Dark Money Groups Buy Elections, Then Call It “Social Welfare”
Written by Jack Mumby
Yesterday, ProPublica released a bombshell report, detailing how supposed “social welfare” nonprofits abuse their tax-exempt status to influence our elections. By classifying the millions they spend on attack ads as “issue advocacy” or “education”, these secretive groups are trying to have it both ways- and they’re getting away with it.
The loophole groups like Crossroads GPS are taking advantage of is a complicated one, and you need to know a bit about our arcane campaign finance laws to fully understand what they’re doing. More specifically, we should take a look at Section 501(c)(4) of the United States Code, which provides the legal framework for so-called civic leagues or social welfare organizations.
On paper, the requirements for these organizations are fairly strict, they must be “operated exclusively for the promotion of social welfare” and funds must be “devoted exclusively to charitable, educational, or recreational purposes.” Applicant organizations must also pledge to stay out of politics before the IRS will grant them 501(c)(4) status.
Unfortunately, the IRS refuses to enforce these provisions- of the thousands of 501(c)(4) applications it has received over the past decade, only 56 have been denied. As a result, many organizations can claim to be purely charitable in nature while using most of their operating budgets for campaign ads and other political spending.
To get away with all this, nonprofits simply have to convince the IRS that their “primary purpose” is social welfare- all that takes is classifying the ads as “educational” spending, and donating money to other “social welfare” front groups. The IRS is all too willing to go along with this ruse, and although they’ve paid lip service to complaints about “impermissible political intervention”, they have yet to enforce their own rules in earnest.
As it turns out, the federal government has little interest in auditing nonprofits’ claims to be apolitical- how else could a group like Americans for Tax Reform tell the IRS it spent less than $2 million on “political activities”, even as they had filed advertising expenditures of more than twice that with the FEC? How can the Commission on Hope, Growth, and Opportunity spend 96 percent of its money on political ads, then call themselves “social welfare organization” with a straight face?
The issue of dark money in politics is, of course, nothing new, but it has only been exacerbated by the Supreme Court’s embarrassing ruling in the Citizens United case. The 5 judges in the majority voided any restrictions on how much money corporations and unions can donate to these secretive groups, under the guise of free expression. 2010’s midterm elections were a test case for what would become the new normal, as the airwaves were flooded with anonymous ads.
The result of all this is that non-profit groups like Crossroads GPS and the Center for Individual Freedom have spent a combined total of $71 million on this year’s presidential election alone, more than both sides’ superPACs combined. These groups are having it both ways, they enjoy all the benefits under the law that genuine social welfare groups receive while pursuing decidedly individualistic ends.
Worse, since they’re doing this under the guise of “social welfare,” these organizations are exempt from taxation- we the taxpayers are effectively subsidizing the corruption of our own democracy. If the IRS isn’t going to hold these groups accountable, it’s up to us to make our voices heard.
Jack Mumby is a 2012 graduate of St. Mary’s College of Maryland, where he campaigned for wage justice and other progressive causes and earned a bachelor’s degree in Political Science and Public Policy. He is currently working as an intern with Common Cause’s national office.