ABSTRACT: The fastest growing and perhaps the most troublesome of the four main avenues for presidential campaign fundraising and spending are the “dark money” organizations. These are non-profit organizations that can accept unlimited amounts of money and keep their donors secret. They are social-welfare groups that are supposed to work exclusively to further the common good and general welfare. However, the Internal Revenue Service (IRS) has interpreted “exclusively” to mean “more than 50%,” which still means that political activity shouldn’t be their primary purpose. In addition, an IRS rule prohibits social-welfare organizations from benefiting a single individual.

Some of the politically active social-welfare organizations have pushed against these limitations. In the 2014 congressional elections, dark money expenditures grew tremendously. Because of the lack of oversight and enforcement by either the IRS or the Federal Election Commission (FEC), dark money organizations started ignoring operating rules and reporting requirements. In the 2016 presidential race, single-candidate dark money organizations have surfaced that seem to violate the IRS’s single individual rule. Dark money organizations have also been active at the state and local levels.

Allowing secret donors to pay for millions of dollars of campaign spending means that voters cannot make informed decisions and raises the specter of serious corruption. Without timely disclosure of donors, our democracy cannot have the informed electorate that is essential to its effective functioning.

FULL POST: The fastest growing and perhaps the most troublesome of the four main avenues for presidential campaign fundraising and spending are the “dark money” organizations. [1] These are non-profit organizations that can accept unlimited amounts of money from wealthy individuals, corporations, unions, and other organizations. However, unlike Political Action Committees (PACs) and Super PACs, they can keep their donors secret, hence their money is “dark money.” Like PACs and Super PACs, they are supposed to operate independently of candidates’ official campaign committees.

In exchange for their non-profit, tax-exempt status, these social-welfare groups are supposed to work exclusively to further the common good and general welfare of the people of the community. However, the Internal Revenue Service (IRS) has interpreted “exclusively” to mean that “more than 50%” of an organization’s activities have to be for social-welfare purposes. [2] [3] Therefore, political activity shouldn’t be the primary purpose of these organizations, which are registered under sections 501(c)(4), (c)(5), and (c)(6) of the IRS Code. In addition, an IRS rule prohibits social-welfare organizations from benefiting a single individual – the so-called “private benefit” rule. However, the IRS has been lax in defining political activity and in enforcing the focus on a social-welfare purpose and the private benefit rule.

Some of the politically active social-welfare organizations have pushed back against these limitations. Given the lack of enforcement from the IRS, some of them are basically ignoring operating rules and reporting requirements. In addition, some of these organizations have laundered their contributions through other entities to complicate any attempts to identify actual donors.

In the 2014 U.S. Senate race in North Carolina, a social-welfare organization called Carolina Rising, spent 97% of the $4.9 million it raised helping Thom Tillis win the seat. It received $4.8 million from a single donor whom it did not, and did not have to, disclose. The organization had no employees and spent $4.7 million through a single advertising firm for TV and cable ads. Because some of these ads aired close to the election in a time window that requires reporting to the Federal Election Commission (FEC), Carolina Rising reported $3.3 million in election spending to the FEC. The contracts it signed with the TV and cable companies airing its ads, which are filed with the Federal Communications Commission, identified the ads as pro-Tillis. However, it reported to the IRS that it had conducted no political activity. Carolina Rising would appear to have clearly violated the IRS rules on benefiting a single individual and on political activity having to be less than 50% of a social-welfare organization’s activity. Furthermore, it may well have knowingly lied to the IRS in stating it had not engaged in political activity. [4]

In the 2016 presidential race, single-candidate dark money organizations have surfaced. At least four Republican presidential candidates have dedicated dark money organizations, although they would appear to violate the IRS’s single individual rule. [5]

A dark money organization, the Conservative Solutions Project, is spending heavily on behalf of Republican presidential candidate Marco Rubio. So far, every Rubio TV ad in the early primary states of Iowa, New Hampshire, and South Carolina, as well as mailings to voters in those states, has been paid for by this dark money, non-profit organization. After spending $3 million over the summer promoting Rubio, it was spending almost $1 million a week in late September and early October on pro-Rubio TV ads. [6] Supposedly, it is doing all of this totally independently of the Rubio campaign.

There are plenty of examples of politically active social-welfare nonprofits flouting rules and reporting. And dark money organizations have been active at the state and local levels as well as at the national level. For example, they have opposed California ballot initiatives and blocked the start-up of a new bus line in Nashville, Tennessee, that would have linked poorer, gentrifying neighborhoods with downtown and wealthier, upscale neighborhoods. [7]

Allowing secret donors to pay for millions of dollars of campaign spending means that voters cannot make informed decisions and raises the specter of serious corruption. Without timely disclosure of political donors, our democracy cannot have the informed electorate that is essential to its effective functioning.

My next post will discuss ways of addressing this lack of disclosure of major donors to election spending.

[1]       See my previous post, Big money for the presidential candidates, for information on the other 3 avenues for campaign fundraising and spending.

[2]       Kuns, K., 7/1/15, “The dark politics of dark money,” The Washington Spectator

[3]       Bykowicz, J., 10/8/15, “Rubio’s presidential bid boosted by secret-money commercials,” The Associated Press (http://bigstory.ap.org/article/5926406673b047a7a34f1177e01014da/anonymous-donors-send-millions-pro-rubio-group)

[4]       Maguire, R., 10/20/15, “Political nonprofit spent nearly 100 percent of funds to elect Tillis in ’14,” Center for Responsive Politics (http://www.opensecrets.org/news/2015/10/political-nonprofit-spent-nearly-100-percent-of-funds-to-elect-tillis-in-14/)

[5]       Maguire, R., & Tucker, W., 9/21/15, “Five-fold upsurge: Super PACs, dark money groups spending far more than in ’12 cycle at the same point in campaign,” Center for Responsive Politics (http://www.opensecrets.org/news/2015/09/five-fold-upsurge-super-pacs-dark-money-groups-spending-far-more-than-in-12-cycle-at-same-point-in-campaign/)

[6]       Bykowicz, J., 10/8/15, see above

[7]       Kranish, M., 10/11/15, “A city’s immovable roadblock,” The Boston Globe

ABSTRACT: Tracking the tons of money already flowing into the 2016 presidential campaign is not easy. There are four main avenues for presidential campaign fundraising and spending today, when as recently as 2008 there was really only one major one – the candidate’s official campaign committee. A candidate’s official committee is limited to donations from individuals of up to $2,700.

Super Political Action Committees (PACs) are one of the new fundraising vehicles. They can accept unlimited donations from individuals, corporations, and other entities. As-of June 30, single-candidate, presidential Super PACs had raised $258 million. This is 16 times the amount such Super PACs had raised at this point in the last presidential campaign. And it is double the amount raised by the official campaign committees.

Fewer than 400 families have given almost half of the $388 million raised by the presidential candidates’ campaigns and Super PACs. While 48,000 Americans have donated $130 million to the presidential candidates’ campaigns, just 65 donors have given an equal amount – $132 million – to the candidates’ Super PACs. Having a wealthy backer or a few, makes a candidate viable today when in the past they wouldn’t have made it to the starting gate.

What all this means is that a small number of the wealthiest people in the US are exercising enormous influence over who our presidential candidates are and what policies they espouse. The rest of us are sitting on the sidelines watching and wondering if our votes or voices matter – and whether our country is still a democracy or not.

FULL POST: Tracking the tons of money already flowing into the 2016 presidential campaign is not easy. Court decisions, creative campaign lawyers, and lax enforcement have all contributed to opening up new avenues for campaign fundraising and making it impossible in some cases to identify the source of the money.

There are four main avenues for presidential campaign fundraising and spending today, when as recently as 2008 there was really only one major one – the candidate’s official campaign committee. [1] Today we have:

1. Candidates’ official campaign committees – limited to donations from individuals of up to $2,700. Have to disclose donors of over $250.
2. Candidate-specific Super Political Action Committees (PACs) – unlimited donations from individuals, corporations, and other entities. Have to disclose donors.
3. Other PACs and Super PACs – some can receive unlimited donations from a wide variety of entities; others are limited. Have to disclose donors.
4. “Dark money” organizations, usually not-for-profit entities – unlimited donations from a wide variety of entities. Do not have to disclose donors.

While any viable presidential candidate today must raise staggering amounts of money, different candidates have different patterns in their fundraising. For example, the Clinton and Sanders campaigns recently reported raising similar amounts of money over the last 3 months, $28 million and $26 million respectively. However, Clinton raised $19 million, roughly two-thirds of her money, through 60 fundraising events where the typical contribution was $2,700. Sanders has held only 7 fundraising events throughout the entire campaign and they typically cost $100 to attend. The bulk of his money came from online contributions where the average contribution was $30 and 99% of his contributions were $100 or less. [2] [3]

The use of candidate-specific Super PACs also varies. While they are supposed to operate independently of the candidate’s official campaign, in reality their operations are complementary if not actually coordinated, so analysis of a candidate’s campaign’s financial status typically combines figures for the candidate’s campaign and his or her Super PAC(s). These Super PACs, while technically barred from coordinating tactics and plans with the official campaign, are increasingly paying for core costs of a campaign, including, for example, the candidate’s travel, polling, and, of course, advertising. Furthermore, candidates are often directly involved with their Super PACs’ fundraising. The Super PACs have effectively eviscerated laws on contribution limits that were put in place to prevent bribery and corruption. [4]

Official data are available on the campaigns’ fundraising through June 30. At that point, the single-candidate, presidential Super PACs had raised $258 million. This is 16 times the amount such Super PACs had raised at this point in the last presidential campaign. And it is double the amount raised by the campaigns themselves. [5] Four of the top 7 candidates in terms of fundraising had raised more money through their Super PACs than through their campaigns, while one had raised no Super PAC money and another had essentially only raised Super PAC money: [6]

• Jeb Bush:                Total raised: $115 million             Super PAC: $103 m          Campaign: $11 m
• Hillary Clinton:     Total raised:  $68 million             Super PAC: $20 m            Campaign: $48 m
• Ted Cruz:                Total raised: $53 million              Super PAC:   $39 m           Campaign: $14 m
• Marco Rubio:         Total raised: $27 million              Super PAC:   $17 m           Campaign: $10 m
• Ben Carson:            Total raised: $17 million              Super PAC:   $7 m             Campaign: $11 m
• Bernie Sanders:     Total raised:   $16 million            Super PAC:   $0 m            Campaign: $16 m
• Chris Christie:        Total raised: $14 million             Super PAC:   $14 m           Campaign:  $0 m

Fewer than 400 families have given almost half of the $388 million raised by the presidential candidates’ campaigns and Super PACs. Much of the Super PAC money is coming from a small handful of individuals and families. While 48,000 Americans have donated $130 million to the presidential candidates’ campaigns, just 65 donors have given an equal amount – $132 million – to the candidates’ Super PACs. These wealthy contributors not only have great access to the candidates they support, they are often confidantes and sometimes have business dealings with the candidates or entities that the candidates run. Having a wealthy backer or a few, makes a candidate viable today when in the past they wouldn’t have made it to the starting gate. [7] For example:

Cruz: 6 people, 4 individuals from one family and 2 other individuals, have contributed the $36 million his Super PACs have received. Under our previous campaign laws, it would have required over 13,000 individuals giving the maximum $2,700 to raise this much money.

Rubio: 4 donors have contributed $12.5 million.

Mike Huckabee: 1 individual gave $3 million.

Bush: 26 individuals or corporations have given over $1 million each.

Clinton: 9 individuals have contributed over $1 million each.

Rand Paul: 2 individuals have given a combined $3 million.

What all this means is that a small number of the wealthiest people in the US are exercising enormous influence over who our presidential candidates are and what policies they espouse. The rest of us – 300 million Americans – are sitting on the sidelines watching and wondering if our votes or voices matter – and whether our country is still a democracy or not. [8]

To put the current presidential campaign’s fundraising in some perspective, the $388 million raised by the presidential candidates’ campaigns and Super PACs already – over a year before the final election – is more than the $331 million that Bill Clinton, George H.W. Bush, and their rivals spent in the whole 1992 election. And it is almost 5 times the amount that had been raised at this point in the 2012 presidential campaign. In the 2016 presidential election, spending will be over 20 times what it was just 24 years ago in the 1992 election.

[1]       Pindell, J., 10/1/15, “Evaluating campaign money reports gets more complicated,” The Boston Globe

[2]       Campaign Notebook, 10/2/15, “Sander’s war chest fills fast,” The Boston Globe from the Associated Press

[3]       Bykowicz, J., 9/30/15, “Clinton, Bush steady fundraising amid GOP summer Trump slump,” Associated Press

[4]       Confessore, N., Cohen, S., & Yourish, K., 8/1/15, “Small pool of rich donors dominates election giving,” The New York Times

[5]       Kranish, M., 9/13/15, “In national politics, big money drowning out everyone else,” The Boston Globe

[6]       OpenSecrets.org, 10/4/15, “Behind the candidates: campaign committees and outside groups,” Center for Responsive Politics (http://www.opensecrets.org/pres16/raised_summ.php)

[7]       Confessore, et al., 8/1/15, see above

[8]       Kranish, M., 9/13/15, see above