Dems file IRS complaint against Small Business Action Committee

The California Democratic Party has filed a complaint with the Internal Revenue Service against the Small Business Action Committee, contending that the group’s role in financing anti-Jerry Brown ad violates the committee’s nonprofit tax-exemption status.

The committee drew attention recently for spending $700,000 from major alcohol and tobacco corporations on November’s ballot initiatives to protect the two-thirds majority vote required to pass the budget. The Party is also calling for SBAC to disclose the financial contributions used by the Committee for the ad. Current campaign disclosure laws do not require the Committee to disclose their financial sources for TV campaign advertisements.

SBAC is listed as a 501 (c) 4 non-profit, which allows tax exemptions for its political contributions. The online IRS political action organization guidelines for 501 (c) 4 and 501 (c) 3 filers implies that qualifying organizations can lose their tax exemptions “due to substantial attempts to influence legislation.” 

“It’s not that they (SBAC) can’t be involved in political activity, it’s that there’s a limit to how much explicit political activity they can engage in,” said Tenoch Flores, spokesman for the California Democratic Party. “They’ve spent enough money that it seems extremely likely that they’ve crossed that threshold.”   Flores said the committee has spent over $3.3 million on two ads attacking Brown.  

Joel Fox, SBAC’s president, says, “The ad is legal and the only one playing politics here is the California Democratic Party.”  

The ad attacks Jerry Brown’s history in politics, focusing primarily on the claim that Brown is not only unequipped to handle the state’s unemployment problem but plans to make it worse.