meeting -- did not violate federal tax law. Groups accepting tax-deductible donations must be operated exclusively for exempt purposes, the panel said. Conferring a benefit on "private interests" -- the language used in the 1989 case -- is a non-exempt purpose, it added.

    Asked if Gingrich was aware of the 1989 ruling, spokesman Tony Blankley said last week he could not comment because of the speaker's agreement with the ethics committee not to discuss his case publicly.

    Gingrich is not the first politician to try to get his supporters a tax benefit. In the mid-1980s, several erstwhile presidential candidates, including Republicans Jack Kemp and Pat Robertson and Democrats Gary Hart and Bruce Babbitt, as well as Gingrich, established supposedly nonpartisan research groups that took tax-deductible donations.

    Those are known as 501(c)(3) groups, after the provision in the tax code that allows the tax break. In addition, many groups are created as 501(c)(4) organizations, which are allowed to do some lobbying and other political work but whose supporters cannot take tax deductions for donations. Some organizations maintain separate 501(c)(3) and 501(c)(4) groups.

    Gingrich's first foray into the world of tax-deductible dollars was in 1984 when he founded and became chairman of the American Opportunity Foundation, a 501(c)(3) group designed to research and conduct forums on such topics as "lessening the burdens of government."

    In October 1984, a month before President Ronald Reagan's landslide reelection, The Washington Post reported that the foundation and a similar group were working with an arm of the Republican National Committee to arrange campus rallies to celebrate the first anniversary of the invasion of Grenada.

    In connection with the rallies, Gingrich's group produced an ad that pictured an American student "rescued" during the Reagan-ordered invasion kissing American soil as well as blindfolded American hostages in Iran when Jimmy Carter, a Democrat, was president. Gingrich described the rallies as a "nonprofit educational experience." The group's director added: "If it does help the president's campaign, it does."

    Gingrich's next experience with a charitable group came in 1986 with the American Campaign Academy -- the group that ended up in tax court. Gaylord, then executive director of the National Republican Congressional Committee (NRCC), was the driving force behind forming the training venture, according to Carlyle Gregory Jr. and Rich Galen, former presidents of the group. The academy was spun off from the NRCC after it became too expensive, Gregory recalled. "We were trying to figure out a way to fund it with tax-exempt money," he said.

    An academy newsletter from the period shows the group ran get-out-the-vote drives in Gingrich's district in the 1986 election. In September 1989, a few months after the tax court denied the tax exemption, Gingrich noted in a letter from GOPAC, the political action committee he chaired, that "we work directly with the American Campaign Academy" among other GOP groups.

    Gregory and Galen remember that Gingrich lectured at the training sessions, but played no formal role. They noted that because of the dispute with the IRS over the tax exemption, they never actually used tax-deductible donations to fund the group.

    Neither the academy nor the American Opportunity Foundation was a subject of the ethics subcommittee report. But it did examine Gingrich's role in using the Abraham Lincoln Opportunity Foundation to take over funding of televised citizen workshops first sponsored by GOPAC, which Gingrich became head of in 1986.

    GOPAC was Gingrich's main vehicle for the long campaign that in 1994 resulted in the Republican takeover of the House after years of Democratic domination. Its goal for the 1990s, according to an internal GOPAC document cited by the ethics panel last month, was "to both create and disseminate the doctrine of a majority Republican party." The document added that "to create the level of change needed to become a majority, the new Republican doctrine must be communicated to a broader audience, with greater frequency, in a more usable form. GOPAC needs a bigger microphone."

    In another document, entitled "Key Factors in a House GOP Majority," the ethics report noted, Gingrich underscored the need to create a new appeal to bring in vast numbers of new voters. "It is more powerful and more effective to develop a reform movement parallel to the official Republican party" because it would attract attention and be more easily accepted by nonvoters, he wrote.

    A short time later, the report said, GOPAC sponsored and paid for a television program centered on a citizens' movement to reform government. Publicly, the program was described as nonpartisan; privately, GOPAC mailings described "partisan political goals," the report said.

    The show was costly, using up a large part of GOPAC's revenue in 1990. GOPAC hit on a more effective way to fund it -- tax-deductible dollars. "With Mr. Gingrich's knowledge and approval," the report said, the show was transferred to the Lincoln foundation, which unlike GOPAC could take tax-deductible contributions. The new project had the same goals and employees as GOPAC's show, the report said.

    The Lincoln foundation had been formed years before by Howard "Bo" Callaway, a top GOPAC official, to help inner-city children, but had been inactive for years. Callaway told The Washington Post in 1995 that the use of tax-deductible donations for the show had been approved by a lawyer, who was also GOPAC's attorney at the time.

    Gingrich wrote GOPAC supporters in 1990 that he was excited about the new project, the report said, noting that "we are making great strides in continuing to recruit activists all across America to become involved with the Republican party. Our efforts are literally snowballing into the activist movement we need to win in '92."

    The Lincoln group spent about $260,000 on two broadcasts in 1990, according to the ethics report. More than $40,000 came from GOPAC and at least $150,000 more from GOPAC donors, the Los Angeles Times reported.

    In the agreement negotiated with Gingrich's attorney last month, the subcommittee reached no conclusion about whether this activity violated tax law. A subcommittee tax expert said it did; a Gingrich tax expert said it didn't. Both said they would have recommended against his using 501(c)(3) to fund the television workshops or the later college course.

    Gingrich started another charitable endeavor in 1990, this one aimed at encouraging poor children to learn by paying them for each book they read. He called it "Earning by Learning." To fund the idea, Gingrich donated money from his speeches to the foundation at West Georgia College, where he once taught.

    Gingrich has touted the program for years, saying, "The overhead is entirely voluntary. . . . The only money goes to the kids." In the first two years, most of the money was paid to schoolchildren. But since then most of the money has gone to Mel Steely, a West Georgia professor and former aide who is now Gingrich's authorized biographer, according to news accounts based on documents from the college foundation.

    In his long march to win the House for the GOP and become speaker, Gingrich brainstormed after each election cycle with advisers on a new or refined message. In December 1992, according to the ethics report, Gingrich began to develop a movement known as Renewing American Civilization.

    It became the focus of GOPAC's efforts, the name of a college course Gingrich taught that fall, and "the main message of virtually every political and campaign speech" Gingrich made in 1993-94, the ethics report said. "The course was, among other things, the primary means for developing and disseminating this message." It was funded with tax-deductible donations to the Kennesaw State College foundation.

    In January 1993, Gingrich met with GOPAC charter members -- those who gave at least $10,000 a year -- to discuss the Renewing American Civilization idea. As Gingrich described it in a letter cited by the ethics report, the session helped shape the message and how to disseminate it. "In addition to my present avenues of communication, I decided to add an avenue close to my heart, that being teaching." The course at Kennesaw State would be expensive because Gingrich wanted to televise it nationally, using satellite uplinks, and to produce videotapes that could be widely distributed. The ethics report said the course cost about $300,000 the first year, with many of the tax-deductible donations coming from GOPAC donors and Gingrich supporters.

    Beginning in about February 1993, the ethics report recounted, GOPAC employees helped develop, raise funds for and market the supposedly nonpartisan course. That June GOPAC executive director Jeffrey Eisenach and two assistants resigned to run the course, but a GOPAC consulting contract paid half their salaries through September.

    In letters to GOPAC members, "a partisan, political role for the course was described," the ethics report said. It quoted a letter in which Gingrich talked about the course attracting 200,000 citizen activists and providing "the structure to build an offense so that Republicans can break through dramatically."

    In another letter, Gingrich described the course as one prong of his multifaceted political strategy. "If we can reach Americans through my course, independent expenditures, GOPAC and other strategies, we just might unseat the Democratic majority in the House in 1994 and make government accountable again," he said.

    The course was moved to Reinhardt College in 1994, after complaints about political overtones stirred controversy at Kennesaw State. The Progress and Freedom Foundation, another Gingrich-related group financed with tax-deductible dollars, picked up the funding.

    The new group was started by former GOPAC official Eisenach in 1993. The ethics report said it spent about $900,000 in tax-deductible donations on the course over the next two years, much of it from Gingrich supporters.

    Staff writer Ruth Marcus contributed to this report.


    © Copyright 1997 The Washington Post Company

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