Pro-McConnell nonprofit hit with IRS complaint

Introduction

Watchdog organization Citizens for Responsibility and Ethics in Washington has asked the Internal Revenue Service to investigate the Kentucky Opportunity Coalition, a conservative nonprofit that spent millions of dollars supplied by undisclosed donors to boost Senate Minority Leader Mitch McConnell during his contentious 2014 re-election bid.

The nonprofit is “nothing more than a sham,” said Melanie Sloan, CREW’s executive director, and it “makes a mockery of a law that is supposed to promote social good, not get a particular politician reelected.”

She continued: “The IRS needs to take quick and decisive action to stop KOC’s blatant violations of tax law and head off others from copying it.”

McConnell, a Kentucky Republican who is set to become the Senate majority leader next year, faced a surprisingly stiff challenge from Democrat Alison Lundergan Grimes.

Ahead of the November election, the Kentucky Opportunity Coalition spent more than $14 million on advertisements, according Scott Jennings, a former McConnell aide-turned-political consultant who serves as its spokesman.

That spending spree earned the Kentucky Opportunity Coalition the distinction of being the top-spending group in the race — airing about one of every seven TV ads.

Jennings did not immediately respond to a request for comment, but in October, he told the Center for Public Integrity that the Kentucky Opportunity Coalition “abides by all rules and regulations governing an organization of its kind.”

The Kentucky Opportunity Coalition, which is organized under Sec. 501(c)(4) of the tax code, was launched in 2008. For years, it was largely inactive — recently filed tax records showing it ended 2012 with just $904 in assets. Now, however, it ranks among the largest social welfare nonprofits in Kentucky. In 2013, it raised $5.9 million, with the largest donor contributing $2 million, according to tax records.

The identities of its donors are unknown. The group’s policy is to “not provide the names of its donors to the general public,” according to its website.

Ever since the U.S. Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling, certain types of donor-shielding nonprofit corporations have been allowed to raise unlimited funds to advocate for and against federal political candidates.

IRS rules, however, stipulate that social welfare nonprofits like the Kentucky Opportunity Coalition “may engage in some political activities, so long as that is not its primary activity.”

Groups that run afoul of these regulations can face penalties, including the revocation of their tax-exempt status.

Earlier this year, for instance, the IRS rejected the tax-exempt application of a liberal group that played a prominent role in the failed 2010 re-election bid of Sen. Blanche Lincoln, D-Ark. That group, Arkansans for Common Sense, spent about $1.3 million that year, the bulk of which the IRS concluded qualified as political, not social welfare, spending.