Tax-Exempt Liberal Groups Exploit Gray Areas of Financial Disclosure Law

Colorado Common Cause, a political non-profit which aims to serve “the public interest, rather than the special interests,” is a political powerhouse with revenues of more than $6 million in 2011 alone. It first registered to operate in Colorado on October 4, 2002, and spent the next ten years raising money and directing it to liberal causes and candidates. Despite operating in the state as a clearly political entity since its inception, records show that Colorado Common Cause has failed to consistently file required disclosure reports with the state since 2003.

But Common Cause is not alone when it comes to refusing to file required disclosure reports. Liberal organizations in Colorado have been exploiting gray areas surrounding a 2005 amendment to a key financial disclosure law, intentionally refusing to file required periodic reports on time. Before the law was amended, any organization that failed to file its financial disclosure reports on time could be administratively dissolved.

Since October of 2005, entities which fail to file periodic reports with the Secretary of State are designated as “Delinquent,” but no action is taken to dissolve the entity. Instead, the state now attempts to bring delinquent organizations back into compliance with a sternly written letter or small fine assessment.

The change in the law — specifically the removal of any real consequence for refusing to file the required disclosure reports — did not go unnoticed by numerous left-leaning political organizations in Colorado.

Liberal Groups Exploit Gray Areas of Law

A search of the publicly available records at the Secretary of State’s website shows an alphabet soup of liberal organizations that failed to file required periodic reports. Some have been deemed delinquent or waited months to return to compliance, while others simply vanished at the end of an election cycle without filing their periodic reports. Those deemed delinquent by the state must file the required reports and pay any assessed fines before the state will consider them to be in good standing.

Due to an ambiguity in the current law created by the 2005 amendment, a charitable organization such as a 501(c)(3) or 501(c)(4) organization may continue to solicit contributions from donors even if it is delinquent in filing required financial disclosure reports. This gray area in the disclosure law appears to contradict the spirit of the law by allowing tax-exempt groups to raise tax-free money without disclosing details of its operations to state authorities. Any charitable organization that solicits more than $25,000 contributions is required to register as a charitable organization with the Secretary of State.

Organizations such as Colorado Common Cause, The Colorado Conservation Voters, Clean Water Action, Environment Colorado, and ProgressNow Colorado refused to file the required disclosure forms for several years, from 2009 through 2011. Many of these organizations were also deemed “delinquent” charitable organizations according to an analysis of records provided by the Secretary of State.

Records available on the Secretary of State’s charitable organization search show Colorado Common Cause receiving three extensions to filing deadlines in 2009; the organization was finally listed as “Delinquent” in September of 2009. In 2010, the Secretary of State issued four separate reminders and one extension to Colorado Common Cause and eventually listed the organization as delinquent once again. The pattern continued to a lesser extent in 2011, with Colorado Common Cause being issued a mere two reminders and being listed as delinquent once. Additionally, Colorado Common Cause failed to file its required periodic business reports between December of 2008 and March of 2009, as well as December of 2009 through March of 2010.

ProgressNow Colorado’s record is similar to that of Colorado Common Cause. It was assessed fines in two instances and was fully suspended in 2009. In 2010 ProgressNow Colorado received two reminders and two extensions from the Secretary of State’s office, and in 2011 the Secretary of State issued three reminders, two extensions, and eventually listed the organization as delinquent in August of 2011.

Ambiguity in the law, the removal of real tangible consequences, and the resulting empowerment of policymakers to interpret the law according to their whims created an environment of non-compliance by groups eager to hide their finances and operations.

During his short tenure as Secretary of State, Democrat Bernie Buescher — a co-sponsor of the 2005 amendment when he served in the legislature — exploited the ambiguity and allowed the groups guilty of non-compliance to continue operating as if nothing happened. The non-compliant groups appear to be less confident in the willingness of current Secretary of State Scott Gessler to look the other way when it comes to their disclosure violations.

Since his election, many of the non-compliant organizations – including Colorado Common Cause – have managed to come back to full compliance as of May 2012 for their periodic business reports. ProgressNow Colorado and Clean Water Action are currently operating under an extension on their required charitable reports, while Colorado Common Cause cured their delinquency in November 2011.

This post was originally published at Media Trackers Colorado.