WASHINGTON -- An Internal Revenue Service decision revoking the tax-exempt status of a small political nonprofit organization may foreshadow an investigation into groups such as Crossroads GPS and Priorities USA that spend millions on the 2012 presidential election.
At risk would be the groups' nonprofit status, which lets them collect millions of dollars from individuals and corporations while keeping donors anonymous.
President Barack Obama and Republican challenger Mitt Romney are benefiting from such nonprofits. Crossroads GPS was started with help from former President George W. Bush's chief political strategist, Karl Rove. Priorities USA was co-founded by Bill Burton, a former Obama aide.
The recent IRS decision sends a signal that it may turn its attention after November's election to major nonprofits involved in this year's election, said Marcus Owens, a lawyer and former IRS director who oversaw nonprofits.
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"The message is groups like Crossroads need to be prepared to explain to the IRS why they're entitled to tax-exempt status," Owens said.
The IRS decision, released last month, involved Emerge America, a San Francisco-based organization that trains female candidates who are part of the Democratic Party.
"You are not operated primarily to promote social welfare because your activities are conducted primarily for the benefit of a political party and a private group of individuals, rather than the community as a whole," said the IRS letter telling the group that it was losing its exemption.
Critics of political nonprofits such as Crossroads and Priorities USA said the same IRS reasoning should apply to those groups.