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Nonprofits wading into healthcare repeal effort

Organizations that have designated themselves under tax law as social welfare groups can accept unlimited donations without identifying contributors. Some such groups are launching ads against the health law.

January 20, 2011|By Kim Geiger and Matea Gold, Washington Bureau

Reporting from Washington — The television ad calling for repeal of the new healthcare law doesn't mince words. "We'll do our spanking on the Congress and show them that we still rule in this country," former Arkansas Gov. Mike Huckabee declares in the spot.

The commercial has run nonstop on cable television for several weeks, paid for by Repeal HealthCare Act, one of at least three nonprofit groups formed in recent months to campaign against the healthcare law. By designating themselves under tax law as 501c(4) social welfare groups, they can accept unlimited donations without identifying their contributors.

Activists on the left are fighting back with their own social welfare groups. An organization called Americans United for Change, financed by labor unions and other undisclosed donors, this week began its own national ad campaign supporting the healthcare law.

The nonprofit 501c(4) social welfare group designation is generally intended for local cultural preservation committees or community associations. But last year, after a set of legal decisions cleared the way for unions, corporations and nonprofits to spend more heavily in elections, political operatives stepped up their use of the designation.

So far there is no clear guidance from the Internal Revenue Service on how much political activity a social welfare organization can engage in without compromising its nonprofit status, so lawyers have settled on their own interpretation: Social welfare groups must dedicate at least 51% of their yearly spending to non-political purposes. That's why many organizations devote most of their resources to "issue" ads that do not expressly advocate for or against a candidate.

That is the kind of ad urging repeal of the healthcare law that was run by American Patriots for Conservative Action, chaired by Frank Spina, who owns a landscaping business in Lakewood. The organization claims to be founded by small-business owners and does not have "one mega-weathly [sic] fat cat supporter," according to the group's website. Spina did not return messages seeking comment.

Another group planning a campaign urging repeal — ForAmerica, officially known as America Inc. — was created last fall by L. Brent Bozell III, the conservative activist who founded the media watchdog groups Parents Television Council and Media Research Center. His status has helped draw substantial online backing for the group, with more than 500,000 people registering support on the group's Facebook page.

Repeal HealthCare Act, the group featuring Huckabee in its ads, is a project of Restore America's Voice, a political action committee that spent $112,000 in the 2010 cycle on behalf of conservative candidates.

In an end-of-the-year report, the IRS indicated it would step up scrutiny of groups claiming social welfare status. But the issue is sensitive for the Obama administration, which could come under criticism if it were viewed as using the IRS to pursue political opponents.

And many legal experts note that the IRS has little financial motivation to pursue possible violations. Because donations to such social welfare groups are not tax deductible, IRS investigations are unlikely to produce more revenue for the government.

kim.geiger@latimes.com

matea.gold@latimes.com

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