Taking Action against 'Dark Money' in Politics

Taking Action against 'Dark Money' in Politics

The Obama administration said on Tuesday it is taking action to curtail the growing influence of "dark money" in U.S. politics.

The Obama administration said on Tuesday it is taking action to curtail the growing influence of "dark money" in U.S. politics. But doubts arose almost immediately as to whether the new proposed guidelines would work as intended.

The new rules are intended to address the growing use of social welfare groups, referred to as 501(c)4s for where they are listed in the tax code, to spend money independently in campaigns. After the Citizens United decision by the U.S. Supreme Court that allowed for corporations to spend money directly in political campaigns, these social welfare groups became the preferred vehicle because they allowed donors to remain anonymous.

The most famous of these on the national scene is Crossroads GPS, founded by Karl Rove. But there are examples of these groups in Texas as well. The best-known are Texans for Fiscal Responsibility, which is affiliated with Michael Quinn Sullivan's Empower Texans, and the Texas Organizing Project, which has received big donations from trial lawyer Steve Mostyn.

"Administration officials described the new proposal as a response to complaints — including objections from the Treasury’s own inspector general after the Tea Party controversy — that the existing regulations were too vague, leading to inconsistent or arbitrary enforcement," reported The New York Times' Nicholas Confessore.

He added: "The final guidance could also include a more precise definition of how much political activity a 501(c)4 group is permitted to engage in while still maintaining its tax exemption. Many election lawyers and their clients use an unofficial rule of thumb: If a tax-exempt group spends less than 50 percent of its budget on political activity, then its primary purpose is not winning campaigns. Some activists have argued that a rule requiring 501(c)4s to spend no more than 15 percent of their budgets on political activities would be closer to the letter and spirit of existing law."

The Times story noted that spending by political nonprofits has soared in recent years — increasing from $5.2 million in 2006 to $300-plus million in 2012.

And that might prove the biggest problem for anyone trying to stop this "dark money." There's just too much of it, and critics say the cash will just find different conduits to enter political campaigns.

Byron Tau and Lauren French of Politico list several ways in which the new guidelines might soon be circumvented. The quickest and easiest way would be for these political nonprofits to just form different kinds of entities to spend on political races.

“If 501(c)4s become an inconvenient vehicle, I have no doubt that funders will find a different vessel and 501(c)6s and LLCs would be likely suspects,” former Federal Election Commission associate general counsel Kenneth Gross told Politico.

Other loopholes exist in the proposed guidelines, including one described in the Politico piece as a "gift to Karl Rove."

While impossible to say at this point how it will all play out, it's probably safe to say that the fight over these new guidelines will create an occasion for yet another bruising fight between Republican and Democratic partisans. And it won't be decided anytime soon. The Times noted that the final rules most likely won't be adopted until after the 2014 midterm elections.

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