WASHINGTON — Two watchdog groups filed a complaint with the IRS on Wednesday arguing that loose federal regulations are allowing political groups to operate as tax-exempt organizations and exacerbating the problem of secret money in elections.
The petition, filed by Democracy 21 and the Campaign Legal Center, charges that lax IRS rules allow not-for-profit “social welfare” organizations to operate as political groups that don’t have to reveal their lists of donors. The petition asks the IRS to cap campaign activities by such groups — called 501(c)(4) nonprofits after a provision in the tax code — to 5 or 10 percent of the total they spend each year.
These organizations engage in far more campaign activity than the IRS allows and court rulings allow, Democracy 21 President Fred Wertheimer said.
An IRS spokeswoman declined to comment on the petition.
The complaint is intended to curb activities by nonprofit groups like the GOP-aligned Crossroads GPS and the Democratic-tilting Priorities USA, which are active in the 2012 presidential and congressional campaigns.
Crossroads spokesman Jonathan Collegio called the petition “an activity with strict partisan ends” by Democracy 21. He said it is doubtful that the IRS will look at complaints by what he called partisan groups. Both watchdogs call themselves nonpartisan, nonprofit organizations.
While the complaint stops short of a lawsuit, the watchdog groups hope to curb what they say is an unfettered stream of money flowing to House, Senate and presidential races, following last year’s Supreme Court ruling that overturned a federal ban on political spending by corporations.
That ruling, in Citizens United v. Federal Election Commission, did not change campaign disclosure requirements. But Wertheimer said tax-exempt groups are widely circumventing and evading the spirit of disclosure.
But Priorities USA co-founder Bill Burton, a former Obama administration official, said his group is indeed “a social welfare organization helping to advance the middle class, and we are well within the rules for that. We feel 100 percent comfortable that we are focused on our social-welfare purpose.”