(CNN) – A major conservative group backed by Karl Rove is being accused of U.S. tax law violations for operating as a non-profit institution and shielding its donor list from the public domain by two campaign finance watchdogs in a letter sent Tuesday.
Democracy 21 and the Campaign Legal Center are urging the Internal Revenue Service to investigate the political activities of Crossroads GPS, the organization, backed in part by Rove, that has structured itself as a tax-exempt "social welfare" 501(c)(4) organization. As part of its tax exempt status, the group is allowed to both raise unlimited amounts of money and keep the names and organizations of their contributors secret - an allowance that facilitates groups of this type to raise considerably more money then standard so-called 527 groups which have to report their donors.
The IRS stipulates 501(c)(4) groups may intervene in campaigns "as long as its primary purpose is the promotion of social welfare." But the line between the "promotion of social welfare" and attacking Democratic candidates is far from clear and one the IRS has yet to articulate.
But no matter where the line is drawn, Crossroads GPS has crossed it, the watchdog groups say in their complaint filed with the IRS.
"In our view, Crossroads GPS is a classic example of a 501(c)(4) organization that is impermissibly using its tax status to spend tens of millions of dollars in the 2010 congressional races while hiding the donors funding these expenditures from the American people," Democracy 21 President Fred Wertheimer said.
A spokesman for Crossroads GPS called the allegation "baseless."
This is a baseless complaint, filed by a partisan group that makes its living by filing baseless complaints, said spokesman Jonathan Collegio. "Crossroads GPS carefully follows all laws governing 501c-4 organizations. Liberal groups spent more than $400 million in undisclosed campaign money in 2008 alone, with zero protest from this group."
Rove and former RNC Chairman Ed Gillespie formed Crossroads GPS in June as an offshoot organization to their previously formed 527 group "American Crossroads." Thanks to the donor anonymity that Crossroads GPS was allowed to provide, the group has reportedly been able to raise millions of dollars at a faster clip the original parent organization did. Together, the two groups, which are run out of the same Washington, DC office - have set a goal of raising $50 million ahead of the midterm elections.
Fueled by those hefty coffers, Crossroads GPS has launched a string of adds across the country in key races targeting vulnerable Democratic candidates.
Most recently the organization went up with ads in California, Pennsylvania, and Kentucky calling on the Democratic Senate candidates running there to "defend citizens of those states from the massive Obamacare legislation – including its big government mandates, Medicare cuts and tax hikes," according to a statement on Crossroads GPS' website.
The group has also launched spots in Nevada targeting Harry Reid, saying the embattled Senate Majority leader "cut sweet deals across the country" to "push Obamacare."
"The group makes almost no effort at all to hide the fact that it was created principally to impact the 2010 elections, and to take money from those interested in contributing to their efforts but doing so anonymously," said J. Gerald Hebert, Executive Director of the Campaign Legal Center.
Both Democracy 21 and the Campaign Legal Center describe themselves as non-partisan organizations.