NY AG Schneiderman, IRS Investigating Chamber of Commerce, Other Dark Money Groups for Abuse of Tax-Exempt Status
New York Attorney General Eric Schneiderman is currently investigating New York philanthropy goliath The Starr Foundation, headed by former AIG chief Hank Greenberg, and the legalities of their $18 million loan to the “charitable” arm of the U.S. Chamber of Commerce beginning in 2003.
The Starr Foundation, which holds $1.3 billion, regularly donates to 1%’er causes such as the Metropolitan Opera and Harvard University, but in 2003 it began giving money to the National Chamber Foundation which is privileged with tax-exempt status. According to Talking Points Memo:
Federal tax records examined by TPM show that in 2003 Greenberg’s philanthropy began giving millions of dollars to the National Chamber Foundation. Registered as a tax-exempt 501(c)(3) organization, it bills itself as “the public policy think tank affiliate of the U.S. Chamber of Commerce.”
In the first year, gifts from Greenberg’s foundation totaled $7 million and were split into three donations. The following year, another three gifts from his foundation totaled $12 million.
At about the same time, a source familiar with the investigation tells TPM, the National Chamber Foundation began making what were described as loans of millions of dollars to the chamber itself.
The amount of those loans, the source said, totaled about $18.1 million.
While the amount of the original donations were not exactly the same as the loans that were eventually made to the U.S. Chamber of Commerce — $19 million versus $18.1 million — the source told TPM they were close enough to raise red flags.
AG Schneiderman is now embarking on a broad investigation into the behavior of tax-exempt groups and how they funnel money into politics. It is worth noting that while Greenberg was the head of the Starr Foundation he was also the head of AIG, a post he held until he was forced to step down in 2005. Other tax-exempt groups that follow similar practices include Americans for Prosperity (funded by notorious money v. law envelope-pushers the Koch Brothers) and Crossroads Grassroots Policy Strategies, Karl Rove’s outfit. These groups, now aided by the Citizens United vs. FEC decision, are already spending mass amounts of money to protect their interests in the 2012 election. During the period in question — 2003-2004 — the U.S. Chamber of Commerce spent $87 million to lobby members of commerce.
Yesterday, the New York Times editorial board praised AG Schneiderman’s investigation in a piece titled, “A Window on Campaign Abuse,” that looked into the role of tax-exempt organizations in funneling donations into campaigns. They reveal that the IRS is also investigating the situation and discuss how the Chamber of Commerce has become an unofficial arm of the Republican Party:
In 2010, and even more so this year, the chamber became an unofficial arm of the Republican Party, spending at least $80 million on ads that helped the party’s candidates and attacked Democrats. Though it claims to speak for all of American business, it is little more than a rigid conservative fighter in the Washington battles over taxes, health care and government spending.
As a tax-exempt business league, the chamber is not required to disclose its corporate donors. In 2003 and 2004, it also accepted a loan from its charitable arm, the National Chamber Foundation, which unlike the chamber itself cannot engage in political or lobbying efforts because it accepts tax-deductible donations.
According to the Center for Responsive Politics, the Chamber of Commerce spent $66 million last year to lobby politicians on behalf of big business and has pledged to spend $50 million on issue ads during this year’s election.
As the IRS joins the battle it will be harder for conservatives to write off concerns about campaign spending as a partisan political issue. According to the NYT, the IRS is looking into the finances of many of the same organizations as AG Schneiderman.
As Nicholas Confessore reported in The Times last week, Mr. Schneiderman has begun an investigation into these charges, issuing subpoenas that examine the connections between the chamber and the two foundations. This is an extremely promising development that could finally illuminate the practices that the chamber is desperate to keep secret.
At the same time, the I.R.S. itself said it would begin sending questionnaires to some of the largest so-called “social welfare” organizations, like Crossroads GPS, founded by Karl Rove, that spend secret donations on behalf of political candidates, mostly Republicans. This is the first step in a belated effort to determine whether these groups are primarily political in nature, which would mean they are violating their tax-exempt status.
These investigations could last for months or years, and are unlikely to affect spending in this year’s election. But they could help stanch the poisonous flow of secret money in future cycles.