FEC Contacts With IRS Broke No Rules, Report Says

By Kenneth P. Doyle

Federal Election Commission staffers contacted former IRS official Lois Lerner about tax-exempt groups involved in politics, but the contacts didn’t violate any rules and weren’t intended to target conservative groups, an investigation by the FEC’s Office of Inspector General found.

“No evidence was developed to indicate the communications between FEC employees and the IRS were made for the purpose of improperly coordinating the targeting of tax exempt political organizations for political reasons,” a report on the investigation concluded.

The conclusion contradicted suggestions by congressional Republicans and others that FEC and Internal Revenue Service staff deliberately targeted Tea Party and other conservative nonprofit groups. The controversy followed the release in 2013 of a report by the Treasury Inspector General for Tax Administration (TIGTA), which said certain political organizations, primarily Tea Party and conservative groups, received more scrutiny than others when applying for tax-exempt status.

Report Released Under FOIA

The new FEC inspector general’s report was completed earlier this year and released to Bloomberg BNA July 18 following a request under the Freedom of Information Act. A summary of the investigation’s findings about contacts between the FEC and the IRS was released last month as part of a semiannual report to Congress from the FEC inspector general’s office.

The office is headed by J. Cameron Thurber, the FEC deputy inspector general, since the retirement earlier this year of longtime Inspector General Lynne McFarland.

The inspector general’s report noted the interest in the IRS’s handling of conservative groups on the part of congressional Republicans, including former Rep. Candice Miller (R-Mich.), who chaired the Committee on House Administration, which has jurisdiction over the FEC. Miller and other GOP leaders wrote to the FEC in 2013 asking for information about contacts with the IRS. The inspector general’s report said interviews were conducted and voluminous emails were retrieved to establish what occurred.

FEC Ex-Colleague Suggested Calling Lerner

The inspector general’s investigation cited an FEC employee, not named in the report, who previously worked for Lerner when she was at the FEC. The FEC staffer suggested contacting Lerner directly “would be the most expedient way to get information from the IRS.” Lerner, who in 2013 was the head of the IRS exempt organizations office, had served earlier as deputy general counsel at the FEC.

Those involved in the matter said in interviews and emails that staff in the FEC’s enforcement division “were only attempting to gather publicly available information,” the inspector general’s report said. Telephone contacts with Lerner were approved by the FEC general counsel’s office and the conversations were documented, the report said. FEC staffers were later provided by the IRS with public documents containing information about the groups involved.

The inspector general’s report noted that FEC staff asked about the tax status of two particular conservative nonprofit groups that had been named in FEC enforcement complaints, American Future Fund (AFF) and American Issues Project (AIP), but the investigation found “no evidence that FEC staff improperly targeted AFF or AIP for enforcement action through coordination with IRS personnel based on either entity’s political beliefs.”

Conservative Groups Named in FEC Complaints

The FEC staffers interviewed said the IRS was contacted for legitimate, case-related reasons, and not to inappropriately target a respondent. The tax-exempt status of both AFF and AIP was raised as an issue in enforcement complaints filed with the FEC, and the information sought from the IRS was relevant to the legal analyses of allegations that the groups violated campaign finance rules requiring disclosure by regulated political action committees. Critics said the nonprofit groups’ spending of millions of dollars to influence elections without fully disclosing their finances to the FEC was illegal.

The FEC eventually resolved the enforcement cases against AIP and AFF. The commissioners deadlocked along party lines in a vote about whether to pursue the case against AIP, while AFF was fined for failing to disclose large contributions from another nonprofit group.

The FEC resolved the AIP case in 2013, nearly five years after the nonprofit organization spent millions of dollars on ads in 2008 seeking to link then-President Barack Obama to the “terrorist” Weather Underground and its founder William Ayers. Ultimately, the FEC deadlock on whether the group—organized as a tax code Section 501(c)(4) organization—violated campaign finance law by failing to register and report as a political action committee.

FEC staff lawyers recommended the agency pursue an enforcement case. Democratic commissioners voted for the recommendation, but Republicans dissented. The six-member FEC is evenly divided between three commissioners recommended by Democrats and three by Republicans. The votes of four commissioners are required to take enforcement action.

Nonprofits Linked to Simmons, Koch Network

Texas billionaire Harold Simmons, a major Republican donor who provided funding to AIP, was let off the hook by the only clear ruling in the case. The FEC commissioners voted to find Simmons didn’t violate PAC contribution limits because such limits were no longer valid, because of court decisions in the intervening years since the 2008 election. Simmons died in late 2013.

The FEC did take action in a case involving AFF, one of only a few nonprofit groups to face an FEC fine during years of gridlock among the commissioners over disclosure issues. Following a settlement, the FEC last year imposed $233,000 in fines against three conservative groups, including AFF, that were linked to the Koch network of conservative donors. The groups were cited for failing to report sources of funding for political advertising.

The fines listed in FEC settlements included $140,000 for AFF, $50,000 for the 60 Plus Association, and $43,000 for Americans for Job Security. The nonprofit watchdog Citizens for Responsibility and Ethics in Washington (CREW), a supporter of strong disclosure rules, filed FEC complaints in the matters.

The fined groups acknowledged that they took, but didn’t report to the FEC, more than $35 million from a nonprofit called the Center to Protect Patient Rights (CPPR), which reportedly was funded by the Koch network—the group of conservative donors linked to Charles and David Koch, who head Koch Industries Inc. The money was used for television ads in congressional campaigns in 2010 in targeted races that helped Republicans take control of the House majority.

To contact the reporter on this story: Kenneth P. Doyle in Washington at kdoyle@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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