Media Matters 'War' on Fox News Brings New Scrutiny on Tax-Exempt Status

The chorus is growing for the IRS to scrutinize Media Matters' tax-exempt status as the left-leaning media watchdog group wages a "war" on Fox News.

Recent questions about Media Matters' activities stem from a campaign against Fox News that founder David Brock described in an interview this year as "guerilla warfare and sabotage." By its own admission, the group is conducting "opposition research" against certain executives and producers. It also features a link on its website called "Drop Fox" which helps users contact advertisers and urge them to boycott the network.

C. Boyden Gray, White House counsel during the George H.W. Bush administration, said the group's claim that Fox News is the leader of the Republican Party "is demonstrably false" and crosses the line.

Gray touched off a debate over Media Matters' status when, in a Washington Times column last week, he claimed the group was running afoul of rulings that prohibit "inflammatory language" for tax-exempt organizations and was too partisan.

"This is ... not what they were given status as a tax-exempt organization for," Gray told Fox News. He cited a 1989 ruling in which an organization was stripped of that status because of its ties to Republican entities.

"The terminology that they're using .... is very dangerous if you're trying to keep your tax-exempt status," said Jordan Sekulow, director of policy and international operations for the American Center for Law and Justice.

Gray, Sekulow, Democratic strategist and Fox News contributor Doug Schoen and Republican strategist Doug Heye all argue that Media Matters either should not be afforded tax-exempt status or at least is running afoul of that status.

Under IRS rules, non-profits are free to participate in advocacy of many kinds. But, for an organization to enjoy tax-exempt status and receive tax-deductible contributions, there are limits.

Fox News has obtained documents showing that multiple complaints have been filed with the IRS, some as part of an online campaign partly encouraged by some Fox News on-air talent, challenging Media Matters' tax-exempt status.

As a tax-exempt group formed for "charitable" and "educational" purposes eight years ago, Media Matters is permitted to engage in advocacy, but that advocacy is supposed to have a "full and fair exposition of pertinent facts to permit an individual or the public to form an independent opinion or conclusion," according to IRS guidelines.

"The mere presentation of unsupported opinion is not educational," according to the IRS.

According to tax filings, the main 501(c)3 branch of Media Matters -- Media Matters for America -- earned nearly $7 million in 2009.

Media Matters did not respond to a request for comment.