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Dark money in the twilight of 2011

by Lindsay Young and Breanna Edwards

Dark money has haunted the psyche of good government reformers. Recent changes in campaign law raise the prospect of unlimited donations, routed to political action committees through 501(c)4 "social welfare" organizations that don't have to disclose contributors' names. That could allow innocuously named groups to shelter powerful individuals and corporations and the influence they're exercising to determine who wins a federal office.

So far, that scenario has been the dog that didn't bark, but that doesn't mean it has been defanged.

Sunlight looked at the super PAC filings in search of 501(c)4 dark money and found just one outright donation listed for 2011. More common were in-kind contributions in the form of staff and office space shared by 501(c)4s with sister organizations. Total receipts reported by super PACs from 501(c)4s amounted to $1.6 million, a number dwarfed by the overall spending figures. Still, it's not insignificant -- and it means super PACs have that much more money to spend on ads because their operating costs have been covered by other organizations.

"Super PACs are still a relatively new phenomena, they are still evolving. Under the current rules, there are a multitude of ways to make anonymous contributions," says Mimi Marziani, counsel for the Brennan Center for Justice. Other routes for dark money are emerging:

  • Some PACs have been getting donations from companies that only exist on paper or, as the New York Times reported, are very hard to find information about .
  • And, as Dave Vance of Campaign Legal Center points out, social welfare organizations "can spend tens of millions dollars of dollars on TV ads anyway, so they don't need to give to another source." One example of a 501(c)4 entering a political race without having to report donors: Citzens for a Working America Inc., reported spending $475,000 on ads supporting Mitt Romney in Iowa, but listed no donors to the FEC at the end of the year. That's because 501(c)4s do not have to disclose the names of political donors names unless they explicitly earmarks his or her money for a particular political advertisement. The FEC last year was asked to change this regulation to force broader disclosure of donor names, but declined to do so.   
  • A study this week by the Washington Post using television advertising records provided by Kantar Media-CMAG suggests that more than a third of political advertising aired in the presidential campaign so far this cycle as been underwritten by social welfare groups who will never have to disclose the sources of their funding. 

Despite Stephen Colbert setting up a shell corporation on his television show television to satirize the campaign finance system, the super PAC he created, Americans for a Better Tomorrow, Tomorrow, did not receive any donations from the new entity in the fourth quarter of 2011.

But some of the entities that are the targets of Colbert's jokes appear to be taking advantage of the opportunities they have not to name names. Donors to Crossroads, the combine created by GOP strategists Karl Rove and Ed Gillespie, seem to prefer anonymity. As CNN noted, Crossroads GPS, the 501(c)4 that does not disclose its donors, raised $32.6 million in 2011. That is more than the super PAC, American Crossroads, which raised $18.4 million during the same period.

Notably, American Crossroads had the only monetary donation from a 501(c)4 that Sunlight Foundation could find. Ironically, it was not from Crossroads GPS, the sister organization, but the $25,000 donation came from the League of American Voters Inc. This is 0.2 percent of the $11.6 million they reported in their last filing. The League of American Voters Inc. sells voter lists. League of American Voters did not return a call from Sunlight seeking information on whether the contribution was in-kind or cash. 

In the most recent filing by the Freedomworks for America super PAC, 61.8 percent of its itemized donations came from "Freedomworks" -- presumably the 501(c)4, though Sunlight's calls to verify this were not returned. The donations listed came in the form of in-kind contributions of staff, overhead, travel and web services. 

Priorities USA Action, the super PAC that President Obama's campaign manager is now urging donors to support, showed more than $215,000, paid by the 501(c)4, Priorities USA. 

Club for Growth Action, a super PAC, received $40,000 worth of in-kind support from its sister organizaiton, Club for Growth, in 2011.

Campaign Legal Center & Democracy 21 have urged the IRS to enforce laws that make sure that 501(c)4 organizations are not political organization cloaked in the protections of a social welfare organization. They have requested an IRS investigation for American Action Network, Americans Elect and Crossroads GPS to reexamine the groups' eligibility to be 501(c)4. Sunlight is backing legislation that would require fuller and quicker disclosure of donors.

Rick Hansen, wrote in his Election Law Blog, "The key is to stop 501(c)4s from becoming shadow super PACs. Yes, campaign finance reform community, it has become this bad: I want more super PACs, because the 501(c)4 alternative is worse!"