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Your Dark Money FAQ

May 06, 2016 | dark money watch |
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Money and politics is one of the hottest issues in the 2016 election. Candidates across the political spectrum — from Donald Trump to Bernie Sanders — are talking about it.

If you think it’s difficult to figure out how the campaign finance system really works, you are not alone. To make things easier, here are some answers to a few frequently asked questions.

1) What is Citizens United?

Citizens United is shorthand for the U.S. Supreme Court’s 2010 decision in the case Citizens United v. Federal Election Commission. By a vote of 5-4, the court ruled that
corporations and unions could spend as much as they want on efforts to influence voters — as long as they do so independently of campaigns.

2) What is a super PAC?

Officially called independent expenditure-only committees, super political action committees (or super PACs) were created in the wake of the Citizens United ruling. They can take in unlimited amounts of money from individuals, corporations or unions, and spend that money advocating for a candidate or cause.

Super PACs cannot give money directly to candidates or political parties, and they cannot coordinate their spending with campaigns. They are required to reveal their donors.

3) What are “dark money” groups?

Dark money groups are organizations that can spend unlimited amounts of money to influence elections without having to reveal their donors.

Typically these groups are limited liability corporations (LLCs) or tax exempt organizations that engage in political activity. These politically active nonprofits are known respectively by their IRS tax codes as 501(c)(4) and 501(c)(6) groups — or, in plain English, as social welfare organizations and trade associations.

Dark money groups can either spend the money they receive on ads and other forms of communication to support or oppose a candidate, or they can give that money to super PACs. Those super PACs have to disclose the name of the organization making the contribution, but not that organization’s donors.

4) Are there any limits on campaign contributions?

Yes. There are limits on contributions to individual candidates and political parties. And corporations and unions are prohibited from contributing directly to candidates, as are dark money groups.

5) Why don’t 501(c)(4) groups have to reveal their donors?

In 1956, Alabama subpoenaed the NAACP for the names and addresses of its members. The NAACP refused to hand over the information, saying that to do so would violate its fourteenth amendment rights.

The case went to the Supreme Court where, in a unanimous decision, the court ruled that Alabama’s requirement violated the NAACP members’ constitutional right to freedom of assembly.

6) Has any “dark money” group ever opened the books on its finances?

Yes. Anonymous Shell Corporation did.

If that name rings a bell, there’s a reason. Stephen Colbert created the 501(c)(4) on his Comedy Central show in the fall of 2011. He later renamed it Colbert Super PAC SHH.

Earlier that year, Colbert had created his own super PAC, aptly named Colbert Super PAC. Its motto was: “Making a better tomorrow, tomorrow.” Colbert then used his shell corporation to help viewers understand how a 501(c)(4) group could make donations to a super PAC without revealing its donors. He also walked viewers through some of the more shady aspects of 501(c)(4)s and campaign finance.

The super PAC raised nearly $774,000, which Colbert eventually gave to charity.

7) Who is responsible for enforcing campaign finance laws?

The Internal Revenue Service and the Federal Election Commission.

The FEC is responsible for enforcing election laws. But the current commissioners are deeply divided along partisan lines and cannot agree on most enforcement actions. One commissioner described the agency as “worse than dysfunctional.”

The IRS is responsible for determining whether organizations qualify for tax-exempt status and for making sure politically active nonprofits comply with the tax agency’s regulations. But the IRS has not clearly established limits on political activity by these nonprofits, and Congress barred it from issuing such rules this year. According to The Center for Responsive Politics, the IRS rarely audits these nonprofits to see if they are engaging in too much political activity.

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