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When it comes to politically active nonprofits, there are those that bend the rules, and there are those that seem to flout them entirely. One group, above all, is a member of the latter set: a 501(c)(4) social welfare organization called Carolina Rising. And its most recent tax filing, obtained by OpenSecrets Blog, only heightens concerns that the group was using nonprofit status as a vehicle for political spending in 2014, using funds given by secret donors.
The new document shows that Carolina Rising, which raised and spent about $4.8 million in 2014 — nearly all in support of Thom Tillis’ (R-N.C.) successful bid to unseat incumbent Democrat Sen. Kay Hagan — raised just $50,000 from a single anonymous donor in 2015, its second year in existence. The remainder of its $67,640 in revenue came from “policy program” revenue coded as “advertising, public relations, and related services.”
Its expenditures dropped precipitously, too, to just $134,542. Most of that — nearly 74 percent — went to a firm set up by the group’s original president, Dallas Woodhouse, just weeks before the nonprofit itself was founded. Woodhouse has moved on to become the executive director of the N.C. Republican Party.
The feast-to-famine nature of Carolina Rising’s finances between election years and off-years is a hallmark of nonprofit groups that don’t have a genuine social welfare function to offset their political activities. But what makes this group unique is the fact that it has spent the vast majority of its money, nearly 98 percent, on just two things: Ads for a single candidate in a single race and payments to firm owned by its founder, raising broader questions about whether the group is violating the law by providing excessive private benefit not only to Tillis — by running ads on his behalf — but also to Woodhouse.
Stealth Political Committee and Cash Cow
Woodhouse, a N.C. political insider and former head of the state chapter of the Koch-affiliated Americans for Prosperity, Dallas Woodhouse, filed documents with the Secretary of State’s office in Raleigh in March 2014 to form two organizations. The first was a limited liability corporation called Solutions NC.
A few weeks later, Woodhouse formed Carolina Rising. By August, the new nonprofit had begun a weeks–long pro-Tillis spending binge that would ultimately top out at $4.7 million, helping usher him to victory against incumbent Kay Hagan and flip the Senate to Republican control.
In addition, though, the nonprofit wound up paying Solutions NC, Woodhouse’s firm, $72,000 for “management services“; that may well have been Woodhouse’s cut for running the group, as he didn’t draw a salary.
In all, over 98 percent of the group’s spending in its first year would go towards paying Crossroads Media for the pro-Tillis ads or paying Woodhouse’s firm.
And the new filings show that the Solutions NC payments continued, and even grew, in 2015, despite the fact that Carolina Rising revenues dropped to just $67,640. Using a combination of 2015 revenue and leftover cash from 2014, Solutions NC was paid an additional $99,000 for “management services.”
In September 2015, Woodhouse moved on to become the executive director of the North Carolina GOP, but not before his firm collected more than $171,000 over two years from Carolina Rising, making it the largest recipient of that group’s money aside from Crossroads Media.
Whatever the payments were for, there is little to show for it. The group’s social media presence on Facebook and Twitter mostly consists of third-party articles talking up GOP Gov. Pat McCrory’s agenda and inspirational Ronald Reagan quotes. (McCrory was just defeated in this year’s election.) The same goes for its website, which hasn’t been updated since June 2015. No Carolina Rising representatives responded to requests for examples of other programs, reports, or materials the group created after the 2014 midterms.
When contacted about the nature of the Carolina Rising payments to his firm, Woodhouse’s only response was an email reading “do not contact me again.” Carolina Rising’s new president, Betsy Wilson, did not respond to calls or emails for comment.
Wilson doesn’t have much of a trail, but her name does appear on a flyer for a fundraising cocktail party benefiting a 527 political committee called Real Jobs NC in October 2016. Tillis was a guest of honor at the event.
Real Jobs is linked to NC political heavyweight Art Pope, who sits on the board of a foundation named after his father, the John William Pope Foundation. A Betsy Wilson is listed on the Pope group’s website as being in charge of receiving grant applications. Calls to the Foundation were not returned.
The larger questions
Last November, the Federal Election Commission deadlocked along party lines on going forward with an investigation of whether Carolina Rising was operating as political organization. That’s despite the fact that Woodhouse appeared on live TV from the floor of the Tillis victory party on election night, saying “$4.7 million, we did it.”
It’s true, we never get tired of mentioning that incident, as there are few facts that seem so directly to unmask a political committee trying to disguise itself as a 501(c) nonprofit. Social welfare organizations like Carolina Rising are not supposed to have politics as their primary purpose, and as a result they can keep their donors’ names secret. But the reality is they can and frequently do spend large amounts on politics and find other ways to justify the rest of their activity to the IRS. Rarely does a group so brazenly spend so much of its money on a single candidate in a single race, though, and then get caught copping to it on live TV.
And IRS rules prohibit a nonprofit from providing excessive benefit, financially or operationally, to any specific group of people (like a political party) or individual (like a single candidate for office or a firm owned by the group’s founder).
Carolina Rising did both, and with the FEC already showing that it is unable to pursue what may be one of the most clear-cut cases of a nonprofit being used to channel anonymous political money into an election, the responsibility for oversight now rests with the IRS, which can revoke the group’s tax-exempt status. The watchdog group CREW has already filed a formal complaint with the IRS about Carolina Rising’s activities in 2014.
Still, even if the IRS disciplines Carolina Rising, it might be a win for the rule of law, but the public would still be in the dark. That’s because when a nonprofit’s status is yanked, and the group has to pay taxes on its income, the decision is not made public in a way that allows identification of the group in question, meaning that it won’t be obvious to the public, or to the FEC, that the group was deemed too political for exempt status.
What if the IRS acted and the FEC happened to catch wind of it and demand Carolina Rising disclose its donors? Even that wouldn’t peel back much of the onion. As we’ve written, the group’s largest donor is another social welfare organization that doesn’t disclose its donors, Crossroads GPS — meaning the wealthy backers who helped Tillis win in 2014 very likely won’t become known to the voters of North Carolina, even retrospectively.
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Pro-Tillis nonprofit goes dark after Tillis victory, but keeps paying former president
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