Some of the biggest political contributors in recent elections don't appear on any list of the usual suspects; they are neither corporations, unions nor extremely wealthy individuals. Instead, they are new nonprofit organizations that have been granted tax-exempt status by the Internal Revenue Service because of the ostensible "social welfare" activities they engage in. In truth, however, these groups have morphed into some of the nation's most powerful backstage political actors, shelling out millions of dollars to support candidates for office without ever having to disclose where their money is coming from or who is trying to influence the outcome on an election.
That's why the Obama administration's proposal last week to tighten restrictions on political spending by tax-exempt nonprofit groups is long overdue. It holds the potential to level the playing field by changing the rules governing how such groups operate, curbing their ability to use secret money to sway voter attitudes and bringing greater transparency to the process of electing our political leaders.
Unlike the traditional political action committees set up to fund the campaigns of individual candidates for local, state and federal offices, there are no limits on how much money nonprofit groups organized under Section 501(c)4 of the federal tax code can collect or spend during an election cycle. Nor is there any requirement that they disclose the names of their contributors. As a result, elections are increasingly vulnerable to undue influence from a handful of powerful but anonymous individuals and interest groups who operate largely behind the scenes.
In recent years, the flow of money through such groups has grown exponentially. In 2006, tax-exempt nonprofits spent less than $5.2 million to influence voter attitudes. By 2012, however, the total had grown nearly sixty-fold, to more than $300 million. Virtually all of it was spent to support candidates indirectly rather than as public contributions to a candidate's PAC. Much of it went to pay for big TV ad buys under the pretense of promoting "social welfare" activities such as issue advocacy and voter education. However, such efforts were mostly just a cover for the real purpose of the organization.
Crossroads Grassroots Policy Strategies, founded by long-time Republican strategist Karl Rove, and Americans for Prosperity, bankrolled by the billionaire Koch brothers, are some of the best known social welfare groups, but many others — including liberal groups like MoveOn.org Civic Action — engage in what is clearly an attempt to sway elections. In doing so, they stretch the definition of social welfare almost beyond recognition.
Under the new rules being proposed by the Treasury Department and the IRS, nonprofits would still be able to carry out traditional election-related activities such as voter registration drives and get-out-the-vote campaigns. But "candidate-related political activity" would be explicitly excluded from the agencies' definition of "social welfare." The new restrictions would, among other things, ban groups from posting advertisements that mention a candidate's name within 60 days of an election as well as prohibit them from giving money to other organizations for candidate-related spending.
It's an axiom that money and politics will always gravitate together, and that as soon as a new law or regulation is approved to prevent that from happening someone will find a way around it. Advocates for campaign finance reform are already warning that the new restrictions could simply push political money into other entities that aren't subject to IRS jurisdiction. Moreover, the proposed changes probably won't be finalized in time to have much effect on the 2014 mid-term elections. Still, they're a start toward clearing up the distortions that the avalanche of unregulated secret money has inflicted on our political system, and that can only be good for the country's voters, candidates and democratic form of government.
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