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K Street Files: Which Campaign Groups Deserve Tax-Exempt Status?

The website of Americans Elect, a nonpartisan group that is set out to mount an alternative presidential candidate in 2012, exhorts visitors: “You have the power to help break gridlock and change politics as usual.”

But campaign finance watchdogs complain that, far from changing the status quo, Americans Elect may be violating tax laws and furthering the trend toward secrecy in political campaigns.

In a letter to the IRS, Democracy 21 and the Campaign Legal Center complain that Americans Elect and three other politically active nonprofit groups do not deserve tax-exempt status.

“There is absolutely no question in my mind that Americans Elect, which is getting on the ballot as a political party, is not entitled to 501(c)(4) tax-exempt status,” said Fred Wertheimer, president of Democracy 21. “A political party cannot qualify as a social welfare organization.”

The complaint also names Crossroads GPS, the GOP-friendly nonprofit affiliated with the super PAC American Crossroads; Priorities USA, a nonprofit backing President Barack Obama; and the conservative American Action Network.

Americans Elect “should not be lumped in with groups like that,” countered the nonpartisan group’s outside counsel, Daniel Winslow. Americans Elect organizers are seeking ballot access in all 50 states, using a website to invite voters to draft candidates, become delegates and help shape a platform.

“We are not a political party; we don’t have a candidate or candidates; we are a nominating process,” Americans Elect Press Secretary Ileana Wachtel said. The group will have a $30 million budget and has raised money from “thousands of small donors” and “a handful of large donors,” she said. Donors are free to identify themselves, but the group has no plans to disclose their names, she said.

But Wertheimer regards the case as open and shut.

“I ask anyone to explain to me how a political party can qualify as a social welfare organization,” said Wertheimer, whose group has responded on several fronts to escalating political activity by nonprofits. It has challenged the IRS to issue new regulations, helped mount a legal challenge to Federal Election Commission disclosure regulations and pushed to revive disclosure legislation on Capitol Hill.

Feast or Famine on K Street?

At first glance, third-quarter lobbying expenditure reports suggest that the bad economy is finally catching up with K Street.

Lobbying spending totaled a little more than $2.4 billion through Sept. 30 of this year, according to a preliminary analysis by the Center for Responsive Politics, down from the $2.6 billion at the same point in 2010.

“On the one hand, we say lobbying is impervious to the economy,” said Sheila Krumholz, CRP executive director. “Historically, even in rough times, companies have not been willing to pinch pennies in this regard. But year after year … perhaps we will see it taking its toll.”

But the latest numbers don’t capture the lobbying blitz in recent months to influence the Joint Committee on Deficit Reduction, Krumholz noted. Moreover, some industries are spending more on lobbying even as others scale back.

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