ECU, which is the first group to legally challenge No Labels’ nonprofit status, sent the IRS complaint to the 27 states where No Labels is registered to solicit charitable contributions
End Citizens United (ECU) submitted a complaint to the Arkansas Attorney General against No Labels alleging fraudulent misuse of its nonprofit status as it prepares to launch a third-party presidential ticket. The complaint was originally filed with the Internal Revenue Service (IRS).
“In its attempt to run a third-party presidential ticket, No Labels is abusing its nonprofit status in Arkansas and we believe Attorney General Tim Griffin should investigate and hold them accountable,” said End Citizens United President Tiffany Muller. “No Labels is a shadowy dark money political group that is grossly exploiting Arkansas laws which are designed to benefit legitimate social welfare organizations. If No Labels’ corrupt charade continues unchecked, it will set a dangerous precedent for future elections.”
The IRS complaint, first reported by the Associated Press, alleges that No Labels cannot be considered a 501(c)(4) social welfare organization as its 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 No Labels’ spending is on political activity. ECU is submitting copies of the IRS complaint to the 27 states No Labels is registered to solicit charitable contributions.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
Read the full IRS complaint HERE.
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