Watchdog Urges IRS to Investigate Nonprofit Tied to Stacey Abrams

March 20, 2019

IRS EO Classification
Mail Code 4910DAL
1100 Commerce St.
Dallas, TX 75242-1198

Email: eoclass@irs.gov

Dear IRS Officer,

The Foundation for Accountability and Civic Trust (FACT) is a nonprofit organization dedicated to promoting accountability, ethics, and transparency in government and civic arenas. We achieve this mission by hanging a lantern over public officials who put their own interests over the interests of the public good.

We write today to request the IRS investigate Fair Fight Action, Inc.,¹ an organization claiming tax-exempt status as a social welfare organization under Internal Revenue Code section 501(c)(4). This investigation should determine whether Fair Fight Action is improperly conferring a “private benefit” on Stacey Abrams in connection with her aspirations for political office.

As explained below, Fair Fight Action is currently being used by Abrams and her political supporters to continue her gubernatorial campaign's lawsuit and to continue funding her personal political activities. By providing support for an individual's personal political activities, Fair Fight Action is in violation of the requirement that a social welfare organization serve general community purposes rather than provide a private benefit to an individual or political group. The IRS has previously determined that an organization that serves to promote a single individual and that individual's “agenda and platforms” does not qualify for Section 501(c)(4) tax-exempt status. We request that you take immediate action to ensure that Fair Fight Action does not abuse the tax code.

1. Fair Fight Action is Stacey Abrams' Personal Political Organization.

Stacey Abrams was a candidate in Georgia's 2018 gubernatorial election. She lost by more than 54,000 votes, but before conceding she made statements undermining the voters' choice and casting doubt on the fairness of the election. Reportedly, “Abrams . . . sent volunteers across the state in search of voters whose ballots were rejected. She filed suit in federal court to force county elections boards to count absentee ballots with incorrect birthdates.”² “Her campaign went to court repeatedly in search of uncounted ballots.”³ When she finally acknowledged that she did not win, she said “the state failed its voters,” “democracy failed Georgians,” and claimed that “eight years of systemic disenfranchisement, disinvestment and incompetence had its desired effect on the electoral process in Georgia.”⁴

In a campaign speech made on November 16, 2018, Abrams clearly described Fair Fight Action as the successor to her 2018 gubernatorial campaign: “We will channel the work of the past several weeks into a strong legal demand for reform of our elections systems in Georgia.”⁵ Abrams “says this November's election featured 'basic incompetence, gross mismanagement and voter suppression' and her group is continuing to gather data to sue the state to make changes before the next election in 2020.”⁶

According to a November 19, 2018 report, “Abrams' campaign indicated they would only file suit once they have evidence of problems the legal system could hopefully resolve.”⁷ On November 27, 2018, Abrams' campaign manager announced a lawsuit against the State of Georgia raising the same claims that were the focus of Abrams' post-election challenges.⁸ The Associated Press reported,” [a] political organization backed by Democrat Stacey Abrams filed a federal lawsuit Tuesday challenging the way Georgia's elections are run, making good on a promise Abrams made as she ended her bid to become the state's governor.”⁹ The organization that brought the lawsuit is Fair Fight Action.

Formed in 2014, Fair Fight Action currently describes itself as a Section 501(c)(4) organization.¹⁰ In 2018, Abrams was the organization's Chief Executive Officer and Chief Financial Officer. Shortly after Abrams lost the election, the organization updated its leadership and charter, both indicating a political purpose. In December 2018,

“the group quietly amended its own charter in an apparent effort to step up future political activity . . . and removed language from its bylaws that barred the organization from 'directly or indirectly' participating or intervening 'in any political campaign on behalf of any candidate for public office.'”¹¹

In January 2019, Groh-Wargo (Abrams 2018 campaign manager) became Fair Fight Action's Chief Executive Officer and Glen Paul Freedman (Abrams 2018 campaign compliance officer) became its Chief Financial Officer and Secretary.¹² Although Abrams is no longer listed as an officer, her role with the organization has reportedly been described by Groh-Wargo as: “Abrams is on the board of the nonprofit Fair Fight Action and helps advise it but doesn't serve in a leadership role. . . .”¹³ According to a USA Today report, “Abrams is chairing the organization; it's run by Lauren Groh-Wargo, her campaign manager.”¹⁴

In sum, while Fair Fight Action is organized and purports to operate as a Section 501(c)(4) organization, it is led by Abrams and her campaign team and its primary activities are continuing efforts started by Abrams' 2018 campaign committee and funding Abrams' current personal political activities and appearances.¹⁵

After the November 2018 election, Fair Fight Action essentially took over Abrams political campaign. Abrams' 2018 campaign committee transferred $1 million to Fair Fight Action on November 20, 2018.¹⁶ Fair Fight Action's new public purpose was to carry on the campaign's legal effort to change Georgia's election rules to increase Abrams' chances of winning the next time she runs.¹⁷ According to the New York Times, “[t]he 66-page complaint filed in the United States District Court for the Northern District of Georgia reiterates a familiar list of issues that Ms. Abrams's team and others had raised before and after Election Day.”¹⁸

Critically, Fair Fight Action funds Abrams' personal political activities apparently to lay the groundwork for her next campaign.¹⁹ Abrams intends to run for elected office again and has said so herself: “'I will certainly run for office again[.]'”²⁰ Recently, the New York Times reported, “She said she will run for office again, and will decide whether for senator, governor or president by late March or early April. Until then, she has been crisscrossing Georgia — and making strategic national appearances. . . .”²¹ Those national appearances also included a “Stacey Abrams Fundraiser,” for which donations went to Fair Fight Action.²² The Fair Fight Action web page demonstrates its purpose — it showcases a video entitled, “Stacey Abrams — Highlight Reel.”²³

Fair Fight Action “is bankrolling [Abrams'] speaking tour,”²⁴ “a statewide 'thank-you' tour” obviously designed to maintain her profile with voters.²⁵ At a stop in Albany, Georgia, Ms. Abrams told her audience why she was speaking to them that day: “I am running for office again.”²⁶ Of this speaking tour, one reporter stated the obvious: “with the start of her tour Monday, she seems to be laying the groundwork for another race.”²⁷

Fair Fight Action also paid for commercial airtime during the Super Bowl (February 3, 2019) to showcase Ms. Abrams to Georgia voters: “Abrams' political group, Fair Fight, has bought airtime on Georgia affiliates during Sunday's NFL broadcast so the Atlanta Democrat can push for election law changes.”²⁸ According to reports, “Fair Fight is spending $100,000 on the initial ad buy in multiple markets beyond the more expensive metro Atlanta market. Digital ads will be targeted to metro Atlanta residents.”²⁹

Fair Fight Action, which allegedly exists to “promote fair elections in Georgia,” also “announced two dozen watch parties for supporters” to “cheer [Abrams] on” as she delivered the Democrats' response to President Trump's State of the Union address on February 5, 2019. “Many of the events are scattered around Georgia,” but Fair Fight Action “has also arranged watch parties in a sweep of places across the nation — including every early-voting state in the presidential primary. That means there will be Abrams parties in Columbia, SC, Iowa City, Iowa, Las Vegas and Manchester, NH. Other events will also be held in major cities where she drew many of her donors: Los Angles, New York, San Francisco, Seattle and Washington.”³⁰

Fair Fight Actions' social media accounts are also being used for political purposes. First, Fair Fight Action's Twitter account is connected to Abrams gubernatorial campaign. It appears that at the end of November 2018, the “Team Abrams” account was refashioned into the Fair Fight Action account. Numerous posts advocating for Abrams as Governor still exist on the account.³¹

Moreover, Fair Fight Action has also funded digital advertisements appearing on Facebook (and other online platforms) that have only a minimal connection to the alleged social welfare purposes of Fair Fight Action. Reportedly, Fair Fight Action “bought a host of social-media ads echoing her allegations that her Republican opponent, now-Gov. Brian Kemp, 'robbed' Abrams of an election victory in November.”³² Other advertisements serve primarily to advertise and promote candidate-to-be Stacey Abrams. An example of one of those advertisements appears below:

The Fair Fight Action advertisement above, urging viewers to “Stand With Stacey Abrams,” is remarkably similar to campaign ads that Ms. Abrams' campaign distributed in 2018, which urged viewers to do exactly the same thing.

Fair Fight Action's activities and Abrams' next campaign are plainly and obviously linked and the purpose of the former is to aid the latter.

2. Tax law prohibits use of a social welfare organization for “private benefit,” including partisan political purposes.

Section 501(c)(4) provides tax-exempt status to “[c]ivic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.”³³ IRS regulations make clear that, in order to be tax-exempt under section 501(c)(4), an organization must be “operated exclusively for the promotion of social welfare” and that an “organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community.”³⁴ A 501(c)(4) organization must be “a community movement designed to accomplish community ends.”³⁵

A section 501(c)(4) organization cannot be primarily operated for a “private benefit.” A “private benefit” is a “nonincidental benefit[ ] conferred on disinterested persons [that] serve[s] private interests.”³⁶ “When an organization operates for the benefit of private interests . . . the organization by definition does not operate exclusively for exempt purposes.”³⁷ An IRS publication explains that “[o]rganizations that promote social welfare should primarily promote the common good and general welfare of the people of the community as a whole” and “[a]n organization that primarily benefits a private group of citizens cannot qualify for IRC 501(c)(4) exempt status.”³⁸

a. American Campaign Academy v. Commissioner of Internal Revenue

In American Campaign Academy v. Commissioner of Internal Revenue, the Tax Court considered application of the “private benefit” doctrine to an organization that the IRS had concluded operated to “benefit Republican Party entities and candidates more than incidentally” and therefore operated to “serve the private interests of Republican Party entities rather than public interests exclusively[,]” in violation of the “private benefit” doctrine.³⁹ The Tax Court noted that the Academy was an “outgrowth” of the National Republican Congressional Committee, based upon funding from and directors ties to the NRCC.⁴⁰

The court stressed that it was applying an “operational test” examining the “actual purpose for the organization's activities and not the nature of the activities or the organization's statement of purpose.”⁴¹ The court explained: “In testing compliance with the operational test, we look beyond the four corners of the organization's charter to discover 'the actual objects motivating the organization and the subsequent conduct of the organization.'”⁴²

The Tax Court agreed with the IRS' determination, finding that the American Campaign Academy, which operated a school to train campaign professionals, “conducted its educational activities with the partisan objective of benefiting Republican candidates and entities.”⁴³ The court found that the American Campaign Academy “operated to advance Republican interests” and “conferred a benefit on those [Republican] candidates” for whom the school's graduates worked.⁴⁴ The court rejected the contention that “because the Republican party is comprised of millions of individuals with like 'political sympathies,' benefits conferred by the Academy on Republican entities and candidates should be deemed to benefit the community at large[,]” responding that it was “not persuaded by petitioner's argument.”⁴⁵

The Tax Court also rejected the American Campaign Academy's contention that, should the court “determine that a private benefit is conferred on Republican entities and candidates, such benefit is incidental and collateral to its primary purpose of benefiting the general public[,]” arguing that because the Academy could not control such benefit it “must be incidental in nature.”⁴⁶ Noting that the Academy cited “no compelling authority in support of its contention that nonincidental benefits must be controllable by the organization,” the court found that the Academy was “formed with a substantial purpose to train campaign professionals for service in Republican entities and campaigns[.]”⁴⁷

The court concluded that the organization was operated for the benefit of private interests, a nonexempt purpose, and because more than an insubstantial part of the organization's activities furthered this nonexempt purpose, the organization was not entitled to tax-exempt status.⁴⁸

b. IRS rulings following American Campaign Academy

The IRS has applied the “private benefit” doctrine in numerous recent cases to deny section 501(c)(4) status to groups engaged in partisan political activities. In one such ruling that relied on American Campaign Academy, the IRS concluded that “an organization which conducts its educational activities to benefit a political party and its candidates serves private interests. And . . . an organization that primarily serves private interests fails to qualify for exemption under section 501(c)(4).”⁴⁹ The IRS determination in that matter stated:

“In summary, you are not operated primarily to promote social welfare because your activities are conducted primarily for the benefit of a political party and a private group of individuals, rather than the community as a whole. Accordingly, you do not qualify for exemption as an organization described in section 501(c)(4) of the Code and you must file federal income tax returns.”⁵⁰

The IRS denied section 501(c)(4) status to a group called Emerge Maine on the grounds that the organization's “activities are conducted primarily for the benefit of a political party and a private group of individuals, rather than the community as a whole.”⁵¹ The IRS explained that “[e]ducational activities undertaken to provide a partisan benefit are considered to serve private interests, rather than the common good.”⁵² “Thus, notwithstanding any benefit your educational activities may provide to the community, you fail to qualify for exemption because your training program primarily benefits the interests of the Democratic party and its candidates.”⁵³

The IRS has also denied tax-exempt status to organizations that are closely associated with individuals and serve those individuals' personal, partisan interests.⁵⁴ For example, in Determination Letter 201128034, the IRS concluded:

Based on Contracting Plumbers Cooperative Restoration Corp., an organization will not meet the requirements of § 501(c)(4) if it is operated primarily to benefit a private group rather than the community as a whole, even if it provides some benefit to the community. 488 F.2d at 687. Your activities serve to primarily benefit Founder. You solely serve to promote Founder and Founder's agenda and platforms.⁵⁵

The present matter is no different. Fair Fight Action may claim to provide “some benefit to the community,” but its activities “serve to primarily benefit” Abrams and it operates to “promote” Abrams' “agenda and platforms.” As was the case in Determination Letter 201128034, Fair Fight Action's “programs . . . are designed strictly to promote [Abrams] and that individual's pursuits.”⁵⁶

Federal Circuit Court, Tax Court and IRS precedent make clear that an organization that conducts activities with the partisan objective of promoting a particular candidate (or political party) is operating for the benefit of private interests — in violation of the “private benefit” doctrine — and is not entitled to tax-exempt status under section 501(c)(4).

3. Fair Fight Action is providing a private benefit to Abrams in violation of Section 501(c)(4) social welfare organization requirements.

Fair Fight Action is an arm of Stacey Abram's political operation, and it is currently serving as a bridge between her 2018 campaign and her next campaign. The organization received funding from Abrams political campaign and is run by Abrams and two campaign staffers, Lauren Groh-Wargo (Abram's campaign manager) and Glen Paul Freedman (Abram's campaign compliance manager). It is continuing a legal effort begun by Abram's 2018 campaign to change election rules that Abrams claims were responsible for her loss. Critically, it is also funding political appearance and activities, including “Stacey Abrams Fundraisers” and watch parties for political speeches. The purpose of the organization is clear from a main video post on its website: “Stacey Abrams — Highlight Reel”. Accordingly, Fair Fight Action is providing a “private benefit” for Abram's partisan campaign purposes, which is a violation of the organization's claimed status as a section 501(c)(4) social welfare organization.

There can be little doubt that Fair Fight Action is providing an impermissible “private benefit” under applicable judicial and IRS precedent. Just as the Tax Court in American Campaign Academy found that a group serving the private interests of a political party entity does not serve the public interest exclusively,⁵⁷ Fair Fight Action is serving the private interest of Stacey Abrams and not the public interest exclusively. Indeed, the “private benefit” served by Fair Fight Action is far narrower than that deemed impermissible in American Campaign Academy. There, the group at issue served “the partisan objective of benefiting Republican candidates and entities” generally. By contrast, Fair Fight Action serves the specific interest of just one candidate and her political activities. If serving the interests of all of one party's candidates confers an impermissible “private benefit,” then serving the interests of a single candidate is clearly a private benefit.

5. Conclusion

Social welfare organizations are classified under the Internal Revenue Code section 501(c)(4). Fair Fight Action is supporting a political candidate who has stated she is running for office again. The organization is closely tied to the candidate's prior political campaign, with funding, staff, social media accounts and posts, and activities. Moreover, many activities the organization funds are beneficial to a future political campaign, i.e. thank-you tours, watch parties to view a political speech, social media posts, and a “Stacey Abrams Fundraiser.” Fair Fight Action is providing a “private benefit” by working on behalf of Stacey Abram's political interest. We request that you take immediate action to ensure that Fair Fight Action does not abuse the tax code.

Respectfully submitted,

Kendra Arnold
Executive Director, Foundation for Accountability & Civic Trust 
Foundation for Accountability and Civic Trust
Washington, DC