Legal Filings

Legal Filings

Ethics Watch Submits Additional Evidence To IRS of Non-Profit Status Violations

Denver - Today, Colorado Ethics Watch, a nonpartisan, nonprofit legal watchdog group, submitted additional evidence to the Internal Revenue Service (IRS) regarding its investigation of four non-profit organizations: American Future Fund (AFF), Coloradans for Economic Growth (CEG), Freedom's Watch, and Western Skies Coalition (WSC).  The letter presents additional evidence, obtained since Ethics Watch's initial letter to the IRS in September 2008, that these four organizations appparently spend more of their total resouces on actions that influence elections rather than on social welfare activities, in violation of their federal tax-exempt status.

AFF, CEG, Freedom's Watch and WSC are each registered as tax exempt organizations pursuant to section 501(c)(4) of the Internal Revenue Code.  According to federal tax law, a 501(c)(4) is exempt from federal income taxation if it operates primarily to promote social welfare.  501(c)(4) organizations must devote at least half of their resources and efforts to activities that promote the common good, general welfare, civic betterment or social improvement of a particular community.  The law clarifies that promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of a candidate.

According to broadcast and other advertising records obtained by Ethics Watch, AFF, CEG, Freedom's Watch and WSC spent significant amounts of money, including more than $1 million by Freedom's Watch alone, on partisan, non-educational activities that provide benefit to various conservative candidates for state and federal public office in violation of statutory requirements for 501(c)(4) organizations.  In addition, Freedom's Watch shuttered its doors, and the other organizations have continued to provide little if any other services to the community, since the election.

"Each of these organizations paid considerably more to purchase television and print ads attacking candidates running for state and federal office," said Chantell Taylor, director of Colorado Ethics Watch.  "It is clear to us that these organizations are primarily engaged in political activities and are doing little to promote the welfare of the community at large.  The fact that Freedom's Watch closed its doors shortly after the 2008 election strongly suggests that Freedom's Watch never intended to operate as a social welfare organization and, based on its overwhelmingly political activities, flagrantly violated its 501(c)(4) tax exempt status."

According to Ethics Watch's research, these organizations spent nearly $2 million on attack ads against specific candidates in Colorado races and other states, while focusing minimal - if any - resources on educational activities that promote social welfare.