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Gambit > bestofneworleans.com > JUlY 26 > 2011
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In January 2010, the Supreme Court dealt a major blow to McCain-Feingold. Ruling in Citizens United v. Federal Election Commission, the court said the government cannot prevent corporations and unions from spending unlimited money to support or criticize specific candidates. Drawing on this decision in March 2010, a federal appeals court ruled in SpeechNow.org v. Federal Election Commission that political committees making independent expenditures — that is, spending not coordinated with or directed by a candidate’s campaign — could accept donations of unlimited size. Together, the rulings super-charged some existing fundraising groups and paved the way for new ones. The FEC, deadlocked for months on issues of disclosure and foreign money, has not yet written new rules interpreting the court decisions. That’s left the field open for political strategists and lawyers. “We’re in very dangerous territory,” said Fred Wertheimer, president of Democracy 21, a campaign-finance watchdog group. “There’s one word to describe what’s going on in the campaign-finance area: The word is ‘obscene.’ And it’s going to result in scandal and corruption and, eventually, opportunities for reform.” Advocates say the changes are needed to protect the First Amendment rights of corporations and certain nonprofits. “Campaign-finance laws inhibit free speech,” said Sean Parnell, president of the Center for Competitive Politics, which views most campaign-finance laws as government meddling. “The First Amendment is not a guarantee that all voices will be heard as often or as effectively as all other voices. It’s just a guarantee that the government won’t step in and say, ‘OK, you’ve spoken enough.’” IN ThE OlD DAyS ThERE WERE JUST PACS — political action committees that could accept donations of up to $5,000 from individuals and pass the money along to the candidates and parties they chose. Now there are Super-PACs — committees that, thanks to the court decisions, can raise and spend unlimited sums of money from individuals, corporations, unions and other groups. Known officially as “independent expenditure-only committees,” they can’t donate directly to candidates but can promote them and attack their opponents, so long as they don’t coordinate with any candidate or political party. Super-PACs are still new, having debuted by spending more than $80 million on the 2010 midterm elections. Republicans pioneered the groups, but Democrats jumped in, too. Many of these new entities have innocuous-sounding
names that make it hard to guess their true political intent: Concerned Taxpayers of America, Citizens for a Working America, We love USA. (And then there’s comedian Stephen Colbert’s new SuperPAC: Americans for a Better Tomorrow, Tomorrow.) More than 100 are now registered with the FEC. like ordinary PACs, Super-PACs must disclose their donors. But because of time lags in reporting, months can go by before the identities of million-dollar donors are revealed; some weren’t disclosed until after the 2010 midterm elections. loopholes also can allow donors to stay hidden, such as when money comes from a nonprofit that doesn’t have to disclose how it’s funded. last month, the campaign-finance watchdog group Center for Responsive Politics found five Super-PACs that attributed a vast majority — and in some cases all — of their funding to affiliated nonprofits that are not required to reveal donors. Most PACs will file their first fundraising reports of the year Friday, but two Super-PACs that had to file early reported raising more than $4.6 million. American Crossroads, which Rove formed to support Republican candidates, raised $3.8 million. The house Majority PAC, aimed at reclaiming the Democratic majority lost in 2010, raised $800,000. NAMED FOR ThE TAx CODE gOvERNINg them, “527” groups were sort of a precursor to Super-PACs. historically, 527s had a choice — they could register as PACs and give directly to candidates under FEC limits, or they could focus on issues, allowing them to raise and spend unlimited amounts. These issue-oriented 527s were not supposed to promote or attack candidates directly, and they often focused on hot-button topics such as guns or abortion. Strict 527 groups first played a major role in the 2004 election, blurring the line between advocating for an issue and a candidate. Three paid fines for breaking laws barring them from directly supporting or criticizing candidates. Because of the recent court rulings, some 527s have decided to become Super-PACs so they can both raise unlimited amounts and advocate for candidates. That said, 527 groups still played an important role in the 2010 mid-term elections, spending more than $415 million, according to the Center for Responsive Politics. AlSO NAMED FOR ThEIR SECTION IN the IRS tax code, tax-exempt 501(C) organizations include charities, civic leagues and unions. (leave it to the IRS to make their descriptions resemble algebra homework.) Charities that fall under the 501(c)(3)
heading are not allowed to be involved in political campaigns, but other 501(c) organizations are, at least to a certain extent. That includes 501(c)(4) “social welfare” organizations, a class that includes groups like the AARP and the NAACP; 501(c)(5) labor unions, like the Teamsters; and 501(c)(6) trade associations, like the U.S. Chamber of Commerce. These groups could always pursue political activities while raising unlimited funds and without disclosing donors — but only if their primary purpose wasn’t politics. The Sunlight Foundation described them as “perhaps the most opaque political players since pre-Watergate days of anonymous cash contributions to candidates.” The best-known of these groups is the Tea Party-supporting Americans for Prosperity, a 501(c)(4) group co-founded by billionaire David Koch, who with his brother Charles is credited with pioneering some of the bolder new campaign fundraising tactics. Why donate anonymously when influence is the goal? Experts say secret giving can shield corporations from blowback when supporting controversial causes, and it can make a corporate-funded effort appear to be grassroots. Plus, no rule prevents donors from telling politicians directly about their support if it suits their needs. “Say I gave a million dollars to Crossroads gPS,” said Rick hasen, a law professor at the University of California-Irvine who runs Election law Blog. “you can tell the whole Republican leadership that. ProPublica can’t find it, but the people you are trying to influence can find it.” So, to review: Super-PACs focus only on politics but must disclose their donors. The 501(c) groups must not have politics as their primary purpose but don’t have to disclose who gives them money. It gets even more interesting when the two groups combine powers. Say some like-minded people form both a Super-PAC and a nonprofit 501(c) (4). Corporations and individuals could then donate as much as they want to the nonprofit, which isn’t required to publicly disclose funders. The nonprofit could then donate as much as it wanted to the SuperPAC, which lists the nonprofit’s donation but not the original contributors. This isn’t just hypothetical. Karl Rove set up this model with the Super-PAC American Crossroads and the nonprofit Crossroads gPS. While some Democrats complain about the influence of so-called “dark money,” others have started to follow in his footsteps. Now the IRS seems to be stepping in — or thinking about it. The IRS in May warned major funders of 501(c)(4) groups that their donations could be subject to gift taxes, but the agency announced last