Eliminate Secret, Unaccountable Money

In addition to super PACs and other funds spent due to Supreme Court rulings, a growing volume of political spending comes from groups that do not disclose their donors. These “dark money” funds play an increasing role in elections.

Hundreds of millions of dollars of this secret money will be spent in the 2016 campaign. A few years ago, this tide of dark money would have been unimaginable. Today, it represents one of the biggest threats to democracy.

In the 2006 midterm election (the last before Citizens United), dark money groups spent almost nothing on elections.[1] By 2010 they spent $105 million (adjusted for inflation), and in 2014 it was $226 million.[2] In 2014, close to 60 percent of nonparty outside spending in the 11 most competitive Senate races came from groups that did not fully disclose their donors.[3]

Keeping voters in the dark about who is trying to sway them eliminates one of the last remaining checks on corruption by special interests. The most pressing problem at the federal level is that groups that are not classified as political committees — and therefore are not required to disclose their donors — can still engage in unlimited election spending. Such groups are often organized under sections 501(c)(4)-(6) of the tax code.

Proposal: Action in Congress

The lack of sensible disclosure rules falls squarely at the feet of Congress and the Federal Election Commission (FEC). The next president should support, and Congress should pass, legislation that requires disclosure for any person or group that engages in election-related spending, regardless of whether they are a political committee. The DISCLOSE Act, which has been introduced several times and fell just short of passage in 2010, would require any group that spends $10,000 or more on campaign expenditures to report that spending within 24 hours and disclose who gave $10,000 or more to the organization.[4] Some states, such as Connecticut, already have similar laws.[5]

While it is critical to reveal the identity of election funders, it is most helpful for voters if disclosure appears on political ads themselves — rather than having to search online or hope the press will research and publish the relevant information. Many ads already state whether they are paid for and/or authorized by a candidate or another group. But some states and cities have gone further, requiring ads from outside groups to list their largest contributors.[6] This helps voters by displaying funders’ real identities, rather than merely listing a group’s usually anodyne, uninformative name.

Proposal: Executive Actions

Even without the cooperation of Congress, the next president can take significant steps by ordering or encouraging executive agencies to increase disclosure and ensure that corporations and other groups follow existing law.

a. An Executive Order requiring federal contractors to disclose political spending

The president should issue an Executive Order requiring all federal contractors to disclose their political spending.[7] While President Obama has considered issuing such an order, he has not yet done so.[8] Requiring such disclosure would be an important safeguard, letting voters know whether corporations that win federal contracts have spent money in support of the president or members of Congress who hold sway over contracting decisions.

b. An SEC rule requiring companies to disclose election spending to stockholders

The president could request that the Securities and Exchange Commission (SEC) require publicly-traded companies to disclose their political spending.[9] Shareholders should know how companies are spending their money to help candidates get elected.[10]

c. An IRS rule limiting nonprofit political activity

The IRS can play a large role in bringing sunlight to elections. A principal reason that many groups can hide their contributors is because they are organized under sections 501(c)(4)-(6) of the tax code. Although the law says that groups created under one of these sections must be organized “exclusively for the promotion of social welfare,” the IRS long ago adopted a rule allowing these organizations to engage in political activity as long as it was not their primary purpose.[11] But the IRS has not been clear about what qualifies as political activity or precisely defined what “primary” means. After Citizens United, the rule has been abused, with prominent organizations seeming to assume they may spend 49 percent of their budget on political advertisements.[12] The IRS could ameliorate the worst effects of dark money by writing a new rule that (a) clarifies the definition of political activity, and (b) sets concrete limits on how much 501(c)(4)-(6) groups can spend on political activity.[13]

d. An FCC rule to ensure the accuracy of disclaimers on election advertisements

Finally, the president should encourage the Federal Communications Commission (FCC) to update its rules to require groups running political ads to provide proper and fully truthful disclaimers. Currently, people or organizations paying for ads can create groups with innocuous names so the true identities of their funders are not displayed in the required disclaimer. Yet the FCC clearly has the authority to “look beyond the disingenuous names of these political organizations and require disclosure of the true identities of the ads’ funders.” Doing so would prevent a common and damaging abuse of current law.[14]

Why This Can Be Achieved

Disclosure is one of the few campaign finance regulations embraced by the anti-regulatory Roberts Court. As Chief Justice John Roberts, no friend of most campaign finance laws, pointed out in 2014’s McCutcheon decision, disclosure helps prevent “abuse of the campaign finance system.”[15] Justice Antonin Scalia has echoed these sentiments. “Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed,” he wrote. “For my part, I do not look forward to a society which, thanks to the Supreme Court, campaigns anonymously and even exercises the direct democracy of initiative and referendum hidden from public scrutiny and protected from the accountability of criticism.”[16] Yet that is exactly the world in which we now live.

In recent years, states have pushed back against the secret money trend by expanding disclosure requirements. According to the National Conference of State Legislature, in 2015, state legislators introduced 785 bills dealing with campaign finance reform, and nearly half of those bills specifically dealt with disclosure.[17] Montana recently enacted a disclosure bill that requires all groups engaged in election spending to disclose how they are spending and the source of that money.[18]

The American public also strongly supports disclosure of election spending. A May 2015 New York Times/CBS News poll found that three-quarters of Americans, regardless of party, believe outside spenders should publicly disclose their donors.[19]

Resources

• Election Spending 2014: Outside Spending in Senate Races Since Citizens United: Analyzes spending trends in Senate elections since the 2010 Citizens United decision.
   
• Requiring Government Contractors to Disclose Political Spending: An explanation of why the president should issue an executive order mandating government contractors to disclose political spending.
   
• Center for Responsive Politics: Political Nonprofits (Dark Money): Latest data on the spending of politically active nonprofits.
   
• Letter to the Internal Revenue Service, February, 2014: Explains why the IRS should create a clear definition of political activity for nonprofits.

Next: Strengthen Rules Preventing Candidate Coordination with Super PACs