By retaining longtime Clinton loyalist James Carville as a regular columnist, the liberal watchdog Media Matters for America has increased its influence as a player in the 2016 presidential election. But Media Matters may be edging toward violating the tax rules that govern nonprofit organizations.
Carville’s new role at Media Matters was announced Thursday, following two weeks of controversy surrounding Hillary Clinton, a likely Democratic presidential candidate and former secretary of state.
Media Matters was founded by another Clinton friend, David Brock, one of the rare Clinton acolytes willing to defend her amid reports that she violated federal law by exclusively using a personal email address during her tenure as secretary of state.
Media Matters has published more than 40 blog posts and videos rebutting widespread and bipartisan criticisms of Clinton.
Just one problem: Brock’s organization is not allowed to campaign for political candidates.
Media Matters is classified by the IRS as a 501(c)(3), exempting the organization from having to pay federal taxes. “Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office,” read the IRS’s rules governing such organizations.
Clinton has yet to begin her formal campaign for president. But she is expected to announce her candidacy within weeks, and there does not appear to be a clear line — or in fact, any line — between her interests and the advocacy work of Media Matters.
“There are two issues here,” said Alan Dye, a lawyer specializing in representing nonprofit organizations and political committees, in an interview with the Washington Examiner media desk. “One is campaign intervention. That is, activity that affects an election.”
Dye has not studied Media Matters’ published content closely, but he said that the more consistently a nonprofit offers criticism that benefits a specific candidate for office, “the more likely the IRS is to consider it campaign intervention.”
Dye said another factor that could result in the IRS revoking a nonprofit’s tax exempt status is “private benefit.”
The private benefit rule says that 501(c)(3)s “must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests.”
“Even if what they [Media Matters] are doing doesn’t rise to the level of campaign intervention,” said Dye, “it could still result in revocation of tax exempt status if the IRS found that a principal part of activity was to benefit the Democratic Party or Hillary Clinton, personally or as a candidate.”
Jose Vejarano, a spokesman for the IRS, affirmed to the Examiner that nonprofits are not permitted to benefit a specific candidate for office, though he was speaking in general terms and not specifically about Media Matters.
Dye said it’s rare for a nonprofit to be found in violation of the private benefit rule, but such cases are occasionally uncovered. “They’d have to find and have some evidence that there was substantial purpose of the organization to benefit some private interest,” he said. “In this case, Hillary Clinton or the Democratic Party.”
As an example, Dye pointed to American Campaign Academy v. Commissioner.
The U.S. Tax Court ruled in that case that a political training school, the American Campaign Academy, could not be classified tax-exempt. Evidence in the case indicated the program was specifically established to benefit the Republican Party by training students who were already affiliated with the GOP to apply their skills to Republican political campaigns, according to Bruce Hopkins, a lawyer who also runs the Nonprofit Law Center blog.
“The Clinton campaign is underway,” Hopkins told the Examiner. “An organization that has as its purpose support of her in this regard is engaging in political campaign activity and thus cannot be tax-exempt as a charitable organization.”
A spokeswoman for Media Matters did not return multiple requests for comment.
