U.S. Sen Jon Tester is taking another shot at forcing nonprofits to reveal their large “dark money” donors.
The Montana Democrat reintroduced the “Spotlight Act” on Wednesday. The bill would require nonprofits to reveal their major donors to the Internal Revenue Service. For years, donors contributing more than $5,000 to nonprofits had to be reported to the IRS, but the U.S. Treasury under former President Donald Trump twice shut the door on such disclosures, making it difficult if not impossible to determine who was bankrolling issue-based ads during elections.
At issue are nonprofit “social welfare” groups registered under the 501(c)(4) section of the federal tax code. Another group, trade associations, fall under tax section 501(c)(6). These groups avoid disclosing donors by not attacking candidates outright, but instead focusing on a particular issue and what side of the issue a candidate chooses. The ads often end by encouraging people to call a candidate to express disapproval about a specific issue. A non-entity before 2010, dark money groups have become a multi-million-dollar force in federal races. The ads aren’t known for being very accurate. Additionally, the groups donate to Super PACs without giving up the names of donors.
“It’s bad for Democracy because there’s so much bad information that’s put out,” Tester said. “They call this stuff educational money, but it really has damn little to do with education. It’s like push polls on the telephone. They’re trying to push people in a direction by just saying crap that’s half truths or not even that good.”
The legislation comes after outside spending in Montana’s 2020 Senate race surpassed $105 million. The nonpartisan Campaign Finance Institute reports that outside spending in the race between Republican Sen. Steve Daines and Democratic challenger Steve Bullock was the nation’s third-most expensive. That ranking doesn’t include money reported after November. Baked into the figures are dark money donations to Super PACs.
Total independent expenditures in the race, representing money from both disclosed donors and indirect dark money donations to political committees, were $48.1 million favoring Daines, and $58.6 million favoring Bullock, according to CFI.
Just two years earlier, all spending in Montana’s 2018 Senate race, in which incumbent Tester defeated Republican challenger Matt Rosendale, was $72 million with dark money groups included among the big spenders.
The issues surrounding dark money campaigns go beyond donors remaining anonymous. There’s the battle for time at the megaphone in the public square. Issue-based ads by dark money groups occupy ad time on television that other groups cannot afford. In doing so, the issue of the dark money ad becomes the point of political discussion over issues that lack a dark money donor. Consequently, important public issues like infrastructure or education don’t receive as much air time. The subject of the issue ads ends up defining a race by crafting definitions of the candidates involved.
“Infrastructure comes to mind just because we are so bad on infrastructure in Congress. That’s one we could shine a little light on that impacts everyone in the state of Montana, whether you’re working to build infrastructure,” Tester said. “But you’re right, the dark money tends to take your focus down roads that really don’t make a difference to people’s lives.”
Tester frames the issue of nonprofits needing to disclose donors to the IRS as the government needing to know whether foreign governments and other bad international actors are secretly shaping the issues that dominate U.S. elections, including issues that are extremely divisive.
The Spotlight Act has been introduced twice before, the first time in 2018 after then-Treasury Secretary Steve Mnuchin told the IRS to stop requiring nonprofits to identify their major donors. Mnuchin argued that donor information was irrelevant to the IRS. The decision meant liberal nonprofits like Conservation Voters and conservative nonprofits like Americans for Prosperity no longer reported donations over $5,000 as they previously had.
The 2018 bill passed the Senate, but went nowhere in the House. Tester and Sen. Ron Wyden, an Oregon Democrat, introduced the bill again in January 2019. That time the bill was assigned to the Senate Finance Committee, but went nowhere.
This time, with Democrats in control of the Senate, Wyden is chairman of Senate Finance. Tester likes the bill’s chances of clearing the Senate and reaching a House chamber, also controlled by Democrats.