Investigators in New York won't be ending a probe into tax-exempt groups that have been raising hundreds of millions of dollars for political ads this year--no matter what Congress has to say.
New York Attorney General Eric Schneiderman defended his right to request private tax documents from organizations operating in New York on Monday in a letter sent to the top Republican tax writers in Congress.
Last week Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee, and Sen. Orrin Hatch, R-Utah, the top Republican on the Finance Committee, warned Schneiderman that his efforts to obtain tax information directly from non-profit political action groups could violate federal privacy laws. They also chastised him for circumventing the IRS process by approaching the groups directly.
"Each state has a fundamental interest in ensuring compliance with its tax laws and in regulating certain activities of nonprofits," Schneiderman wrote Monday. "The recent activities of some tax-exempt organizations and businesses have been matters of great concern to New Yorkers. While my office respects applicable federal requirements and restrictions, I will continue to perform my duties and enforce the laws of the State of New York."
Schneiderman's sharply-worded letter is the latest round in a partisan sparring match over the large and growing role of outside groups on the political process. Schneiderman, a Democrat, has been under fire from GOP lawmakers since it was reported that his office requested documents from a long list of 501(c)4 non-profits, including the Karl Rove-run Crossroads GPS and the pro-Mitt Romney American Action Fund.
Several liberal-leaning organizations were also included in the probe, but Republican leaders have been outspoken in their defense of these powerful fundraising groups.
The original letter from Hatch and Camp was a direct warning for Schneiderman to back down.
"We emphasize strongly that willful unauthorized disclosure of returns or return information is a federal crime subject to fines and/or imprisonment," the two said. "We, therefore, request that your office cease its efforts to obtain tax returns and tax return information directly from these groups. Your office should direct your inquires instead to the IRS."
Under federal rules, 501(c)4 status is intended for groups that provide community benefit and education. Groups like Crossroads GPS have been criticized for stepping over the poorly defined line between partisan advocacy and issue education. The IRS and the Federal Election Commission have been slow to clear up the confusion in the wake of the Supreme Court's 201 Citizens United decision.
In the meantime, more and more groups have flooded into the political arena, eager to take advantage of the increased secrecy.
New York has been one of the first states to begin looking into concerns that politically-affiliated fundraising groups and Super PACs may be violating their tax exempt status.