One legacy of the 115th U.S. Congress that will end next week is allowing dark political money to get even darker.
Last summer, the Treasury Department, led by Trump appointee Steve Mnuchin, decided that certain politically active, tax-exempt organizations no longer need to disclose the identity of major donors. The rule applies to entities organized under IRS code 501(c)4, which are required to operate “exclusively for social welfare.” However, the IRS allows these 501(c)4 groups to spend up to 50 percent of their money on political activities.
Not surprisingly, these nonprofit “social welfare” groups, such as the National Rifle Association, Planned Parenthood, Americans for Prosperity and the League of Conservation Voters, put millions of (tax free) dollars into advertising and other efforts aimed at persuading voters and candidates to favor the organization’s positions and preferences. Although they cannot directly tell voters to support or defeat a candidate, they often tell voters to call an official or candidate to tell him or her what to do on an issue.
Both AFP and LCV were active in Montana’s 2018 U.S. Senate campaign, which concluded with Jon Tester winning a third term.
Even though some of the 501(c)4 spending was intended to benefit Tester, the Montana Democrat led the charge to reject this darker money IRS rule, introducing legislation in July and last month bringing a resolution to the Senate floor.
Tester and Sen. Ron Wyden, D-Oregon, recruited 28 co-signers, which forced a Senate vote on Dec. 12. All Senate Democrats and independents, plus Republican Susan Collins of Maine, voted to reject the secrecy rule. It passed the Senate 50-49 with one Republican abstaining.
The argument for the rule is privacy of donors who have given at least $5,000 in a year to the “social welfare” group.
Republican Sen. Steve Daines made the privacy argument in a response to a Gazette reporter’s questions, saying that the Tester-Wyden resolution was another attempt to “weaponize the IRS for political purposes.”
The Senate disclosure resolution wasn’t taken up in the Republican-controlled House, so the secrecy rule stands.
This is significant because the U.S. Supreme Court has lifted restrictions on political spending, ruling that money is speech and that corporations and other organizations have the same speech rights as people under the Constitution. The major check remaining in law is disclosure: compelling big political spenders to tell the public where they got the money they use to try to influence our elections.
The latest backtracking on donor transparency also begs the question: Why are organizations that spend up to half of their money on politicking allowed to operate tax free?
Back in July, shortly after the Treasury Department announced the new secrecy rule, Tester introduced the Spotlight Act, which sought to require donor disclosure for several types of tax-exempt organizations that the IRS was not disclosing.
The IRS does, however, require charities organized under 501(c)3 to disclose major donors.
Obviously, the U.S. tax code needs work — to be consistent, fair and to hold organizations accountable for following the requirements of their tax exemption.
The problem with lack of disclosure is not knowing what we don’t know. Without disclosure, the public won’t know that donations were made by foreign agents or even criminals. This isn’t a hypothetical concern: The NRA spent $54 million to help elect Donald Trump and has acknowledged receiving about $3,000 from Russian agents, according to OpenSecrets.org.
The issue here isn’t money going to private charities, but money flowing from tax-exempt organizations into our public elections.
Thanks to Tester, the fight for transparency continues and the public has a champion for their right to know about election spending.
Both parties stand to lose from dark money attacks, both potentially could gain. Why not work together for more transparent American elections?