Press Releases

End Citizens United Files IRS and FEC Complaints Against No Labels

Jan 24, 2024

ECU, which is the first group to legally challenge No Labels’ nonprofit status, also sent the IRS complaint to the 27 states where No Labels is registered to solicit charitable contributions

End Citizens United (ECU) filed complaints with the Internal Revenue Service (IRS) and the Federal Election Commission (FEC) against No Labels alleging fraudulent misuse of their 501(c)(4) nonprofit status. The complaints follow a letter sent by ECU and eight other pro-democracy organizations warning No Labels to reveal their donors or face legal challenges.

“No Labels’ corrupt charade has gone unchecked for too long and it’s time for them to be held accountable for abusing the law to evade transparency,” said End Citizens United President Tiffany Muller. “No Labels has been trying to hide their donors because they know if Americans were able to see who is fueling their third party dreams they’d be exposed as puppets for big money special interests looking to pad their bottom lines over the interests of working people. It’s imperative for No Labels to play by the same rules as everyone else otherwise it would set an incredibly dangerous precedent for future elections.”

The IRS complaint alleges that No Labels cannot be considered a 501(c)(4) social welfare organization as their work primarily benefits the No Labels Party, and does not meet the minimum 50% threshold of promoting social welfare. Instead, it appears that nearly the entirety of their spending is on political activity. ECU is also sending copies of the IRS complaint to the 27 states No Labels is registered as a 501(c)(4) nonprofit to solicit charitable contributions.

The complaint filed with the FEC claims that No Labels has violated federal law by failing to register as a political committee. The complaint argues that No Labels’ major purpose is to nominate and elect federal candidates—and it has clearly crossed the $1,000 expenditure threshold.

Muller added, “No Labels is flagrantly abusing their nonprofit status. We’re calling on the IRS to immediately investigate them for this apparent fraud and revoke their tax-exempt status. We’re also asking the FEC to establish grounds for determining that No Labels is, in fact, a political committee that’s neglecting its mandatory registration and reporting requirements.”

The IRS complaint:

  • The IRS requires 501(c)(4) nonprofits to operate “exclusively for the promotion of social welfare”—meaning these organizations must be primarily engaged in the promotion of the common good and general welfare of the people.

  • No Labels is violating its 501(c)(4) status in two ways: (1) it is primarily benefiting private individuals–the No Labels Party; (2) its primary purpose is not promoting social welfare and instead it is primarily engaged in political activity.

  • A 501(c)(4) cannot claim tax exempt status when it operates for a non-incidental private purpose instead of the general welfare. The IRS has repeatedly found that, when a nonprofit organization operates for the benefit of one political party, it engages in non-incidental private benefit inconsistent with its tax-exempt status.

  • All of No Labels’ ballot access work is to benefit private individuals, not the general welfare. The facts indicate that almost all of No Labels’ activities—significantly more than a non-incidental amount—are to increase the civic and electoral participation of members of one political party: the No Labels Party.

  • At least 50% of a nonprofit organization’s activities need to be dedicated to promoting social welfare; while 501(c)(4) nonprofit organizations can participate in some direct or indirect political campaign intervention, it cannot be the primary purpose.

  • In their 2022 financial reporting, No Labels shows $8.9 million of programmatic spending and it appears that the entirety of their spending was related to ballot access work. Ballot access work is clearly categorized as political activity as it is dedicated to defeating political candidates, not the social welfare activities that would qualify their nonprofit status.

  • Their spending on political activity in 2023 has almost certainly exceeded their 2022 spending as No Labels has increased ballot access efforts across the country. If No Labels’ projections for its fundraising come to fruition, that would mean to offset $70 million in political spending, the organization’s total program budget would have to exceed $140 million—a figure that strains plausibility.

  • The group also does not claim credit for any other large project on its Form 990 that could possibly amount to nearly $6 million dollars in program expenses. All other expenses, including salaries, legal, compliance, and advertising costs also appear to be in furtherance of No Labels’ ballot access efforts.

  • This renders their purpose as non-exempt that is inconsistent with a 501(c)(4) status. The IRS has previously revoked nonprofit status for organizations created to benefit political parties and No Labels should not be an exception.

The FEC complaint:

  • Under the Federal Election Campaign Act and FEC regulations, an organization must register within ten days of meeting the definition of a “political committee” and are then required to file periodic reports of contributions, expenditures, and other relevant information.

  • A “political committee” is “any committee, club, association or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or which makes expenditures aggregating in excess of $1,000 during a calendar year” and that has as its major purpose the nomination or election of federal candidates. If an organization is not under control of a candidate, they must still register as a political committee if it has as its “major purpose” the nomination or election of federal candidates, and crosses the $1,000 statutory threshold.

  • To determine an organization’s major purpose, the FEC considers their public statements, internal communications, financial statements, governing documents, and filings. No Labels has made it clear that they are doing very little—if anything—other than campaign related work to defeat President Biden and former-President Trump in the 2024 presidential election.

  • To qualify as a political committee, an organization must make independent expenditures of at least $1,000 in a calendar year.

  • No Labels has easily crossed this threshold—their digital ads on Facebook alone would cost more than $1,000 to produce and run. Their ads are expressly advocating against presidential candidates, reinforcing their major purpose as qualifying them as a political committee.

Read full IRS complaint HERE and FEC complaint HERE