A conservative advocacy group leading efforts to attack the Biden administration's top candidates has failed to disclose some of its spending on political ads, a move experts say could complicate their tax-exempt status.
The organization, the American Accountability Foundation, reported no spending on lobbying or advertising in 2021 and 2022, according to documents obtained through ProPublica's nonprofit database and shared with POLITICO by the liberal watchdog Accountable.US. But advertising spending data shows that AAF has spent hundreds of thousands of dollars to promote research attacking President Joe Biden's nominees, with everyone from Supreme Court justices to institutional leaders publicly campaigning against them as the campaign culminated in the candidate's withdrawal. I also cheered for success.
“That money appears to have been left out of the form,” said Philip Hackney, a law professor at the University of Pittsburgh who focuses on nonprofits. “That’s a real problem.”
What the IRS considers lobbying is largely vague, tax experts emphasized. But the organization has taken the position that supporting or opposing a candidate who requires Senate confirmation is lobbying, said Ellen April, a professor emeritus at Loyola Marymount University. And if the IRS determines that groups like the AAF have conducted too much political activity, it could impose fines or, for particularly egregious conduct, jeopardize its tax-exempt status.
Based on a letter from AAF disclosing the 2021 IRS audit, the agency appears to be looking into the matter. As the IRS examined AAF's 2021 tax return, it requested, among other information, “an accounting of $65,000 paid in media fees.” and the specific issues being addressed for each media fee paid.”
The foundation did not respond to a request for comment. The fundraising appeal called the audit a “politically motivated IRS investigation.” Republican senators also accused the agency of weaponizing its power by auditing conservative nonprofits.
The AAF, which calls itself a “government oversight and research agency,” said it spent $136,028 on media fees and unspecified “service fees” in 2022. But AAF spent more than $230,000 on meta ads alone that year to oppose Biden's FCC nominee, Gigi Sohn, according to data obtained by advertising analytics firm AdImpact. According to Meta's data, advertising spending targeting Son Heung-min in 2022 was confirmed to be close to this figure. These figures do not include other means of advertising, nor do they include spending on other issues.
This expenditure does not appear to be included in the AAF's budget figures for other categories. Other entities may have made these purchases on behalf of AAF, but details of their transactions with the groups involved were not disclosed.
When Son's nomination was withdrawn in March last year, the AAF celebrated that it had spent hundreds of thousands of dollars on billboards, newspapers and digital advertising to secure the result.
Mr. Son said the group was key in killing his candidacy, especially by spreading the outlandish story that he was a “police-hating partisan leftist.”
“They spent a lot of money in certain states with vulnerable Democrats to create a completely false narrative about me,” Son said, pointing to billboards around the Las Vegas Strip attacking his nomination. She added that the fact that the AAF is only going after Biden “sounds like partisan politics to me.”
During the Supreme Court nomination hearing for Ketanji Brown Jackson, AAF released opposition research that sparked conspiracy theories that were circulated in conservative media and widely promoted within the QAnon community.
During the campaign, AAF also lobbied Republican congressional offices to blacklist former Hill staffers who served on the Jan. 6 committee and co-sponsored several conferences for Hill staffers on congressional oversight and research.
The group began as a spinoff of the Donald Trump-allied Conservative Partnership Institute and shares funding and resources among a network of conservative groups. Some of these lack both tax benefits and transparency requirements. Tax experts say this allows AAF to leverage a system that allows so-called dark money groups to conceal their finances.
It was launched in 2020 by Tom Jones, who is listed as a director in CPI's annual filings. IRS filings for CPI and the America First Legal Foundation, founded by former Trump adviser Stephen Miller, list both groups as “directly controlled entities” by the AAF. More than 60% of AAF's reported spending in 2021 went to compensation for Jones and one other top employee.
CPI also helped create two entities, Compass Professional and Compass Legal, which its annual report said could be used to outsource human resources, accounting and legal services. Both companies are run by former Trump administration officials, one of whom is the brother of CPI's chairman and CEO.
AAF disclosed in the filing that it shared resources with affiliates, but the documents do not provide details about those transactions, particularly what resources or services were shared. CPI, whose leader is former Trump chief of staff Mark Meadows, reported donating about $530,000 to the AAF in 2021 and 2022, or about 40% of AAF's total donations over those two years. .
CPI also reported more than $1 million to Compass Legal and about $949,000 to Compass Professional in 2022.
CPI did not respond to a request for comment.
Brian Mittendorf, an accounting professor at Ohio State University, said the AAF's connections to these groups limit their visibility into their finances. And companies affiliated with nonprofit organizations appear to exist as a sort of clearinghouse for shared services, he added.
“It’s the best scenario,” Mittendorf said. “We lose transparency. The worst-case scenario is that we have to start worrying about conflicts of interest and organizations that are not allowed to use funds for political purposes.”