Fighting Over Secret Money

(Photo: AP/Bill Clark/CQ Roll Call)

Democracy Spring protesters on Capitol Hill on April 13 demonstrate against big money in politics.

The biggest problem with the campaign-finance system is also the hardest to correct: the escalating millions spent on politics behind a veil of secrecy. On its face, this should be an easy problem to fix. Why not simply require donor disclosure for all campaign activities? The hard part is that many groups that claim to be engaging in advocacy or public education are actually making political expenditures.

The courts have ruled that advocacy groups have a right to keep their donors private, lest the government tread on constitutionally protected free speech. But that means that disclosure rules must be carefully crafted to protect both voters’ right to know who is paying for American elections, and organizers’ rights to petition the government without harassment or intrusion.

Right now, the regulatory regime tilts heavily in favor of secret spenders, while leaving American voters increasingly in the dark. That’s in part because the Supreme Court’s 2010 Citizens United v. FEC ruling lifted all limits on independent political spending by corporations, including incorporated nonprofits. Such tax-exempt groups are exempt from donor disclosure, again to protect their freedom of association. In theory, both the Federal Election Commission and the Internal Revenue Service could rein in political activity by groups that fail to disclose their donors. But for different reasons, both agencies have essentially stopped enforcing the rules.

This lack of federal oversight gave tax-exempt groups of all stripes the green light to spend lavishly on elections without publicly reporting who’s footing the bill. So far in this election cycle, these non-disclosing groups have spent $22.1 million on campaigns, more than double the $9 million that such groups spent on politics in 2012. Many of the big spenders claim tax exemptions as social-welfare groups, meaning that, in theory, they must spend more than half their money for that purpose and not on politics.

Watchdog organizations have filed multiple complaints with the FEC and the IRS, citing blatant violations of this rule. In a particularly egregious example according to documents that recently came to light, the conservative Commission for Hope Growth and Opportunity told the IRS in 2010 that it would not “spend any money attempting to influence” elections, while privately informing donors that its goal was to “win Senate seats.” The group promised to “make a measurable impact on the election outcome” with “no donor disclosure.”

It’s just one of literally dozens of examples of barely disguised political spending by purported social-welfare groups, from the Crossroads Grassroots Policy Strategies, a nonprofit masterminded by GOP operative Karl Rove, to Americans for Prosperity, a multimillion-dollar conservative group at the heart of a network of nonprofits underwritten by the billionaire industrialists Charles and David Koch.

Attempts to push disclosure legislation have repeatedly run aground on Capitol Hill amid forceful GOP opposition. Republicans in Congress also attached a rider to a spending bill last year that, for the moment, blocks the IRS from even writing new regulations to draw clear parameters around political activity. Republicans are still livid that the agency targeted Tea Party groups and other conservative organizations seeking tax exemptions in 2013.

But recently, the Bright Lines Project, a group housed at Public Citizen that is focused on clarifying the rules, called for an end to the delay in new IRS regulations regarding political activity. The stalled IRS rulemaking actually chills political activity and “will hamper the exercise of free speech throughout the nonprofit world,” the group warned, particularly in the case of charities and churches that rely on clear rules to promote civic engagement.

State legislatures have also moved to require more political disclosure, but with mixed results. Political disclosure fights are unfolding in Alabama, Arizona, Missouri and elsewhere as state legislators wrestle with where to draw the line in curbing secret spending. A federal district court judge in California recently blocked the state’s effort to require the Americans for Prosperity Foundation, the charitable arm of the big-spending Koch group Americans for Prosperity, to disclose its donors to California regulators.

State Attorney General Kamala Harris plans to appeal, and the case may well land before the Supreme Court. The challenge for state and federal regulators is to write disclosure rules that don’t squelch free speech. The challenge for Republicans who unilaterally oppose all disclosure—even in the form of simple, new IRS regulations, or of disclosure to government agencies and not to the public as California had requested—is that they are out of step with voters, including those in their own party. The vast majority of voters—76 percent of both Republicans and Democrats, according to one New York Times/CBS News poll—say that groups that spend money on political activities should disclose their donors.

Ultimately, disclosure opponents may also find themselves on the wrong side of the Supreme Court. Even in its Citizens United ruling, the Court upheld existing disclosure rules. As the late Justice Antonin Scalia put it in a 2010 case known as Doe v. Reed: “Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed. For my part, I do not look forward to a society which, thanks to the Supreme Court, campaigns anonymously … hidden from public scrutiny and protected from the accountability of criticism. This does not resemble the Home of the Brave.”

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