IRS May Audit AFL-CIO, NEA, More

The Landmark Legal Found. filed an IRS complaint July 20 against the Nat’l Edu. Ass’n. citing new evidence not only of NEA’s use of millions of dollars of tax-exempt funds for political purposes, but its extensive campaign coordination activities with DNC. LLF’s complaint includes evidence provided to FEC, which released this information to the public on May 2, 2001, but four days later placed the evidence under seal. LLF secured copies of this evidence during the first 48-hours of its public release.

LLF’s complaint provides overwhelming evidence of NEA’s political activities, including its key role in the “Coordinated Campaign Steering Committee,” which set strategy for the election of Democratic candidates. In addition to NEA and DNC, other members of the Committee were AFL-CIO, Clinton-Gore ’96, DSCC, DCCC, Democratic Governors’ Ass’n,  Democratic Leadership Campaign Committee, and the hard-left Emily’s List. NEA state groups were also involved.

“The extent to which the NEA and its state affiliates have coordinated their political activities with the Democratic Party, and have used millions of dollars in tax-exempt general revenues to support these activities, is truly breathtaking,” said LLF president Mark R. Levin. “NEA has become an appendage of the Democratic Party, complete with an ATM machine that dispenses tax-exempt membership dues to underwrite that party’s political activities.” [LLF Media Release 7/27/01]

LLF’s complaint led to a detailed Associated Press report saying: “Eager to help Democrats, unions have spent millions on TV ads and voter guides portraying the party favorably, and worked neighborhoods to get voters to the polls. But they routinely report zero political expenses to the IRS, a review of union documents shows.” Failure to report taxable political expenses could result in back taxes and fines.

“It could trigger an audit. It certainly could,” said Jack Reilly, a longtime IRS official who has written manuals for tax-exempt groups. Tom Miller, manager of IRS’s section that writes the rules for tax-exempt groups, added: “If you look at some of the things that have been out there publicly, some of the activities fall on that side of the line.” One key, the officials said, was whether the documents show the intent of unions was to help candidates or specific political parties. Miller said documents indicating that unions intended to help Democrats win suggests those expenses should have been disclosed to IRS.

Union bosses, including those at AFL-CIO, which spent $35 million on activities during the 1996 election campaign but reported no political expenses to the IRS, said they believe they have properly filled out their tax forms.  John Hiatt, AFL-CIO gen. counsel, said, “If we’re audited, we’ll face the music and show them what we’ve done.”

Unions’ political foes did report political spending. For example, the U.S. Chamber of Commerce reported nearly $14 million in political and lobbying expenses in 1996 and the Nat’l Ass’n of Mfrs. reported $5.2 million. AP gathered the tax forms of several major unions dating to 1996. None reported political expenses.

AP also reviewed thousands of pages of internal union documents gathered by FEC during a four-year investigation of union activities.  The documents, which otherwise would not be public, detail how tens of millions of dollars in workers’ dues were spent on activities designed to defeat Republicans or elect labor-friendly Democrats in 1996.

For instance, a document laying out Democratic activities in North Carolina to be approved and partly funded by unions stated a clear mission: “We seek to: re-elect President Bill Clinton, re-elect Gov. Jim Hunt, elect Harvey Gantt to the Senate … win back at least two seats if not the majority in our state’s congressional delegation.” Clinton, Hunt, and Gantt are all Democrats. AFL-CIO trained about 50 Democratic congressional candidates, arming them with materials to help them better communicate with “union and women voters.”

Several unions pooled their money for a $2.7 million program called the “96 Project.” Internal project documents said the goal was to influence the national debate over Republicans’ Contract With America. The unions also ran millions of dollars of so-called issue ads in congressional districts where they hoped to defeat Republicans. The ads portrayed GOP policies as bad and Democratic alternatives as better. Republicans are “after Medicare again,” said one ad that ran around the time of the 1996 presidential nominating conventions.

Union bosses said they don’t believe their activities met the IRS requirement for reporting political expenditures.  “It’s a common practice by us and every other organization I know of, and there’s no legal authority to the contrary. You are really grasping at straws,” said AFL-CIO associate gen. counsel Laurence E. Gold. The Internal Revenue Code requires unions to list any direct or indirect expense “intended to influence the selection, nomination, election or appointment of anyone to a federal, state or local public office.”  Tax experts said the union documents likely would raise questions among IRS auditors. [AP 8/7/01]