By Bill Lueders
Wisconsin Center for Investigative Journalism
Let no one doubt American ingenuity — especially regarding ways to pour special-interest money into the political process.
In recent weeks, two conservative groups — the Madison-based John K. MacIver Institute and national Americans for Prosperity Foundation — have run three television ads praising changes in the state’s relationship with its public employees.
“Wisconsin is stronger than ever, thanks to our budget reforms,” declares one ad. It says the state cut spending rather than raise taxes, asked government workers “to contribute to their own pensions and benefits … like everyone else,” and reined in “abuses of collective bargaining privileges.”
The ads’ factual claims have been footnoted by the groups and challenged by the Center for Media and Democracy, a Madison-based nonprofit investigative reporting center devoted to “exposing corporate spin.” The ad themes echo those made in support of Republicans during state Senate recall elections last summer. What’s unusual is not the message, but the tax status of the sponsors.
Both the MacIver Institute and the Americans for Prosperity Foundation are 501(c)(3)s under federal tax code. Thus they are barred from “directly or indirectly participating in, or intervening in, any political campaign,” for or against any electoral candidate, according to the Internal Revenue Service. Violators could lose their tax-exempt status.
Groups registered as 501(c)(3)s can do some lobbying for or against legislation (but not candidates), so long as this is “an insubstantial part” of their overall activities, a threshold the IRS has not clearly defined. Most groups that engage in issue advocacy opt for a different tax status, 501(c)(4).
It’s doubtful that this ad campaign — and an affiliated website called “It’s Working!” — could qualify as “insubstantial.” One Wisconsin Now, a liberal advocacy group, puts the cost for these three ads at more than $1.5 million, based on TV station ad-buy records.
The Virginia-based Americans for Prosperity Foundation, chaired by billionaire oil magnate David Koch, spent more than $15 million in 2010, its federal tax filing shows. MacIver’s latest filing, for the year ending June 30, 2010, reported expenditures of $384,756.
Matt Seaholm, state director for Americans for Prosperity Wisconsin, did not respond to interview requests. Brett Healy, president of the MacIver Institute, declined to discuss how these ads are being paid for or whether they’ll continue. But he did address his group’s co-sponsorship of the ads and website in light of its 501(c)(3) tax status.
“The ‘It’s Working Wisconsin’ effort serves the public interest by educating Wisconsinites about an important public policy debate,” Healy wrote in an email. “Legal counsel reviewed our script before it ran. We only talk about public policy.”
Neither the ads nor a nine-minute video on the website mention Republican Gov. Scott Walker or any other political player or party. But both are clearly tied to the recall effort against the governor and other Republicans.
“These are campaign ads in disguise — politicking masquerading as something nonpolitical,” says Mike McCabe, executive director of the nonpartisan Wisconsin Democracy Campaign. “I am not aware of any 501(c)(3)s that have done this kind of thing (before).” The two groups are “breaking new ground, to the best of my knowledge.”
Ellen Aprill, a professor of tax law at Loyola Law School in Los Angeles, reviewed the ads and says “viewers may well conclude they are taking a position regarding a likely recall campaign.” She thinks, however, that they probably fall into a category not clearly covered by IRS rules.
“These ads do seem to come close to the line,” Aprill says. “But because they avoid any mention of candidates’ or incumbents’ names, there is a reasonable basis for the organizations to say that the ads are statements regarding public policy, rather than either lobbying or campaign intervention.”
That means there are no limits to how much the groups can raise and spend on these efforts. Brace yourself.
Bill Lueders is the Money and Politics Project director at the Wisconsin Center for Investigative Journalism. The project, a partnership of the Center and MapLight, is supported by the Open Society Institute.
The nonprofit and nonpartisan Center (www.WisconsinWatch.org) collaborates with Wisconsin Public Television, Wisconsin Public Radio, other news media and the UW-Madison School of Journalism and Mass Communication. All works created, published, posted or disseminated by the Center do not necessarily reflect the views or opinions of UW-Madison or any of its affiliates.