GOP group goes after NRDC’s tax-exempt status

By Jennifer Yachnin | 07/13/2015 07:19 AM EDT

An effort by environmental activists to question Illinois Sen. Mark Kirk’s (R) green credentials has the campaign arm for Senate Republicans seeing red — and demanding that the IRS revoke the Natural Resources Defense Council’s tax-exempt status.

An effort by environmental activists to question Illinois Sen. Mark Kirk’s (R) green credentials has the campaign arm for Senate Republicans seeing red — and demanding that the IRS revoke the Natural Resources Defense Council’s tax-exempt status.

In a complaint filed to the IRS last week, the National Republican Senatorial Committee accuses NRDC of a "flagrant violation" of its tax status as a 501(c)3 organization, pointing to an ad campaign the nonprofit launched earlier this month.

"NRDC might have deluded itself into thinking that its mission ‘to safeguard the Earth: its people, its plants and animals and the natural systems on which all life depends’ gives it a license to violate federal tax law. It is wrong. The law is clear, and the IRS must hold NRDC and its donors to account," NRSC General Counsel Matthew Raymer states in the complaint.


In the 11-page document, Raymer points to a 30-second ad NRDC released last week. The spot highlights Kirk’s opposition to the U.S. EPA’s Clean Power Plan, citing his June vote in support of a spending bill that would block the agency from using funding to enforce its effort to rein in power-sector carbon emissions. The ad does not specifically name the rule or the legislation.

"Since Senator Kirk cast the deciding vote in June to let power plants keep polluting our air, polluters are breathing a lot easier," a female narrator states as images of Kirk, dry fields and asthmatic children using nebulizers appears on screen.

The ad concludes with Kirk’s Senate office telephone number on screen, as the narrator states: "Tell Senator Kirk to stop protecting polluters and start protecting our kids."

The NRSC complaint also points to other ads that NRDC has sponsored in recent months, including spots criticizing Pennsylvania Sen. Pat Toomey (R) and Ohio Sen. Rob Portman (R), as well as a North Carolina state lawmaker. "That is more than $2 million in less than 18 months, a substantial amount by any standard," it says.

The Republican campaign committee also asserts that NRDC was misusing its tax-exempt status to allow its donors — pointing to "liberal billionaires and Hollywood elites" — to claim tax deductions for political contributions, something donors would be unable to do when giving to the related NRDC Action Fund or NRDC Action Fund Inc. Political Action Committee.

"The IRS should revoke NRDC’s tax-exempt status under Section 501(c)(3) immediately and investigate the source of contributions used to fund these ads," Raymer stated. "Any donors who have earmarked their contributions for this ad and others like it and who have taken corresponding tax deductions should be prosecuted for tax fraud to the fullest extent of the law."

NRDC’s director of government affairs, David Goldston, dismissed the IRS filing in a statement provided to E&E Daily, asserting that the environmental group was within its rights to air the ad.

"This complaint is an effort to distract attention from Senator Kirk’s vote. Senator Kirk has yet to explain why he cast a vote that would prevent cleaning up power plant pollution — pollution that can lead to asthma attacks, as well as pollution that worsens climate change," Goldston said. "This public education ad was designed to inform Sen. Kirk’s constituents about a critical vote he cast that deals with an issue of utmost concern to all Illinoisans. This is one of the essential roles for advocacy groups. The complaint is without merit."

Both Democrats and Republicans have made the Illinois Senate seat a top priority in the 2016 elections, as Kirk seeks a second term. The Cook Political Report rates the race as a "toss-up," its most competitive designation.

Kirk’s stance on the power plant proposal especially rankles environmentalists because they once considered him an ally: When he served in the House, he was just one of eight Republicans who voted for a greenhouse gas cap-and-trade bill in 2009.

Rep. Tammy Duckworth and former Chicago Urban League CEO Andrea Zopp are competing for the Democratic nomination to challenge Kirk next year. The Democratic Senatorial Campaign Committee endorsed Duckworth last week.

According the tax forms filed by NRDC in 2014 — the most recent set of documents available from the organization on its website — the environmental group received nearly $116 million in 2012 and spent $102 million that same year.

Guidelines for political messages

An IRS-published compliance guide for 501(c)3 organizations notes that while such groups may take positions on policy issues, the nonprofits "must avoid any issue advocacy that functions as political campaign intervention."

While that typically includes avoiding expressed statements to vote for or against a candidate, the IRS handbook also states such ads must not include political party affiliations, or "distinctive features" of a candidate’s platform or biography.

"All the facts and circumstances need to be considered to determine if the advocacy is political campaign intervention," the IRS states. Other factors can include how close the advertisement is aired to an election and whether the ad is "part of an ongoing series of communications by the organization on the same issue that are made independent of the timing of any election."

Unlike the Federal Election Commission, the IRS is not required to formally respond to any complaint, whether it opts to dismiss the matter or pursue it outright.

But if the IRS opts to review the complaint and finds against NRDC, the group could be required to pay excise taxes on the amount of its prohibited advertising along with the loss of its tax-exempt status.

"It’s a pretty clear wall there when it comes to election activity. The Internal Revenue Code has a very broad definition of political activity and political intervention … you don’t often see (c)3s trying to violate those rules through political intervention," said Craig Holman, a government affairs lobbyist for watchdog group Public Citizen.

Holman, who had not read the complaint and spoke on the issue of nonprofits generally, added that the NRSC’s complaint is unusual, if only because so many alternatives exist for nonprofit groups to wade into politics without jeopardizing their nonprofit status.

"Usually, if a (c)3 decides that it wants to start getting involved in political intervention, it will set up a (c)4 to do so," Holman said, referring to groups like the League of Conservation Voters, which similarly targeted Kirk with ads in June.

But Brett Kappel, a campaign finance expert and partner with the law firm Akerman LLP, questioned the viability of the Republicans’ complaint, noting that nonprofits are allowed to air advertisements that criticize a senator’s stance on pending legislation or encourage constituents to contact their member of Congress.

"Unless there’s an exhortation to take a political action against him, it’s a protected expression of the First Amendment," said Kappel, who later added: "It’s a nice press release, but it’s not going to go anywhere."