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A new 501(c)4: “social welfare” group or political machine?

April 2, 2013, 12:00 am
A new nonprofit that formed last month adopted an innocuous name: “New Mexico Prosperity.”  Yet an internal document obtained by SFR—which lists goals like “taking back the Governorship” and “incumbent protection” for Democrats—makes the organization look more like a partisan vehicle than the “social welfare” nonprofit it’s supposed to be.

Jon Lipshutz, the Democratic political consultant listed as the nonprofit’s director, tells SFR that New Mexico Prosperity’s mission changed by the time it registered with the state, on Feb. 13, as a 501(c)4—the official tax category for a social welfare organization. According to the Internal Revenue Service, 501(c)4s must be operated primarily for “the common good and general welfare of the people of the community.”

“You definitely received a copy of an internal document,” Lipshutz says of the 12-page report.

After reviewing the document, Marcus Owens—the former head of the Internal Revenue Service’s Exempt Organizations Division—tells SFR that “nothing in that sheet really is an appropriate activity for a 501(c)4.”

Although 501(c)4s are allowed to lobby and spend cash on issue ads, political advocacy can’t be their sole raison d’être. The IRS specifies that promoting “social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.”

“Their primary function or purpose must not be for political reasons,” summarizes Ariel Bickel, an independent consultant who has served as the political director for America Votes New Mexico—a 501(c)4 formed to expand “progressive policies” and “ballot access.”

Yet since the US Supreme Court’s 2010 Citizens United decision—which allowed groups to raise and spend unlimited amounts of cash in elections—501(c)4s have morphed into political heavyweights. In New Mexico’s US Senate race, for instance, they poured hundreds of thousands of dollars into attacking both parties’ candidates. Nationally, 501(c)4s outspent so-called super PACs—which do have to disclose their donors—by millions in 2010. The numbers haven’t been tallied for 2012 yet, but that trend likely continued last year.

And according to the document obtained by SFR, New Mexico Prosperity looks poised to follow suit.

“The 2012 election cycle in New Mexico proved to be successful for Democrats,” it begins. But 2014, it warns, “will be a very different environment.”

The document outlines “Program Tactics,” including polling to “fine tune our messaging”; an opposition mail program “against the Governor,” Republican Susana Martinez; “rapid response” robo-calls; and an “Incumbent Protection” “Frontline” program to protect Democrats in New Mexico’s House. The 501(c)4 structure “allows us to accept unlimited contributions with limited reporting obligations,” it notes.

“If we have any hope of taking back the Governorship while also maintaining our majority in the State House, we must get started now,” the document proclaims. “New Mexico Prosperity will be the organization tasked to develop a long-term sustainable operation that will not only lead the way towards a successful 2014-election cycle, but will develop an infrastructure for years to come.”

To Owens, the document sends a clear—and political—message.

“It certainly appears that the organization is operating for the benefit of the Democratic Party of New Mexico, and for particular candidates—and against certain candidates of the Republican Party,” he says. “And that’s the sort of private benefit that the IRS has used to deny exemption to other 501(c)4s in the past.”

The IRS can audit whether 501(c)4s are dedicating a majority of their cash, hours and resources to politics. So far, it’s been slow to keep up with the wave of politically active 501(c)4s, but it occasionally cracks down: Last summer, it reportedly revoked the 501(c)4 status of Emerge New Mexico’s parent organization because of the group’s openly partisan mission of training Democratic women to run for office.

Yet Lipshutz maintains that Prosperity’s mission isn’t purely political. Instead, he says, it’s designed to be an “issue advocacy” nonprofit focused on an array of topics, including economic development, equal rights, the environment and education. The group will leave the “door open” to target other issues “that matter most to New Mexicans,” he adds.

Lipshutz calls the document obtained by SFR “one of the more earlier planning documents—kind of figuring out, you know, different aspects of the—not only, you know, the c4 world, but potentially the campaign world.”

In his view, “It’s not a fair representation of what we’re doing.”

 

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