Barbour Group Too Partisan, IRS Rules

WASHINGTON — An Internal Revenue Service ruling disclosed Monday raised new questions about whether an organization set up by former GOP Chairman Haley Barbour was an illegal offshoot of the Republican Party.

The IRS informed the now-defunct National Policy Forum earlier this year that the group was too partisan to receive tax-exempt status, sources said. Barbour, who created the group in 1993, is appealing the decision, which creates legal and political headaches for the GOP.

Republican Party officials have insisted that the policy forum was completely separate from the Republican National Committee, as is required by federal election law. The point is especially significant because the Policy Forum, if exempt from taxes, would be legally entitled to receive foreign contributions, while the party is not.

GOP officials returned more than $100,000 in illegal foreign donations last week and could be required to send back more if officials determine the Republican National Committee and the National Policy Forum to be essentially one organization.

Internal Policy Forum documents clearly show a link between the two groups.

Major givers to the GOP were promised a role in setting the party’s agenda at the Policy Forum, according to memos. And Barbour wrote to donors of $100,000 or more that “The RNC is creating the National Policy Forum to help develop and articulate a positive Republican agenda for America and provide a proactive forum for Republican participation at the grass-roots level.”

Barbour and his associates, however, insisted that the groups had separate missions. The Policy Forum was a think tank, they said, not a political group.

“It never contributed to any candidate. It never endorsed. It never advocated the election or defeat of any candidate for public office at any level at any time,” Barbour said Sunday on ABC’s “This Week.” He added: “It wasn’t allowed to because it was a 501(c)(4), organized that way, and it operated that way every day.”

But a preliminary ruling from the IRS, which came after the policy forum had shut its doors, found that the group was not entitled to tax-exempt 501(c)(4) status. The decision, if upheld, could prompt the IRS to pursue back taxes from the Policy Forum, which was heavily in debt when it closed its doors last fall.

The Policy Forum’s troubles also could lead to sanctions against the GOP by the Federal Election Commission. In 1993, the Policy Forum received $2.2 million in loan guarantees from a Hong Kong-based company, Young Brothers Development, enabling the group to repay a loan to the Republican National Committee in the critical weeks before the 1994 election. Such a transfer would be illegal if the National Policy Forum were a political organization rather than an independent tax-exempt group.

Democrats seized on that point in calling for GOP to release all records concerning the Policy Forum.

“Republicans have made a point of saying they did not have an orchestrated effort to raise foreign money for their campaigns,” Democratic Chairman Roy Romer said in a statement. “The problems of the National Policy Forum and the illegal Hong Kong contributions linked to it demonstrate that Republican efforts to raise foreign money were so sophisticated [that] they almost went unnoticed.”