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Friday, October 7, 2011

The 501 Thicket

Our chapter on elections and campaigns discusses campaign finance, and our election update mentions the impact of Citizens United. As we have previously discussed here, Super PACs have become a major part of the scene. And in 2012, some of them are arising to support specific presidential candidates. At ProPublica, Marian Wang explains an even newer development:

Perry’s allies also just launched a new nonprofit, Citizens for a Greater America, which will also be able to take in unlimited funds while keeping donors secret. iWatch News posted a fact sheet [11] on the new group that it traced to a Perry fundraiser [12] who had received it from Mike Toomey, Perry’s close ally [13] and former chief of staff.

The efforts could be the start of a new trend in campaign finance—nonprofits started by allies of a specific candidate that can be used as conduits for undisclosed donations. Together with those so-called candidate-specific super PACs [14], the two groups make a powerful pair, allowing supporters to donate to support specific candidates with few restrictions and, if so desired, with no disclosure.

As we explain in our guide to campaign finance [15], the nonprofit groups, or 501(c)(4)s, can't be primarily involved in politics but can donate to super PACS, and they don't have to publicly disclose their donors. Meanwhile, super PACs must disclose their donors, and they can’t coordinate their spending with candidates’ campaigns, but they can run ads directly in support of candidates and they can take unlimited money. If a nonprofit in turn passes along donations to a super PAC, the original donors, whether an individual or corporation, can stay hidden. (Campaign finance reform groups have filed complaints [16] with the IRS against both Democratic- and Republican-aligned nonprofits, alleging that the groups are violating their tax-exempt status by crossing the line into political activity and partnering closely with their explicitly political sister super PACs.)