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November 5, 2018

Dark Money 101: Secretive Political Donations Grow Since Citizens United

Dark Money 101: Secretive Political Donations Grow Since Citizens United

November 5, 2018
Published By American Promise

Its name comes from the secrecy that surrounds it, but its role in elections is not so secret.

We’ve all heard mention of dark money in politics, but many Americans aren’t clear on exactly what dark money is—which is by design—and how important its influence is on our elections. Dark money is the term used to describe donations to some political nonprofits—primarily 501(c)(4) and 501(c)(6) organizations—and corporate entities such as limited liability companies that are not required to disclose their donors. Since the U.S. Supreme Court’s Citizens United decision in 2010 removed restrictions on their political donations, these organizations have been spending increasing amounts on campaigns.

As campaign spending continues to hit new heights—topping $5 billion for this week’s midterm contests—so do financial contributions from unknown donors. That amount for the 2018 midterms included more than $628 million in outside spending from politically active nonprofits, according to the Center for Responsive Politics, of which more than $134 million came from dark money groups. (Note that these amounts typically rise as campaign spending reports are completed after the election.) Dark money’s lack of transparency means we don’t know who is behind political messages, or even that these donors are Americans—a fact that’s increasingly being recognized as a potential national security threat.

Dark money is being employed by a relatively small group of organizations, giving these donors outsize influence over political outcomes. According to a report earlier this year by Issue One, of the $800 million spent by dark money groups from January 2010 to December 2016, more than $600 million came from the top-spending 15 dark money groups. The report notes these big-spending organizations hold increasing sway over candidates and elected officials: “Dark money groups are influential in part because they aim to define candidates and issues before, during and after an election.”

The Organizations Behind Dark Money

So just who are these organizations collecting and spending dark money on elections? The Center for Responsive Politics provides this overview:

  • 501(c)(4) groups: Commonly referred to as “social welfare” organizations, these groups may engage in political activities as long as the activities do not become their primary purpose. The IRS has not defined what “primary” means, or how a percentage should be calculated, so the current de facto rule is 49.9 percent of overall expenditures. Donations to these groups are not tax-deductible.
    • Prominent groups: National Rifle Association, Planned Parenthood, Sierra Club
    • Lesser-known groups: Crossroads GPS, Patriot Majority, American Future Fund
  • 501(c)(6) organizations: These business leagues, chambers of commerce, real estate boards and boards of trade may engage in political activity as long as they adhere to the same general limits as 501(c)(4) organizations. Donations to these groups are not tax-deductible.
    • Prominent groups: U.S. Chamber of Commerce, American Medical Association, PhRMA
    • Lesser-known groups: Freedom Partners Chamber of Commerce, Americans for Job Security
  • Limited liability companies (LLCs): These business structures sometimes are established for political purposes to help disguise the identity of a donor or source of money spent on behalf of a political candidate. LLCs are governed by state law, although in some states minimal information is necessary to file the required articles of incorporation. This lack of transparency and accountability has helped some LLCs disguise the sources of millions of dollars in political spending each election cycle.

Dark Money’s Influence

What does growing dark money spending mean for the average American citizen? These donor groups increasingly have a louder voice in campaigns and can dominate election conversations through attack ads and other tactics.

Dark money is bipartisan, working to support candidates and elected officials on both sides of the political aisle. As profiled in the Issue One report, the top 15 dark money groups include Americans for Prosperity, the politically active nonprofit of billionaire industrialists Charles and David Koch; Crossroads GPS, a GOP-aligned group associated with former George W. Bush White House advisor Karl Rove; and Patriot Majority USA, an organization led by political operatives with close ties to Democratic Senate leaders Harry Reid and Chuck Schumer.

Calls for more regulation of political donors are also increasingly bipartisan, as a growing number of Republican, Democratic and independent officials seek more transparency in U.S. campaigns so donors are known to the public and voters are more informed of who’s pushing what messages. These include more than 250 candidates across the United States and across the political spectrum who have signed the American Promise Candidate Pledge, promising to use their office to advance the 28th Amendment and control campaign spending.

Even the nation’s top court concurs. While the Supreme Court upheld the rights of corporations to free speech and unlimited political spending on independent advertising in its Citizens United decision, eight of the nine justices agreed that disclosure of money in politics was important because “transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

What can be done to reduce the role of dark money? Some call for a restructuring of the Federal Election Commission, which is the main federal regulator of political spending. Some say the Internal Revenue Service could strengthen its regulations of nonprofit organizations and revoke tax-exempt status as appropriate.

But American Promise and other supporters of transparency see another route: amending the Constitution to set reasonable spending limits in U.S. elections. Our nation has employed Constitutional amendments to solve fundamental rights issues 27 times in the past—seven of which explicitly overturned Supreme Court rulings. Approval of the 28th Amendment would rebalance politics and government by putting the rights of individual citizens before dark money donors and other sources of concentrated wealth.

Note: American Promise is a 501(c)(4), but we do not accept undisclosed funding sources. We disclose all funding sources. Find our funders here. 

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