The bill aims to crack down on “dark money” groups spending to influence U.S. elections by repealing a restriction in the omnibus bill preventing the Internal Revenue Service from using its funding to clarify rules governing how much political activity 501(c)(4) nonprofit groups can engage in.
Nonprofit groups operating under section 501(c)(4) of the tax code don’t have to disclose their donors but are supposed to exist for social welfare purposes, meaning politics is not supposed to be the primary purpose of 501(c) groups.
Federal political committees like super PACs reported receiving more than $606 million in contributions from 501(c) nonprofits during the 2022 cycle, a new OpenSecrets analysis of Federal Election Commission disclosures found. An additional $34.6 million in federal outside spending was reported to the FEC.
But the vast majority of dark money is not reported to the FEC. So-called “issue ads” that mention a candidate without expressly advocating for their election or defeat are only required to be disclosed to the FEC if they are aired on TV or radio in the weeks leading up to an election, and online ads that avoid expressly advocating for the election or defeat of a candidate don’t require disclosure to the FEC at all. While the FEC passed a rule in November requiring anyone who places political advertising on the internet to disclose who paid for it in a disclaimer within the ad, the commission has not passed additional rules requiring online ad spending disclosure to the FEC.
“Coloradans deserve to know who is trying to influence their vote. Instead, we have a system that allows mega-donors to hide their identities. This is a critical threat to our democracy and yet it’s going unchecked,” said Crow in a press release issued Monday.
Nearly every year since 2015, Congress has passed appropriations bills that included a similar provision barring the IRS from clarifying rules on 501(c) nonprofit political activity.
Nonprofits operating under section 501(c)(4) of the tax code are allowed to spend practically unlimited sums on political campaign activities without ever disclosing their donors so long as their primary purpose is focused on social welfare activities. But IRS rules lack clarity on how much politicking is too much.
The generally accepted rule of thumb is that less than half of a 501(c)(4) nonprofit’s activities can be political in order for the group to keep its tax-exempt status. But IRS enforcement has been chronically lax and many groups have found ways to skirt the rules.
According to a 2020 U.S. Government Accountability Office report, an “overarching challenge” for IRS agents is the “absence of bright line rules regarding what constitutes political campaign intervention” and the lack of “clear and concise guidance” on the extent to which 501(c)(4) nonprofits can engage in political campaign activities.
“Bad rules at the IRS have allowed bad actors to abuse the system for too long,” said Emily Peterson-Cassin, coordinator of the Bright Lines Project at Public Citizen, a progressive nonprofit that supports the End Dark Money Act. OpenSecrets has also participated in the Bright Lines Project.
“For too long, mega-donors and big money special interests, operating under the guise of ‘social welfare,’ have abused this glaring loophole for their own gain. It’s a scheme that’s designed to keep the American people in the dark about who’s trying to buy influence in our elections,” said Tiffany Muller, president of End Citizens United and Let America Vote Action Fund, progressive political advocacy groups supporting the bill.
Crow first introduced the End Dark Money Act in 2019, his first legislative action after Colorado’s 6th Congressional District first elected him to Congress. The House removed language from the funding bill prohibiting the IRS from updating or clarifying its rules governing political activity by these social welfare organizations, effectively achieving the aim of the End Dark Money Act for that fiscal year.
The Colorado congressman re-introduced the End Dark Money Act in 2021. The 2021 iteration of the End Dark Money Act sought to repeal a provision in the House appropriations bill barring the IRS from using funds to clarify the rules governing social welfare organizations’ political activity, similar to the one included in the recently-passed omnibus bill.
Crow’s new iteration of the bill would free the IRS to clarify its rules about how much political activity 501(c) nonprofits can engage in, though the proposal comes shortly after the House passed a bill stripping the IRS of about $71 billion of its newly-allocated funding and as congressional Republicans push another bill to abolish the IRS entirely. Such measures would require approval of the Senate, which is controlled by Democrats.
Legislation aiming to close loopholes that allow dark money to pour into U.S. elections have failed repeatedly over the last decade. The DISCLOSE Act, reintroduced several times by Sen. Sheldon Whitehouse (D–R.I.) over the last 10 years, failed another vote in the Senate in September despite bipartisan support and backing from President Joe Biden. Among other provisions, the bill would have required dark money groups that make contributions to federal political committees or spend on any communications referring to a federal candidate to disclose contributions greater than $10,000 to the FEC.
Dark money groups aligned with political leadership poured hundreds of millions of dollars into 2022 elections
501(c) groups that contributed the most money during the 2022 election cycle are aligned with Democratic and Republican leadership in the U.S. Senate.
The primary dark money group aligned with Democratic U.S. Senate leadership, Majority Forward, poured about $75.9 million into political contributions reported to the FEC during the last election cycle. As of Nov. 4, Majority Forward also purchased $26.5 million in TV and online ads boosting Democratic candidates without explicitly calling for their election or defeat, according to data provided to OpenSecrets by the ad tracking firm AdImpact.
Senate Majority PAC, the primary super PAC aligned with Senate Democratic leadership, reported receiving more than $72 million from Majority Forward as of post-general filings with the FEC. During the 2022 election cycle, Senate Majority PAC also moved money to groups that spent tens of millions of dollars to influence U.S. Senate elections in key states, obfuscating ties between the national groups aligned with party leadership and the state-focused super PACs.
Georgia Honor, a super PAC entirely funded by Senate Majority PAC, spent $5.7 million boosting incumbent Sen. Raphael Warnock (D–Ga.) and $54.9 million opposing his GOP challenger, Herschel Walker, ahead of Warnock’s bitterly contested reelection. The super PAC did not report spending in any other race.
Majority Forward also helped fund various other Democratic groups and seed “pop-up” PACs boosting candidates in key Senate races. One “pop-up” group called 53 Peaks that sponsored ads attacking the Republican primary candidates seeking to challenge Sen. Michael Bennet (D-Colo.), was fully funded by a $3 million contribution from the dark money group, the Colorado Sun first reported.
House Majority Forward, a 501(c)(4) aligned with Democratic House leadership, poured $8.5 million during the 2022 election cycle. Most of that went to the hybrid PAC aligned with Democratic House leadership, House Majority PAC, which spent more than $145.1 million in the 2022 midterm elections. AdImpact tracked another $13 million in TV and online ad spending as of Nov. 4.
One Nation, a 501(c)(4) dark money group aligned with Senate Republican leadership, poured over $145 million into ad spending and political contributions during the 2022 cycle but reported none of that spending to the FEC. About $71 million of that went to TV and online ad spending during the 2022 cycle, according to AdImpact tracking previously reported by OpenSecrets.
The dark money groups steered another $74 million into political contributions to influence federal races as the parties vied for control of the U.S. Senate. Most of that went to the Senate Leadership Fund, a super PAC aligned with Senate Minority Leader Mitch McConnell (R-Ky.) that shares staff and offices with the dark money group. Senate Leadership Fund spent more money than any other outside group during the 2022 election cycle, pouring more than $245.7 million into U.S. Senate races across the country. The second biggest outside spender was the Congressional Leadership Fund, a hybrid PAC aligned with GOP House leadership that poured more than $227.1 million into the 2022 midterms.
Congressional Leadership Fund reported receiving tens of millions of dollars from American Action Network, a 501(c)(4) group aligned with U.S. House Republican leadership that poured $46.5 million into federal elections during the 2022 election cycle. The dark money group did not report any spending directly to the FEC.
American Action Network spent another $30.7 million on TV and online ads boosting or attacking candidates as of Nov. 4, according to AdImpact data provided to OpenSecrets.
Another top dark money contributor, American Prosperity Alliance, bankrolled the Conservative Americans PAC, a “pop-up” super PAC that spent over $2.4 million in GOP primary races for U.S. House seats in Missouri, Tennessee and Arizona from July 19 to 29, 2022. By registering with the FEC right before an election, the super PAC was only required to disclose the dark money contributions after voters had cast their ballot. The dark money group is not required to disclose the real donors behind the millions spent to influence voters in these races.
“This bill strikes at the root of the problem by preventing mega-donors from using non-profits as vehicles for political contributions,” Crow said. “By increasing transparency and accountability in our elections, we are returning power back to voters and restoring Americans’ faith in our democracy.”