Some of the heaviest advertisers in the 2012 presidential campaign are groups financed by anonymous donors. They're not organized as political committees, but as "social welfare" organizations.
Peter Overby, NPR's money and politics correspondent, says one of those groups is rivaling the campaigns themselves for money spent on high-profile ads so far in the campaign.
Four months before the election, the top three advertisers are President Obama's re-election campaign ($40 million), Mitt Romney's campaign ($32 million), and — at $29 million — Crossroads GPS, which is classified as a "social welfare" organization for federal tax purposes, Overby tells NPR's Weekend Edition Saturday.
And such social welfare organizations are looming large, Overby reports. One such group, Americans for Prosperity, which is backed by wealthy conservative donors, rolled out a $9 million ad campaign in swing states attacking Obama and the health care law right after the June 28 Supreme Court ruling.
Officially, social welfare organizations are classified under Section 501(c)(4) of the tax code, which means they perform some kind of public or community benefit, Overby explains. They include groups like local volunteer fire departments, Rotary International and the League of Women Voters.
"There's this gray area where election law meets tax law," Overby explains. "While the campaigns are disclosing their donors, the superPACs are disclosing their donors, the (c)(4)s do not have to disclose their donors."
Republican strategist Karl Rove, a leader of Crossroads GPS, told Fox News recently why the group can call itself a "social welfare" organization: "It's a social welfare organization because it spends the vast preponderance of its money in furtherance of its social welfare goals. It's an issues advocacy group. For example, it's talking right now about the need to change our policies on spending and debt."
Crossroads GPS, which was formed in 2010, shortly after the Supreme Court's Citizens United ruling that loosened some campaign finance regulations, has raised $77 million in its first two years in existence. Overby reports that 90 percent of that came from — at most — 24 donors.
"This is what makes the social welfare organization approach so appealing," Overby explains. "You've got a couple dozen people who are able to play this incredibly powerful role in the election. It's anonymous. Nobody will ever know who they are. Not their business competitors. Not their political rivals. And not the voters."
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SCOTT SIMON, HOST:
With President Obama on his road trip and his opponent, Mitt Romney, at his family's vacation house, the campaign is already at full volume on television. Some of the heaviest advertisers are groups financed by anonymous donors. And these groups are not organized as political committees, but as social welfare organizations. NPR's money and politics correspondent Peter Overby joins us. Peter, thanks for being with us.
PETER OVERBY, BYLINE: Glad to be here.
SIMON: And to begin, how prominent are some of these groups?
OVERBY: Well, Scott, if you look at the top three TV advertisers so far, you've got President Obama's campaign, at $40 million; Mitt Romney's campaign, at $32 million; and then right behind that, at $29 million, is one of these social welfare organizations, Crossroads GPS. There are certainly other big spenders in the - you know, the big picture of the presidential campaign, but the social welfare organizations are looming large.
Just for example, last week, the Supreme Court made the decision on the health-care law. The next day, a social welfare organization rolled out a $9 million ad campaign in the swing states, attacking President Obama and the health-care bill. That social welfare organization was Americans for Prosperity, which is backed by David and Charles Koch.
SIMON: Now, what qualifies a group to be a social welfare organization? I mean, I think we understand it if it's the Salvation Army, for example. But...
OVERBY: Officially, they're under Section 501(c)(4) of the tax code, which means they perform some type of public or community benefit. Rotary International is a (c)(4); League of Women Voters; your volunteer fire department is a (c)(4). And there's this gray area where election law meets tax law. While the campaigns are disclosing their donors, the superPACs are disclosing their donors; the (c)(4)s do not have to disclose their donors.
SIMON: How is what they do considered social welfare work?
OVERBY: Crossroads GPS, one of its leaders is Karl Rove, the strategist. He was on FOX News recently, and Greta Van Susteren asked him that point-blank - why are you a social welfare organization, and not a political committee?
(SOUNDBITE OF TV SHOW, "ON THE RECORD")
KARL ROVE: Well, it's a social welfare organization because it spends the vast preponderance of its money in furtherance of its social welfare goals. It's an issue-advocacy group. For example, it's talking right now about the need to change our policies on spending and debt.
OVERBY: So Rove is saying here that the social welfare goal is advocating for better government-spending policies. And this is how that translates into a Crossroads GPS ad that's been running in Virginia.
(SOUNDBITE OF POLITICAL AD)
UNIDENTIFIED ANNOUNCER: Reckless spending, red ink, higher taxes - they have a lot in common. We work hard and save. Obama and Kaine? Tax and spend.
SIMON: Let me ask you about that other issue - the anonymous donors.
OVERBY: Yeah. If you look at Crossroads GPS and the superPAC that runs alongside of it - American Crossroads - they were both formed in 2010, right after the Supreme Court's Citizens United ruling. American Crossroads started strong, but it's Crossroads GPS that's had this powerful growth in its finances. Looking at the tax records, Crossroads GPS raised $77 million in its first two years; 90 percent of that came from, at most, 24 donors. So this is what makes the social welfare organization approach so appealing. You've got a couple dozen people who are able to play this incredibly powerful role in the election. It's anonymous. Nobody will ever know who they are - not their business competitors, not their political rivals, and not the voters.
SIMON: Isn't the ultimate judge as to whether or not a group is a social welfare organization, the Internal Revenue Service?
OVERBY: It is. And there have been complaints filed against some of the social welfare organizations, saying that they're abusing their tax status. We don't know if the IRS is looking at those or not. What we do know is that this spring, the IRS revoked the 501(c)(4) tax status of a couple of other small, political 501(c)(4)s. And they used an entirely different argument than the ones that have been made in these complaints. So it may be that the IRS is developing a strategy to take a deeper look at the use of 501(c)(4) social welfare organizations in elective politics.
SIMON: NPR's money and politics correspondent Peter Overby. Thanks so much.
OVERBY: Glad to do it. Transcript provided by NPR, Copyright NPR.