Journalism in the Public Interest

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.

Susan Winchester

Nov. 2, 2012, 8:59 a.m.

It is time for some changes to the rules for not-for-profit organizations. First, any organization that spends more than a fixed amount trying to influence elections (either candidates or issues) should be required to disclose donors who contributed over a fixed amount (say, $5.000) to IRS and the FEC. Second, if an organization is found to have misled the IRS on its application for exempt status, there shoudl be a mandatory prison sentence for the individuals who signed the application.

Susan, the groups are shells.  At best, you’ll net some kid out of high school who signed in exchange for concert tickets or something.

To enact change, make the politicians responsible for what’s said in their name.  I mean, almost every race is a two-party machine, with third parties marginal where they exist.  So spending against one candidate is clearly spending for another.

So, if an organization supports the candidate, hit them where it hurts and disqualify the candidate.  The campaigns will then police these groups for us, to make sure nobody is framing them.  They’ll also police their opponents to make sure there’s nothing they can use as leverage.

We could also just restrict the amount of money the candidate can spend campaigning with the same penalty system.  I mean, we live in an era where people connect to their interests through social media and search engines.  It’s not like it actually costs a billion dollars to get your message out.  It may cost a billion dollars to trick people into believing it, but that’s not the behavior we want to reward.

This article is part of an ongoing investigation:
Buying Your Vote

Buying Your Vote: Dark Money and Big Data

ProPublica is following the money and exploring campaign issues you won't read about elsewhere.

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