A Pop-Up Problem
By the time the Internal Revenue Service discovers that a group has crossed the line from nonprofit promotion to politicking, many operators have boarded up shop and moved on.
This post was co-published with TIME.
The rules and regulations governing dark-money groups are almost as mystifying as the names of their donors. In general, the Federal Election Commission requires groups that make electing candidates their "major purpose" to register as political committees, which means they have to disclose their donors.
But other groups can remain obscure simply by telling the FEC that their major purpose is not electing candidates—that they are, rather, "social welfare" nonprofits or trade associations. That means they have to identify only those donors who specifically earmark their money for political ads—something that rarely happens.
Under the tax code, these groups don't have to publicly report any of their donors' names. They are allowed to support candidates for office as long as promoting social welfare or industry is their primary purpose. But politics moves much faster than federal agencies, and by the time the Internal Revenue Service discovers that a group has crossed the line from nonprofit promotion to politicking, many operators have boarded up shop and moved on.
Take the liberal group Americans for Stable Quality Care. A rare coalition of pharmaceutical and health-care associations and unions, it spent more than $43 million in 2009 on ads promoting health care reform. After reform passed in 2010, the group changed its name to the Citizens for Strength and Security Action Fund and spent almost $3 million supporting liberal candidates for office in the midterms. After the 2010 elections, the group went dormant, and its website was taken down.
But in 2011, a new group formed: the Citizens for Strength and Security Fund, with the same Beltway consulting firm and the same clip art and message as the action fund's website. It has spent an unknown amount on ads criticizing the Republican candidates for Senate in Montana and New Mexico this year. But finding out much more than that is difficult. The group's address is a post-office box. Neither of the two people listed as being in charge returned calls for comment or replied to an email submitted via the group's website.
A ProPublica examination of 72 nonprofits active in the 2010 election found that 32 that initially told the IRS they would not be involved in politics eventually filed tax returns revealing that they were. Many of these nonprofits are pop-up groups — outfits that form quickly just before an election, spend on one campaign or another and then disband, sometimes after filing just one tax return. By the time the IRS has time to investigate, some groups have ceased to exist.
The IRS, which assigns less than 1 percent of its staff to overseeing nonprofits, told Congress in September that more than 1,600 groups were seeking recognition as social-welfare nonprofits. Not all are political, of course, but it's safe to assume that a growing number aren't strictly charitable, either. "The corruption of democracy by these groups is going to grow far worse in the years ahead," said Fred Wertheimer, president of Democracy 21, which works to shrink the influence of money in politics. "This is just the beginning."
For more on Dark Money, read Dark Money Rises.
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