Watchdog filed IRS complaint against dark money group run by Chris Rants

An advocacy group run by former Iowa House Speaker Chris Rants “is operating with the primary purpose of influencing political campaigns” in violation of federal tax code, according to the watchdog group Citizens for Responsibility and Ethics in Washington.

Last month CREW filed Internal Revenue Service complaints against ten 501(c)(4) groups, which claim non-profit status as “social welfare” organizations but spent a large share of their funds on political activity during the 2014 election cycle. One of them was the Iowa-based Legacy Foundation Action Fund, for which Rants serves as president and secretary. (The fund did not seek to influence any Iowa elections in 2014.) CREW also filed criminal complaints against six of the ten groups for “falsely representing the amount of money they spent on political activity in 2014”; the Legacy Foundation Action Fund was not among them.

Although Rants’s 501(c)(4) does not disclose its donors, CREW was able to determine that most of its 2014 funding came from American Encore, a “secretive” 501(c)(4) group “formerly known as the Center to Protect Patient Rights.” American Encore has been described as “the linchpin” of the Koch brothers dark money network. The Legacy Foundation Action Fund reported $980,000 in “contributions and grants” on its 2014 tax return; $880,000 of that amount came from American Encore.

More details on CREW’s IRS complaint are below. Rants responded via e-mail, “I am confident that Legation Foundation Action Fund is in compliance with the IRS rules. Legal counsel is reviewing the tax returns and we will file any amendment necessary to ensure the tax returns accurately reflected the organizations actives.”

CREW announced its action on June 15:

Citizens for Responsibility and Ethics in Washington (CREW) filed IRS complaints against 10 “social welfare” groups today for violating their non-profit status by acting as political organizations or for significantly underreporting their political activity. CREW also filed criminal complaints with the Department of Justice against six of the organizations, calling on the FBI and DOJ to investigate whether they lied to the IRS about their political activity.

501(c)(4) social welfare groups are allowed to make political expenditures as long as political activity is not the primary focus of the group and they disclose all political spending to the IRS. These groups failed to meet those simple standards.

“The disastrous Citizens United decision opened up the floodgates for dark money groups to spend on politics,” CREW Executive Director Noah Bookbinder said. “But there are still some limits to the amount of spending and secrecy these groups are permitted—and too many brazenly ignore these modest limits.”

American Dream Initiative (based in Virginia but active in Texas), the DC based Arizona Future Fund, Jobs and Progress Fund (organized in Ohio but spending in Georgia), Michigan Citizens for Fiscal Responsibility, Ohio’s Mid America Fund (which spent in Rhode Island and Illinois) and the Rule of Law Project (organized in Virginia but active in Wisconsin) all spent hundreds of thousands of dollars on politics in the 2014 election that they hid from the IRS, leading to CREW’s criminal and IRS complaints. Ohio’s Freedom Vote and Moving Ohio Forward, Oklahomans for a Conservative Future and the Iowa based but Nebraska and Arizona spending Legacy Foundation Action Fund all impermissibly spent more than 60% of their spending on political activity—as did many of the groups included in the criminal complaint, leading to today’s IRS complaints.

“These groups have demonstrated a clear disregard for the law,” Bookbinder said. “If the government does not act, it will send a signal to dark money groups that no laws or limits apply to them and it is open season for secret money in our elections.”

CREW laid out its concerns about Rants’s organization in this one-page fact sheet:

Organization: Legacy Foundation Action Fund (LFAF) Year founded: 2011 or 2013

State of formation: Iowa

Fiscal year: January 1 to December 31

Summary of CREW complaint: LFAF acknowledged on its 2014 tax return that it spent more than $700,000 on political activity that year, and another $23,000 in 2013. LFAF’s political spending accounted for nearly 72% of the group’s total spending in 2014 and its political spending in 2013 and 2014 accounted for 69% of its spending during those years, apparently making politics the group’s primary activity.

Elections involved: 2014 Nebraska Senate, Republican primary, and 2014 Arizona Governor, Republican primary. LFAF paid for TV ads, digital ads, billboards, and get-out-the-vote calls in support of now-Sen. Ben Sasse (R-NE) in Nebraska’s Republican Senate primary and television advertisements attacking then-Mesa Mayor Scott Smith while he was a candidate in the Arizona Republican gubernatorial primary election.

Players:
• Christopher Rants is the president and secretary of LFAF. Mr. Rants, a former member of the Iowa House of Representatives, is the founder of the consulting firm inSight Communications. He also serves as president and executive director of the Legacy Foundation, a section 501(c)(3) charitable organization.
• Deborah Peters is the secretary of LFAF.
• Curt Bramble is a director of LFAF.

Known donors: LFAF does not reveal its donors, but tax returns for other non-profit organizations reveal that American Encore, which was formerly known as the Center to Protect Patient Rights, contributed $880,000 to LFAF in 2014. American Encore also contributed $25,000 to LFAF in 2013. The State Government Leadership Foundation, which is affiliated with the Republican State Leadership Committee, a group whose declared mission is to elect down-ballot, state-level Republican officeholders, also contributed $45,000 to LFAF in 2014.

Additional information of interest: LFAF is currently engaged in litigation with the Arizona Citizens Clean Elections Committee over whether the television advertisements the organization ran criticizing Mayor Smith constituted “express advocacy” during the former mayor’s gubernatorial election campaign. The resolution of that case will not be determinative of any investigation of CREW’s complaint to the IRS complaint because the standard for express advocacy under Arizona law is much narrower than the tests the IRS applies to determine if an activity is political.

The full IRS complaint is available here, including the Legacy Foundation Action Fund’s 2013 and 2014 tax returns as supporting documents. I enclose below the four-page letter from CREW Executive Director Noah Bookbinder to IRS Commissioner John Koskinen.

As mentioned above, Rants asserts that the fund is “in compliance with the IRS rules” for social welfare organizations and “will file any amendment necessary to ensure the tax returns accurately reflected the organizations actives.” I had intended to publish this post last month, but soon after CREW announced its actions against the dark money groups, Rants departed for a three-week overseas vacation. He responded to my request for comment soon after his return.

Final note: Rants is a regular guest columnist for the Des Moines Register. I found it odd for the editorial board to maintain that arrangement after Rants became a senior adviser to Carly Fiorina’s presidential campaign, receiving $7,500 per month through his firm inSight Communications. Stranger still, the newspaper continued to run Rants’s commentaries even after the Register’s own reporter Jason Clayworth revealed that the former lawmaker had engaged in improper communications with state officials as a lobbyist for an insurance company seeking a managed-care contract for Medicaid.

I am seeking comment from the Register on whether Rants will continue to write for the op-ed page, in light of alleged tax code violations by the Legacy Foundation Action Fund.

UPDATE: Des Moines Register executive editor Amalie Nash responded by e-mail,

We’ve published five columns from Christopher Rants this year. The last one published was in early June.

He’s welcome to submit columns, and we publish them at our discretion. That’s the extent of the relationship. He is labeled a “guest columnist” because of his background/expertise and our desire to highlight a Republican voice in our op-ed pages.

Rants has never written a column on Medicaid privatization. He and the Register repeatedly disclosed his connection to the Fiorina campaign, and he has disclosed other conflicts to us (such as his lobbying clients) and has avoided writing on these issues.

Nash had no comment on the CREW complaint.

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  • Criminal?

    How does a watchdog group file criminal complaints? I think they are getting some definitions mixed up that seem a little libelous.

    • CREW's been around for a long time

      They know what they are doing. You can read their letter to the assistant director of the FBI’s Washington field office and the acting assistant attorney general in charge of the DOJ’s tax division here.

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