IRS Probe of Political Nonprofits Should Include Liberty Central

As Justice Clarence Thomas and his Supreme Court colleagues prepare for hearings on a landmark health care reform law, it's time for the IRS to investigate the tax status of a nonprofit group Thomas' wife founded in 2009.
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As Justice Clarence Thomas and his Supreme Court colleagues prepare for three days of hearings on a landmark health care reform law, it's time for the Internal Revenue Service to investigate the tax status of a nonprofit group Thomas' wife founded in 2009 to campaign against members of Congress who voted for the law and other Obama administration initiatives unpopular with libertarians.

The political activities of Liberty Central, started by Virginia "Ginni" Thomas, appear to go well beyond restrictions the IRS places on organizations that claim a tax exemption under section 501 (c)(4) of the Internal Revenue Code, Common Cause alleges in a complaint filed today with the tax agency.

The law allows the so-called C-4s to participate in politics but says their primary focus must be "social welfare" activity.

If Liberty Central is found to have improperly exploited its tax exempt status, the IRS should "designate the group as a political organization, and impose any appropriate taxes and penalties," Elizabeth Kingsley, counsel for Common Cause, said in a letter to IRS Commissioner Douglas Shulman.

Now apparently dormant, Liberty Central devoted itself during 2010 to attacks on the Obama administration and the election or defeat of dozens of incumbent congressmen and senators. As a C-4, Liberty Central was able to shield its corporate and individual donors from public view; it was launched with $550,000 provided by two anonymous contributors.

Dozens of other C-4s, including some affiliated with Tea Party groups, run by former aides to President Obama, or aligned with Republican candidates for President, are similarly exploiting their tax-exempt status this year as they dump tens of millions of dollars from anonymous donors into federal campaigns.

The groups' fundraising and spending has become a major point of controversy and the IRS is reviewing their tax exemptions. It should pursue that inquiry, and extend it to Liberty Central, because while the Supreme Court has invited corporations to invest in our elections, it did not promise them secrecy for doing so. Americans have a right to expect that the IRS will be vigilant in enforcing tax laws and ensuring that "social welfare" nonprofits are not allowed to serve as conduits for secret political spending.

Ms. Thomas, who left Liberty Central shortly after the 2010 election, was its public face throughout that campaign, once boasting that it would become a more important political force than the Tea Party. It never attained that status, but Liberty Central was among the first groups to capitalize on the Supreme Court's Citizens United decision, which in January 2010 freed corporations and unions to spend unlimited amounts on political advocacy.

Justice Thomas was part of the high court's 5-4 majority in Citizens United; his wife organized Liberty Central while he and his colleagues were still working on the decision. A few weeks after their ruling was announced, Ms. Thomas told the Los Angeles Times that Liberty Central would be soliciting donations from corporations and other entities freed by Citizens United to step up their political activity. Several more months passed before Republican strategist Karl Rove launched his American Crossroads super PAC and its C-4 affiliate, Crossroads GPS.

Though directed at Liberty Central's tax status, the Common Cause complaint may focus new attention on potential conflicts of interest involving Ms. Thomas and her husband. Liberty Central's and Virginia Thomas' vocal opposition to the Obama administration's health care reform effort -- nearly three-fourths of the incumbents Liberty Central targeted for defeat in 2010 supported reform -- already has led some court watchers to urge that Justice Thomas withdraw from participation in next week's Supreme Court hearings on the Affordable Care Act. There is no indication that he intends to do so.

Justice Thomas also is the target of conflict of interest charges growing out of his wife's involvement in founding Liberty Central. Because Citizens United aided Liberty Central's fundraising among from corporate donors, and thus arguably helped pay his wife's salary, Common Cause has asked the Department of Justice to consider whether Thomas should have recused himself from the case.

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