Smart. Sharp. Funny. Fearless.
Wednesday, October 26, 2016

by Justin Elliott, ProPublica

Last month, when House Democrats introduced the DISCLOSE 2012 Act to try to stop the flow of secret “dark money” into the electoral process, it marked an ironic twist.

A decade ago, it was Republicans who were pushing for disclosure of donors to nonprofit social welfare groups who are now pouring millions into political attack ads and House Democrats who opposed them.

Now the parties have exchanged positions.

The groups in question are nonprofits known as 501(c)(4)s, after the section of the tax code that describes them.

The best-known of the newer c4’s are the Karl Rove-affiliated Crossroads GPS, which last year raised a $33 million war chest to support Republicans, and the Obama-affiliated Priorities USA, which is expected to play a similar role for the president. Like super PACs, c4’s can accept unlimited donations. But Super PACs have to reveal their donors; c4’s do not.

The 501(c)(4) category is not new. Many older interest groups (including some that engage in little or no political activity) are organized as social welfare groups, from the Sierra Club to the National Rifle Association. But the Supreme Court’s 2010 decision in the Citizens United case — a case filed by a c4 — eliminated restrictions on campaign activity by these social welfare groups and other types of corporations, taking their political spending to another level.

The legislative battle over donor disclosure in the summer of 2000 shows how history often repeats itself when it comes to campaign finance regulation and how the partisan divide was not always what it is today.

Social welfare groups came under scrutiny in 2000 when Congress, led by Sen. John McCain, R.-Ariz., sought to close a loophole involving 527s, other groups that were running campaign ads without revealing their donors. A pro-Bush 527 called Republicans for Clean Air had hammered McCain with $2.5 million in negative ads during the GOP presidential primary, which the senator ultimately lost.

In June 2000, a McCain-sponsored amendment passed the Senate that required 527s to disclose their donors. Then some House Republicans proposed extending the disclosure requirements to apply to 501 (c)(4), (5), and (6) organizations — social welfare groups, unions, and business trade associations, respectively.

“We need disclosure by section 527 organizations, but when 501(c) groups intervene in the political process, they should disclose what they are doing and who is paying for it as well,” said House Ways and Means Oversight Subcommittee Chairman Amo Houghton, a New York Republican who helped draft a bill to expand disclosure.

Houghton’s bill would have required 501(c )(4) (5) and (6) organizations that spent more than $10,000 per cycle on political ads and other election activity to reveal donors who gave more than $1,000. The proposal met stiff opposition from the nonprofit community, which argued it would have a chilling effect on donations.

But Republicans on the Ways and Means committee 2013- as well as McCain — supported the measure.

Democrats on the committee opposed it. Some argued that expanding disclosure requirements was a “poison pill” designed to make the legislation unpalatable and to prevent any reform from passing. Others said the bill imposed “overly broad and uncertain disclosure requirements” on social welfare groups. A top aide to House Minority Leader Richard Gephardt, D-Mo., told the newspaper Roll Call that the Houghton bill “goes too far.”

Ultimately, the Republican leadership in the House concluded that it did not have the votes to force disclosure for 501 groups. The House approved the narrower bill that had passed the Senate and President Clinton signed it into law in July 2000, closing the 527 loophole.

But lawmakers recognized even then that big donors seeking ways to influence campaigns anonymously could turn from 527s to social welfare groups.

“[Q]uite honestly, I believe these groups are perfectly capable of hiring good tax lawyers and going out and finding another way of getting around this if you aim it at specific tax sections,” said Rep. Mike Castle, R-Del., at a June 2000 news conference, explaining why he supported disclosure requirements for social welfare groups.

Castle left politics in 2011 after losing a GOP Senate primary to Tea Party favorite Christine O’Donnell. Now a partner at law firm DLA Piper, he said this election cycle has vindicated his concerns about anonymous money being routed through social welfare groups.

“You’ve got these groups that can essentially contribute huge sums of money, first of all without limitation and secondly without disclosure,” Castle said. “I think it’s just a terrible injustice to a fair election system.”

Click here for reuse options!
Copyright 2012 The National Memo
  • ludicrous

    Best government money can by.
    Just goes to show what money is really worth.

  • Howz 1

    The real problem is we only have 2 parties that are giant partonage machines instead of working for the peoples benefit

  • Obozo Must Go

    Even if I dont like the speech, I don’t want it limited. Especially by the politicians themselves. Why would a politician want to limit spending or speech? To protect his own butt from competition, that’s why. All these spending rules and regulations actually make it more difficult for challengers, not incumbents. I do see the other side of the coin in that there is both real and perceived possibilities for political corruption. But I contend that this danger is worse under a system where spending is limited and controlled by the very politicians who benefit from that control. The only way to make it fair is to make it completely unrestricted on all sides. If I want to donate $1 million to defeat Obozo or any other leftist nutjob, I should be allowed to have my speech excercised in the form of my donation. Equally, if you are a leftist nutjob and you like Obozo or Nancy Piglosi, and you want to spend a million to have your speech, have at it. No restrictions. But transparency and no foreign money should be the only rules. Who’s donating and how much is all we need to know. We will NEVER get rid of corruption, no matter how many rules or laws are passed. It’s human nature and we cant legislate human nature. All we can do is open up the kimono and let everyone see. Have a nice day!

  • 2lolo

    This been going on for years, Corporation and Wealthy people is buying Politicians everyday.. A Million here a Million there. What’s a Million to a Large Corporations? Nothing!!!! Just write it off on their INCOME TAX.. Now the Wealthy and Corporations have “POLITICIANS PROSTITUTE”…

  • wayneonly

    The real problem is the POWER of big money in politics. But it(big money) wouldn’t be there if it didn’t have influence. So we wind up with a Congress and a President that are bought and paid for by Wall Street, big banks, and multinational corporations. And the “real” people of the United States have no representation in government. But it doesn’t have to be this way. We (the voter) can get big money out of our election process. But first, lets look at what big money has done to our economy in the last few years.

    The recession started in 2008 with the bailout of the “Too Big to Fail” banks. But the cause was the repeal of the Glass-Steagall Act by the Gramm-Leach-Bliley Act of 1999 which was sponsored by the big banks. This bill allowed big banks to invest depositor money in risky securities such as subprime mortgages and other risky mortgage securities. When the banks became too heavily invested in these risky securities they became insolvent. So they went to the government to bail them out. The taxpayer footed the bill and the housing market dropped and homeowners lost millions of dollars in home value and millions of homes went into foreclosure. Home construction dried up and jobs were lost. The stock market tanked and millions of investors lost money. Millions more jobs were lost. Four years later the “Too Big to Fail” banks are bigger and making more money and paying their executives bigger bonuses and more stock options. All this at taxpayer expense. And the homeowner is still left with less value to his home or no home due to foreclosure. And millions are still looking for jobs or had to take lower paying or part time jobs. All because of the greed of big banks and Congress.

    We (the voter) need to become more educated about the way Congress works and the influence of big money on the way Congress legislates. Most bills are written by lobbies (Big bank lobbies, drug company lobbies, oil company lobbies, Wall Street lobbies, etc.). They are sponsored by Congresspeople who are influenced (by campaign contributions from big banks, Wall Street, and multinational corporations). So in a sense their (Congress) vote has been bought. These legislation bills don’t benefit the “real” people of America, they benefit Wall Street, big banks, and multinational corporations. And usually they cost the taxpayer money either directly or indirectly. Then again Congresspeople put “earmarks” in most of these bills. Usually these earmarks either directly or indirectly benefit either the Congressperson or their cronies (campaign contributors). Also, Congresspeople buy or sell stocks based on whether a piece of legislation will pass or fail. Illegal insider trading for every other American, but perfectly legal for a Congressperson. But you can see this is why we get so much legislation that has a detrimental affect on the economy of the “real” American. The interests of Wall Street, big banks, multinational corporations and the 1%ers are seldom the same as the interest of the common (middle class) American.

    Congress has set themselves up as the PERMANENT POLITICAL CLASS. They believe they are the “elite” class and are “entitled” to special privileges and are “above the law”(s) that govern the rest of us. They believe that legislation is big business and that they are there to make themselves and their cronies (campaign contributors) richer. And most often they do that at the expense of the taxpayer.

    So how do we (the voter) combat this situation and gain back our government? We have to educate ourselves and be smarter voters. Three good books to read are: Winner Tale All Politics: How Washington Made The Rich Richer And Turned It’s Back On The Middle Class by Jacob Hacker and Paul Pierson, Throw Them All Out by Peter Schweozer, and Greedy Bastards by Dylan Ratigan. They will open your eyes to what is really going on in Congress. And it may be important who we elect President in the upcoming election, but it is far more important who we elect to Congress in the next two or three elections. Congress has far more influence of legislation and budget than the President does.

    We (the voter) need to start by eliminating the PERMANENT POLITICAL CLASS. We built this class by electing the same Congressperson term after term until they think it is their right to hold the office. So we have to show them that is is not their right, it is an obligation they have been entrusted by the voter. We need to get their attention by voting EVERY incumbent Congressperson out of office as they come up for reelection. We need to be dedicated to this principle until we have gotten their attention and they realize they work for the voter, not Wall Street, big banks and big business. As it becomes less cost affective for big money to buy Congress, they will slowly withdraw their money and lose more of their influence. As big money loses influence the voter will gain more influence in government. This can only be a good thing both for the middle class and for business in general.

    But our (the voter) responsibility doesn’t stop there. We need to let our newly elected Congresspeople know what we expect of them when we send them to Congress. Usually a candidate tells us what they will do when elected (at least what they think we want to hear to vote for them). Once elected, it is up to us to tell them what we expect from them. I have a list of a few things that I would expect. They may not be what others would expect, but here they are.

    1. Get Wall Street and big money out of Congress. Won’t happen overnight and won’t happen completely, but should happen gradually and substantially.

    2. Get the budget under control and start reducing the deficit. Again, this is a gradual process. Nothing happens overnight.

    3. Restore the Glass-Steagall Act so we don’t have to bail out the “Too Big to Fail” banks again. Without this protection it will surely happen again.

    4. Protect the “safety net” for the elderly, the poor, the disabled. (SS, SSI, Medicare, Medicaid, etc). Get rid of the fraud and waste but keep the programs strong.

    5. Revise the tax codes, make them simpler and more equitable and fairer.

    6. Bring back honesty and ethics to government. Congress has not been able to police themselves so we need an outside ethics committee to define and decide what is ethical according to the standards of the American people instead of Congress.

    This is just a start of what could be a peaceful revolution. Some people may think it will never work, some people will say it is too little too late, but you have to start somewhere. Every journey starts with a single step, not all revolutions have to fire a single shot.

  • wayneonly

    Sorry, folks, I set the previous comment up in paragraph form (5or 6) but it came out as one paragraph when I posted. I don’t know why because it usually keeps separate paragraphs when I have posted before.

  • Maricia12

    It is no surprise the GOP flip floped on disclosure of dark money or any other monies. They vote for anything when it looks like it will benefit their party and withdraw support when it looks as if it will benefit the Democrats. Ho hum, The only thing they really get excited about is SEX. We need legislation to require the Republican leaders to undergo a “phychological PROBE” before they can run for office. After all, they can not be capable of making decisions, without a thorough exam, before they vote on such enormous matters that effect the entire country. 🙂