When Taco Bell heir Rob McKay and his fellow "investors" gathered in Washington this month to fund start-ups, they weren't looking for the latest idea hatched in some tinkerer's garage.
Instead, the investment partnership known as Democracy Alliance, a group that includes film director Rob Reiner and billionaire George Soros, was looking to be angels to political start-ups. In the coming election, their millions could be part of the new thing in politics in 2008.
Some major political players are expected to shift their money from traditional campaign entities in favor of an old standby: the nonprofit organization. By giving to nonprofits, donors are unfettered by contribution caps that apply when they give to candidates. They also can be assured of anonymity.
The law allows the nonprofits to be "very aggressive politically, while shielding donors from disclosure," former Federal Elections Commission Chairman Michael E. Toner said. "That is a very attractive combination."
In an election cycle in which top-tier presidential candidates set fundraising records, nonprofits offer yet another channel into which money will flow. Politically active nonprofits have been around for years. But interest in them generally - and in one type in particular - is increasing as federal regulators crack down on other types of independent campaign organizations.
It is the 501(c)(4), named for the tax code that defines it, that seems to have struck a chord with those looking for new ways to organize their independent fundraising. Financiers who make up Democracy Alliance are among those who have funded nonprofits in the past and almost certainly will do so in the coming year.
Independent campaigns typically don't back specific candidates. Instead, they target candidates' stands on issues, from immigration and abortion rights to the environment, the Iraq war and various labor and business questions.
Nonprofits won't be the only path for independent campaigns. Political action committees, controlled by unions, business and ideological groups, have been part of the scene for decades. So far this year, PACs raised $111.2 million, a 9 percent increase, the nonpartisan Campaign Finance Institute reports.
Another type, 527s, named for the IRS code that defines them, emerged in 2004 when Swift Boat Veterans for Truth and others spent millions. In the first nine months of the year, 527s raised at least $76 million, recent filings show. That's up from $60 million at the same point in the past presidential campaign.
Some donors are shifting away from 527s as federal regulators crack down. But unions remain heavy users. Democratic and Republican governors' associations operate through them. Unlike nonprofits, which are barred from spending a majority of their money on elections, the 527s aim to get involved in elections. They are not supposed to expressly advocate for or against a candidate's election, but they can be pointed.
One such group, Stop Her Now, states its goal as "rescuing the American public from the radical ideas of Hillary Clinton." However, it is not advocating her defeat; it's merely "educating the American public," spokesman Joe Turman said.
On the flip side, last week John Podesta, President Bill Clinton's former chief of staff, incorporated a new 527 called the Fund for America. The Democracy Alliance's McKay and Anna Burger, national political strategist for the Service Employees International Union, also are officers in the new group, which is expected to provide money to help elect Democrats.
"It is going to be a huge deal. Control of the federal government is at stake," California Republican strategist Jim Brulte said of independent efforts.
Washington lawyer Joseph J. Andrew, former Democratic National Committee chairman, predicted that groups involved in health care and energy, sure to be high on the next administration's agenda, would be especially active.
"Stakes are perceived to be very high," Andrew said.
The wealthy, corporations and unions long have paid for independent campaigns. The size of an individual's donations to federal candidates is capped at $2,300. But people can spend as much as they want on outside efforts, so long as they don't coordinate with candidates. Often, ads aired by independent campaigns are the most pointed.
"This is part of the modern political playbook," said Evan Tracey, president of TNS Media Intelligence/Campaign Media Analysis Group, which predicts that as much as $3 billion will be spent on ads in the 2008 campaign.
Noting that campaign finance laws restricting direct donations simply sent campaign money in different directions, Tracey said: "We crushed one giant cockroach, and now we have 60."
A tenet of campaign finance law is disclosure. Disclosure provides insight into who backs campaigns and why. Candidates, parties, political action committees and 527s reveal donors' identities in filings with the Federal Election Commission or Internal Revenue Service.
By law, nonprofits can keep donors confidential. Although their tax returns are public documents, they contain much less information than campaign finance reports. And because tax returns are filed once a year, money spent in the 2008 election year won't become public until long after votes are counted.
"The law hasn't really caught up with many of these organizations," said Stephen Weissman of the Campaign Finance Institute in Washington.
In a recent report, the Campaign Finance Institute said nonprofits, ranging from the AFL-CIO to Focus on the Family Action, spent $90 million on campaign-related activities in 2006.
"Due to the lack of official disclosure, this is clearly an underestimate," the report said, predicting "a substantially larger sum of soft money" would be spent in 2008.
Dan Morain writes for the Los Angeles Times.
Funding the campaigns
For the 2008 election, some major political players are expected to shift their money from traditional campaign entities to an old standby: the nonprofit. Donors to nonprofits avoid spending caps and public disclosure.