#ncpol: Carolina Rising (IRS watching?)

It looks like Robert Pittenger might not be the only NCGOP figure facing scrutiny from the Internal Revenue Service.  The IRS is being asked to take a good hard look at a group called Carolina Rising: 

A social welfare group called Carolina Rising spent 97 percent of the money it raised in the 2014 midterm elections — nearly $5 million — running ads that helped Sen. Thom Tillis (R-N.C.) defeat the incumbent Democrat that cycle.

The group, formed by political operative Dallas Woodhouse in late March 2014, did virtually nothing else. Its first tax filing, obtained by the Center for Responsive Politics, shows that the organization raised nearly $4.9 million in its first year — $4.8 million of it from a single donor;  nearly all of that went out the door to a prominent political media firm in Virginia for ads mentioning Tillis, while the rest was spent on payments to an LLC started by Woodhouse only months earlier.

Woodhouse, as you know, just got hired as the senior staffer over at NCGOP HQ.  MORE: 

[…] The stark set of facts raises questions not only about whether the group spent the majority of its funds on political activity — verboten for nonprofits claiming 501(c)(4) status under the tax code — but about whether Carolina Rising was devoted to helping a single individual. That would violate an IRS rule barring social welfare organizations from benefiting one person — the so-called “private benefit” prohibition.

As OpenSecrets Blog prepared to publish this post, the group Citizens for Responsibility and Ethics in Washington (with which this blog has no affiliation) filed complaints with the IRS accusing Carolina Rising […] of spending the vast majority of their money on behalf of a single candidate, in violation of the agenc[y]’s rules.[…]

The race between Republican Thom Tillis and then-Sen. Kay Hagan, a Democrat, was one of the most contentious of the 2014 cycle, and, as a key piece of the successful GOP strategy to retake the Senate, it attracted unprecedented amounts of money. Much of that cash was spent by so-called outside groups — super PACs and politically-active nonprofits — that are supposed to operate independently from the campaigns themselves.

Carolina Rising was one of those groups. It reported to the Federal Election Commission that it spent $3.3 million in the race, making it the fifth most active nonparty group in that faceoff. And that’s not counting the $1.3 million more the nonprofit spent on ads that didn’t have to be logged with the agency.thomsigh

Carolina Rising was one of just three examples of a new a breed of outside group that popped up in 2014 — candidate-specific nonprofits that served as nominally independent arms of the campaigns themselves with one key difference: The ability to raise and spend unlimited amounts of money without revealing their donors to the public.

Carolina Rising raised nearly all of its funds from a single $4.8 million contribution. It’s not known who provided the contribution, but a 2014 report in the Washington Post suggests that Art Pope, the wealthy, conservative retail magnate who wields considerable influence in North Carolina, is a supporter of the group.

While politics is not supposed to be the primary purpose of 501(c)(4) social welfare organizations like Carolina Rising, lax oversight by agencies like the FEC and the IRS, coupled with the fact that such organizations do not have to disclose their donors, has made them increasingly popular vehicles for political money.

IRS rules are supposed to hold 501(c)(4) groups to spending less than half their resources on politics. But to get around these limits on political activity, groups often hire lawyers who help them churn money to other groups and divvy up their spending to make it difficult for the IRS to prove that they primarily were devoted to influencing elections.

Carolina Rising is novel, though, in that it doesn’t appear to have made much effort to hide the nature of its activities.

Next-Level Sham

Despite raising millions of dollars in its first year, Carolina Rising hired no employees and had no volunteers, according to its tax form. It’s run by a known political operative, Dallas Woodhouse, who didn’t take a salary from the organization; instead, Carolina Rising paid $72,000 to Solutions NC, an LLC incorporated in North Carolina only weeks before Carolina Rising was founded. Woodhouse, according to Carolina Rising’s filing, is the sole owner of Solutions NC.

Picture taken at location of Carolina Rising's "Headquarters"

The group does not appear to have office space. The “Carolina Rising Headquarters,” as it is described on its website, is actually a rented mailbox at a Custom Postal store next to a GNC in a small north Raleigh strip mall.

Carolina Rising did have an office at one point, but didn’t spend more than six or seven months there. The office’s subsequent occupant, an attorney, moved in around early November 2014. Other tenants on that floor, when contacted by OpenSecrets Blog, said they could not recall a nonprofit organization operating there.

Other than the payments to Woodhouse’s own LLC, nearly all of the remaining funds — $4.7 million, or about 97 percent of total spending — went to Crossroads Media, one of the largest political advertising firms in the country, for a purpose described as “TV & cable ad.”

For those keeping score, Crossroads is a Karl Rove-affiliated group.   Rove, as you know, was an enthusiastic, active supporter of the Tillis campaign. MORE: 

Based on Carolina Rising’s own press releases at the time, the entirety of the Crossroads Media payments became television ads that touted Tillis’ achievements in North Carolina. While some of the ads also mentioned Republican Gov. Pat McCrory — who wasn’t up for re-election in 2014 — all of the ads prominently featured Thom Tillis.

One other ad and a robocall mentioned in separate press releases were directed at Attorney General Roy Cooper. The ad is on YouTube, but there is no evidence — either in Federal Communications Commission data or reports at the time — that it ever saw airtime. Based on the amounts Carolina Rising spent on its Tillis ads, the group couldn’t have spent more than $20,000 or so on the robocall — or about 0.4 percent of its overall budget.

The “Issue” is Tillis

Carolina-RisingCarolina Rising started spending on ads in earnest in mid-August, 2014, less than three months before the election. The first ad the group bought cost $1.5 million and ran in “all of North Carolina’s major media markets for two weeks,” according to the group’s press release.

According to Kantar Media tracking data reported by the Wesleyan Media Project in partnership with the Center for Responsive Politics, Carolina Rising had already run the ad 1,431 times by early September. The expenditures for this ad were never reported to the FEC, though, because it was framed as an “issue ad.” Those are ads that don’t explicitly ask viewers to vote for or against a candidate and are presumably concerned with a pending policy issue; as a result, they don’t have to be reported to the FEC unless they run within 30 days before a primary or 60 days before a general election.

The ad said that McCrory and and then-North Carolina House Speaker Tillis were responsible for the “largest teacher pay raises in North Carolina history.” It applauded the two for improving starting teachers’ salaries and hi-tech learning in the state. Unlike most other issue ads, no action was requested on the part of the viewer — no calls or emails to the politicians to thank them for supporting certain policies or asking them to vote for legislation.

[…]

The remaining ads highlighted in Carolina Rising’s press releases and featured on its Youtube page include one released in early September at a cost of nearly $1.4 million. It featured that a “veteran North Carolina educator” from Yadkin, N.C. (The educator, Judy Wilburn, was arrested five months later and charged with assaulting a handicapped student and obstruction of justice.) A few weeks later, the group dropped another $2 million on an ad featuring a young couple and their autistic son discussing “Thom Tillis’s efforts to pass an autism insurance measure.”

Both of those ads fell within the “windows” that required them to be reported to the FEC as electioneering communications, and they were, to the tune of $3.3 million. But although the outlays for those spots amounted to 68 percent of the group’s total expenditures, Carolina Rising told the IRS on its Form 990 tax filing that it had conducted no political activity in that time period. As early as late November, 2014, Woodhouse was making the claim, in an interview with the Center for Public Integrity, that the ads were “not political ads,” but “issue ads.”

“A Private Benefit Slam Dunk”

The issue of whether a nonprofit spent more than 49 percent of its resources on political activity is usually the focus of examinations of groups that claim (c)(4) status. But there’s a larger issue, according to attorneys who specialize in tax law. These organizations are supposed to exist for a social welfare purpose to benefit the public — not to benefit individuals, like a single politician, or select groups, like the Republican or Democratic parties.

Marcus Owens, a tax lawyer and former director of the IRS exempt organizations division, calls the case of Carolina Rising “a perfect example of the private benefit that is inherent in the modern politically active nonprofit.

“More and more, 501(c)s are being started to benefit one party or one candidate,” Owens said, “and that is a private benefit.” Beyond parsing whether ads paid for by Carolina Rising should count as political activity or not, Owens said, regulators should consider the fact that the group spent all of its money casting a single person — particularly one running for public office — in a positive light.

“This seems like a private benefit slam dunk,” Owens said. “This organization was formed to support Mr. Tillis, and they did that.”

In past cycles, groups have often spent well over half of their overall funds on the kinds of issue ads that Carolina Rising made, but they directed them at a large set of candidates in different states, rather than just one.

“If a 501(c)(4) spends on a number of different candidates,” says Jessica Levinson, professor at Loyola School of Law in Los Angeles, “then it may be easier to argue with a straight face that they are touting an agenda, not a particular candidate.”

It doesn’t help Carolina Rising’s case that on ad contracts it signed with broadcast and cable channels, which are filed with the FCC, the group repeatedly characterized the “issue” in its ads as being some variation of “Pro-Tillis” — belying the idea that the ads were about policies, not politics.

An example of an FCC filing showing a "Pro Thom Tillis" ad bought by Carolina Rising

In some cases, the forms included McCrory’s name, but clearly listed the U.S. Senate race and the date of the election. McCrory wasn’t running for any office in 2014.

pro tillis mccrory

Still others came right out and explained that the ad wasn’t about anything more than getting Tillis elected.

pro tillis mccrory explicit

This, Owens told the OpenSecrets Blog, raises more serious questions of perjury.

“The fact that they were candid with another federal agency [the FCC] suggests that they may have knowingly lied to the IRS” in saying the group was  not active politically.

“$4.7 million. We did it.”

Thanks to Dallas Woodhouse, it will be hard to claim the wording was an error. That’s not just because Woodhouse tweeted pictures of himself “putting up signs for the next US Senator @ThomTillis” the day before the election — one of his many tweets supporting Tillis or opposing Hagan in the final months of the campaign.

Beyond that, it’s because Woodhouse went to Tillis’ victory celebration on Election Day and was interviewed on live TV saying that his organization spent $4.7 million to support the Republican’s candidacy.

Dallas Woodhouse at the Tillis campaign's victory party, wearing a "Thom Tillis" hat talking to WNCN

In the interview, local WNCN reporter Derick Waller introduces Woodhouse as representing Carolina Rising, and then immediately says “You just mentioned, you spent a whole lot of money to get this man elected, right?”

Donning a red “Thom Tillis” hat — and looking like he might have had a few celebratory cocktails — Woodhouse responds “$4.7 million. We did it.”

A screenshot of a tweet from Dallas Woodhouse the next day shows him asking the reporter to take the video down “due to copyright.” Perhaps that was the real issue, though some commented at the time that he might want the footage to go away because he appeared intoxicated. Given his quote to the reporter, though, it’s also possible he’d received a call from an angry lawyer for his group or Tillis’ campaign.

Woodhouse did not respond to calls or emails seeking comment.[…] 

 

18 thoughts on “#ncpol: Carolina Rising (IRS watching?)

  1. Great reporting. Those of us in the trenches last year know what a disgusting campaign the Tillis team ran. None of this is surprising at all.
    What is surprising, to me anyway, is that the #NCGOP hired Woodhouse anyway. And how about those “conservatives” everyone was so excited to have at the helm. Crickets.
    And they wonder why ppl continue to leave the party that stands for nothing.

  2. Thom Tillis, another RINO. Lied thru his teeth and promised to be a Conservative during the election. Then, once in Washington, he got on his knees and kissed Mitch McConnell’s feet, then joined McConnell in bending over and grabbing his ankles for Obama.
    As Virginia’s Rep. John Randolph once said of House speaker Henry Clay: “like a rotten mackerel in the moonlight, he both stinks and shines”.

  3. What is scary for the NCGOP is that this same dude will be filling out the NCGOP forms for both the IRS and FEC. The NCSBOE, too, but they often cut their friends some slack. Supposedly, the RNC stressed the need for the NCGOP to get someone qualified to fill out those financial reports in selecting an ED, but it does not look like the Central Committee bothered to look at Woodhouse’s history of filling out forms.

    The hiring of Woodhouse was more and more clearly wired for factional political purposes than based on qualifications. The Central Committee is going to have a lot to answer for in this hiring. The Woodhouse / IRS saga is likely to drag on into the election season, and the media is likely to be harping on it regularly like they did with a certain former NCGOP chairman and his tax troubles.

    1. Yes, a lot of those district chairs are so chronically impressed with themselves, that critical thinking usually doesn’t penetrate their meeting room. A few of them have been cozying up to the Governor and the GA leaders and cutting some sweet deals for themselves in return for undermining the new Chairman and his team.

  4. Woodhouse was not the choice for true conservatives on CC. It was revealed that the other contender presented a detailed plan to CC and is highly respected in DC. He’s also well connected with liberty minded conservatives with mucho deep pockets that dwarf Art Pope’s. He knows how to act on national TV too.
    So Who’s Woody working for? You decide.
    Hired to do the Chairman’s job? Big mistake.

  5. Liars, cheaters and thieves. This smacks of cronyism and fraud. And where is the NCGOP? OH, wait, in bed with Dallas Woodhouse the operative of Rove and the Tillis campaign. Oh, how I detest the fact that long ago when Dallas was AFPNC I stood with him in the “Hands Off My Healthcare” initiative. We must always have an eye of skepticism toward anyone being paid by any organization. Apparently Dallas will do anything for the almighty buck. #DefundTheGOP

  6. Anyone paying attention would have known that Obama weaponized the IRS to go after conservatives and Republicans. Woodhouse was incredibly dense if he did not comprehend that. Playing fast and loose with IRS rules in a political campaign is just begging to do the perp walk in the future. This is just one more example of Woodhouse;s total lack of judgment. One hopes he is getting lots of adult supervision at NCGOP, but somehow that is doubtful. The Central Committee likely would have seen that video of the interview that Woodhouse did while drunk, another sign of total lack of judgment, but they hired him anyway.

    From this point forward, Woodhouse is unlikely to be functioning at anywhere near 100% for NCGOP, as his mind will be focused on not going to jail. This has to be the dumbest hire the NCGOP as ever made for ED. There is also lots of potential for negative media attention with the NCGOP’s name attached to it while the saga unfolds, just as happened with Jim Hastings.

    It is time for the NCGOP to insist that Woodhouse resign before this gets any worse. He was a bad choice from the beginning and is only there due to an intra-oarty power play. Lets hip it in the bud.

    1. Good lord, Woodhouse is the only one keeping the NCGOP from closing it’s doors due to our inept Chairman

      1. Or, so goes the establishment party line. In reality, his main competitor had a well thought out plan on fund raising, while Woodpecker’s solution was just to hire a fundraising consultant. I suspect that consultant would be happy to work for other party leaders, too,

          1. Welcome to the weaponization of the Obama IRS condoned by the Obama ”Justice” Department. Lois Lerner ought to be under the jail house. And the Obama cheerleaders in the major media applaud. Dallas Woodhouse was a fool to play games with these characters because they do not play fair.

      2. That isn’t necessarily a good thing, at this point, I think NC would be better off with 100 fully independent County Republican Parties.

  7. If the IRS looks favorably on this complaint, what are the consequences beyond Carolina Rising losing its 501(c)4 status? Could Dallas Woodhouse be criminally charged?

    1. That is up to the IRS. The rule of thumb I have always heard is that if more than one IRS guy shows up for an audit, then they are looking at criminal charges, which can range from tax fraud to perjury. Check Al Capone. That is how they got him, through the IRS.

  8. Another huge issue that comes out of this is Dallas Woodpecker’s relationship to Karl Rove, the biggest enemy of conservatives within the Republican Party. There are lots of consultants who make political ads, many of them of higher quality than Karl Rove, so why would Dallas Woodpecker go to Rove with his $4.7 million? The rumor out there was Stewart or Shumaker, which would have been bad enough but Karl Rove????!!!!!

    Our Central Committee gave us someone who is chummy with anti-conservative hachet man Karl Rove as our ED. I cannot imagine a bigger kick in the face to the GOP grassroots. The two CC members that come up for replacement next are the National Committeeman and National Committeewoman at the 2015 convention, and we may get a crack at the National Committeeman before that, with impeachment petitions now circulating. Let’s clean house!

  9. “Anyone paying attention would have known that Obama weaponized the IRS to go after conservatives and Republicans”…………
    ……while empowering Obama’s (George Soros funded) voter fraud group ACORN, to buss in thousands of ineligible voters during the “early voting” scam at polling places (when they were least able to verify eligibility).
    They tried John, they tried. However, Obama’s IRS Hatchet Woman (and damned ugly broad – Lois Lerner) repeatedly took The Fifth.
    Then, Obama sic’d his “House Negro” Eric Holder on the states, and he sued every state (every state) that attempted to pass a “Voter I.D. Law”.
    Does that tell you anything?

    1. Addendum: And now we have the announcement from Hussein’s “Justice” Department (and his home girl bitch Loretta Lynch), that NO CHARGES WILL BE BROUGHT IN THE IRS SCANDAL! (Zip, zero, notta)!
      The Guilty Party, Lois Lerner (who took The Fifth – twice) has since retired on a fat government pension.
      Of course, we could have figured it out, couldn’t we?
      The same will go for Hussein’s “Justice” Department (and his home girl bitch Loretta Lynch) investigation into Hillary’s E Mail Scandal (which Federal Judge Andrew Napolitano and former Federal Prosecutor Rudi Giuliani say Hillary could be indicted on several felonies and misdemeanors for); it will also go nowhere.

      1. The Lois Lerner whitewash shows just how dishonest and corrupt the Obama administration really is, but hopefully President Ted Cruz; administration will reopen these investigations and prosecute.

        What we have to remember about Loretta Lynch is all of the Obama Republicans, like our own senators Tillis and Burr, who voted to let the Lynch nomination go forward by voting for cloture. We all need to remember that at election time, This was a major betrayal.

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