It seems they have violated the requirements and restrictions:
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Exemption Requirements - Section 501(c)(3) Organizations
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.
The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.
Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.
A
Yep, and it’s coming under even more scrutiny now:
“Is Media Matters breaking the law in its ‘war’ on Fox News?”
The Washington Examiner ^ | March 27, 2011 | Mark Tapscott
“...There is nothing in the Politico article to suggest that Brock, who was paid just under $300,000 in 2009, according to the group’s most recently available tax return, plans to ask the IRS to change his organization’s tax status as a 501(C)(3) tax-exempt educational foundation.
Being a C3 puts MM in the non-profit, non-commercial sector, and it also bars the organzation from participating in partisan political activity. This new, more aggressive stance, however, appears to run directly counter to the government’s requirements for maintaining a C3 tax status.”
http://www.freerepublic.com/focus/f-news/2695775/posts