Obama Targeting the Tea Party, and using IRS to Steps Up Scrutiny of Tax-Exempt Political Groups

By Patrick Temple-West and Alina Selyukh

WASHINGTON (Reuters) - The Internal Revenue Service is signaling that it will increase its scrutiny of tax-exempt political organizations, which are becoming a force in elections by raising tens of millions of dollars from undisclosed donors.

The IRS has been corresponding with such groups and is preparing questions to ask them as part of effort to determine whether their fundraising or advertising work runs afoul of tax law. IRS spokesman Terry Lemons said on Thursday the scrutiny will affect a range of tax-exempt groups.

The move comes as such tax-exempt groups - many of which have better-known sister organizations known as "Super PACs," or political action committees - are under criticism from Democrats and some Republicans for using money from anonymous sources to try to influence elections.

Like Super PACs, tax-exempt political groups can raise and spend unlimited funds - in contrast to political campaigns, which may receive only $2,500 per donor each election cycle.

Super PACs, which must disclose their donors, operate independently from campaigns but may release ads that boost or attack specific candidates.

Tax-exempt groups, meanwhile, can qualify under the U.S. tax code as social welfare groups, which allows them to keep their donors private as long as most of their money is spent on so-called "issue ads." Unlike regular political ads, such ads cannot use a candidate's name or likeness and are supposed to be used to educate the public on broad issues or positions.

But some ads released by tax-exempt groups have pushed those boundaries, raising questions about the groups' legal status and calls for them to be forced to disclose their donors, as Super PACs do.

This month, Democratic President Barack Obama's re-election campaign asked the Federal Election Commission (FEC) to force Crossroads GPS, a tax-exempt group founded by former George W. Bush adviser Karl Rove, to register as a PAC and disclose its donors.