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Watchdog Group Sues IRS Over Dark Money Rules

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Now, Gill has joined with the watchdog group Citizens for Responsibility and Ethics in Washington (CREW) to sue the IRS, accusing the agency of creating a loophole that has allowed groups like the American Action Network to flourish. The civil suit, filed on Tuesday in U.S. District Court for the District of Columbia, alleges that Gill suffered economic harm and harm to his reputation as a result of "false and misleading" ads financed by the American Action Network.

As a 501(c)4 "social welfare" nonprofit, the American Action Network does not normally disclose its donors. But the group is known to have received funding in the past from the insurance company Aetna and the Pharmaceutical Research and Manufacturers of America. The lawsuit claims that the public was unaware that those groups sought Gill's defeat because of his support for a single-payer, national health care plan.

CREW's arguments focus on the difference between federal law, which states that non-profits organized as 501(c)4s must operate "exclusively for purposes beneficial to the community as a whole," and IRS regulations, which allow groups "primarily" engaged in social welfare to have 501(c)4 status.

"Many 501(c)(4) groups have interpreted this to mean they can spend up to 49 percent of their funds on political activities," CREW said in a press release on Monday. "The lawsuit, however, alleges the IRS regulation is invalid because 'exclusively' and 'primarily' are not synonymous and 501(c)(4) groups should be barred from engaging in political activities."

In response to a call from TPM, the IRS said that it does not generally comment on pending litigation.

Read the complaint here:

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