Dark money

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"Dark money" depiction displayed in Washington Metro stations, spring 2015

In the politics of the United States, dark money is a term for funds given to nonprofit organizations—primarily 501(c)(4) (social welfare) and 501(c)(6) (trade association) groups—that can receive unlimited donations from corporations, individuals, and unions, and spend funds to influence elections, but are not required to disclose their donors.[1][2]

According to the Center for Responsive Politics, "spending by organizations that do not disclose their donors has increased from less than $5.2 million in 2006 to well over $300 million in the 2012 presidential cycle and more than $174 million in the 2014 midterms."[1] Dark money represented 4.6% of all campaign spending in 2014.[3] The New York Times editorial board has opined that the 2014 midterm elections were influenced by "the greatest wave of secret, special-interest money ever raised in a congressional election."[4]

Etymology[edit]

The term was used by the Sunlight Foundation to describe undisclosed funds that were used during the United States 2010 mid-term election.[5][6]

Activities and influence[edit]

In some elections, dark-money groups have surpassed traditional political action committees (PAC) and "super PACs" (independent-expenditure-only committees) in the volume of spending.[2] In 2014, the group Freedom Partners was identified as the "poster child" for the rise of dark money.[2] In 2012, Freedom Partners had the ninth-highest revenues among all U.S. trade associations which filed tax returns that year, more than "established heavyweights" such as the American Petroleum Institute, PhRMA, and U.S. Chamber of Commerce.[2] Freedom Partners largely acted as a conduit for campaign spending; of the $238 million it spent in 2012, 99 percent went to other groups, and Freedom Partners itself did not have any employees.[2] This was a major distinction between other high-revenue trade associations, which typically have many employees and devote only about 6 percent of spending to grants to outside groups.[2]

The largest and most complex network of dark-money groups are funded by conservative billionaire business magnates Charles and David Koch; the Koch brothers' network accounted for about a quarter of dark-money spending in 2012.[2]

The rise of dark-money groups was aided by the U.S. Supreme Court decisions in FEC v. Wisconsin Right to Life, Inc. (2008) and Citizens United v. FEC (2010).[2] In Citizens United, the Court ruled (by a 5-4 vote) that corporations and unions could spend unlimited amounts of money to advocate for or against political candidates.[7]

Among the more prominent conservative dark-money groups is the Koch-backed Americans for Prosperity and Karl Rove's Crossroads GPS; one liberal dark-money group is Patriot Majority USA.[8]

The Federal Elections Commission, which regulates federal elections has been unable to control dark money. According to the Center for Public Integrity, FEC commissioners are voting on many fewer enforcement matters than in the past because of "an overtaxed staff and commissioner disagreement."[8]

Disclosure in U.S. elections[edit]

The first federal law requiring disclosure of campaign contributions was passed in 1910. By the late 1970s, virtually all states and the federal government required public disclosure of campaign contributions and information on political donors. Most states and the federal government also required public disclosure of information about donors and amounts spent on independent expenditures, that is, expenditures made independently of a candidate's campaign.

In January 2010, at least 38 states and the federal government required disclosure for all or some independent expenditures or electioneering communications, for all sponsors.[9]

Yet despite disclosure rules, it is possible to spend money without voters knowing the identities of donors before the election.[10][11] In federal elections, for example, political action committees have the option to choose to file reports on a "monthly" or "quarterly" basis.[12][13][14] This allows funds raised by PACs in the final days of the election to be spent and votes cast before the report is due.

In at least one high-profile case, a donor to a Super PAC kept his name hidden by using an LLC formed for the purpose of hiding their personal name.[15] One super PAC, that originally listed a $250,000 donation from an LLC that no one could find, led to a subsequent filing where the previously "secret donors" were revealed.[16] However, campaign finance experts have argued that this tactic is already illegal, since it would constitute a contribution in the name of another.[17]

In addition to PACs, non-profit groups ranging from Planned Parenthood to Crossroads may make expenditures in connection with political races. Since these non-profits are not political committees, as defined in the Federal Election Campaign Act, they have few reporting requirements beyond the amounts of their expenditures. They are not required by law to publicly disclose information on their donors. As a result, voters do not know who gave money to these groups. Reports have disclosed instances where non-profits were managed by close associates, former staff, or a candidates family member, and this has led to concern that the candidates benefiting from their expenditures would be able to know who donated the funds to the non-profit group, but the public would not.[18] [19]

Additionally, such 501(c) non-profits may transfer funds given to another non-profit or to a Super PAC, making it still more difficult to trace the original source of funds.[20]

For example, in the 2012 election cycle, one organization, the National Organization for Marriage, or NOM, operated two non-profit arms that received millions in donations from just a few donors. It in turn funded several different PACs. While these PACs had to disclose that NOM contributed the funds, they were not required to disclose who gave money to NOM.[21]

On March 30, 2012 a US District Court ruled that all groups that spend money on electioneering communications must report all donors that give more than $1,000.[22][23] However, this ruling was overturned on appeal.[24]

Theory of required disclosure[edit]

According to Columbia Law School's Richard Briffault, disclosure of campaign expenditures, contributions, and donors is intended to deter corruption.[25]

See also[edit]

References[edit]

  1. ^ a b "Political Nonprofits". opensecrets.org. Center for Responsive Politics. 2015. Retrieved March 10, 2015. 
  2. ^ a b c d e f g h Robert Maguire, How 2014 Is Shaping Up to be the Darkest Money Election to Date, Center for Responsive Politics (April 30, 2014).
  3. ^ https://www.opensecrets.org/overview/cost.php
  4. ^ Editorial, Dark Money Helped Win the Senate, New York Times (November 8, 2014).
  5. ^ Allison, Bill (October 18, 2010). "Daily Disclosures". Retrieved December 8, 2013. 
  6. ^ Sibley, Ryan (October 20, 2010). "Dark money: Super PACs fueled by $97.5 million that can't be traced to donors Sunlight Foundation Reporting Group". 
  7. ^ Michael Beckel & Jared Bennett, 12 ways 'Citizens United' has changed politics: Center for Public Integrity investigations illuminate political 'dark money' (January 21, 2015).
  8. ^ a b Leah McGrath Goodman, As Dark Money Floods U.S. Elections, Regulators Turn a Blind Eye, Newsweek (September 30, 2014).
  9. ^ Citizens Informed: Broader Disclosure and Disclaimer for Corporate Electoral Advocacy in the Wake of Citizens United, Yale Law School Legal Scholarship Repository, Page 625 footnote 13, by Daniel Winik Yale Law School, January 1, 2010
  10. ^ Who funds Super PAC? FEC looks into powerful influence, By Gail Russell Chaddock, The Christian Science Monitor, Feb 02, 2012
  11. ^ Levinthal, Dave; Vogel, Kenneth P. (December 30, 2011). "Super PACs go stealth through first contests". Politico.com. Retrieved January 12, 2012. 
  12. ^ “Super PACs” in Federal Elections: Overview and Issues for Congress, Congressional Research Service, by R. Sam Garrett, December 2, 2011
  13. ^ Federal Election Commission web site, Sourced: February 5, 2012
  14. ^ Forgetting a lesson from Watergate, CNN, By John Blake, February 4, 2012
  15. ^ In D.C., a mockery of campaign finance laws, Washington Post, By Colbert I. King, Published: January 14, 2012
  16. ^ A secret donor revealed, New York Times, By Michael Luo, February 7, 2010
  17. ^ The Strange Case of W. Spann LLC, by Bradley A. Smith, August 5, 2011
  18. ^ Indiana businesses giving big money to presidential super PACs, Indianapolis Star 2012-02-06
  19. ^ Filing by Restore Our Future, Inc., January 2012
  20. ^ I.R.S. Moves to Tax Gifts to Groups Active in Politics, New York Times, By Stephanie Strom, May 12, 2011
  21. ^ National Organization for Marriage appeals ruling requiring release of donor list, The Associated Press, March 02, 2011
  22. ^ Judge tosses rule shielding campaign donors, Associated Press, March 31, 2012
  23. ^ Ruling Hollen v. FEC, US District Court for District of Columbia, March 30, 2012
  24. ^ Van Hollen Decision Overturned, Russ Choma, Center for Responsive Politics, September 18, 2012
  25. ^ Campaign finance disclosure 2.0, Election Law Journal, by Richard Briffault, Page 14 of 31, November 4, 2010