Following the Chamber of Commerce down the campaign finance rabbit hole


US Chamber of Commerce LogoA New York Times report that New York’s Attorney General Eric Schneiderman is subpoenaing records of tax-exempt groups involved in politics underscores the difficulty of tracking campaign spending to its source following the 2010 Citizens United decision, a ruling that the Supreme Court reaffirmed this week. 

According to the Times story, Schneiderman is seeking emails and bank records to determine the legality of financial transactions made between the National Chamber Foundation and one of its donors, the Starr Foundation, and the U.S. Chamber of Commerce. The business trade association received $18 million from the Chamber Foundation in 2003 and 2004, the Times said. In a complaint filed last year, a number of watchdog groups alleged that the money was illegally used for political purposes. Schneiderman's office did not return a call from the Sunlight Foundation seeking comment on the report, but the Chamber appeared to tacitly confirm the investigation when it called the subpoenas politically motivated.

Some of the political influence exercised by the figures at the center of the reported investigation is obvious:

  • The U.S. Chamber of Commerce is a political heavy hitter. Since 1990, employees and political action committees of the giant trade association and its affiliated organizations have given a grand total of $62.9 million to state and federal political candidates and committees. According to Sunlight's Influence Explorer, the Chamber has spent more than $544 million on lobbying Congress.
  • U.S. Chamber of Commerce PAC has hosted at least 14 fundraisers since 2008, according to Political Party Time; Including a $1,000 a plate breakfast fundraiser with Mitch McConnell, a recent champion of donor secrecy.
  • The Chamber also creates a plethora of its own political advertisements. Electioneering by the U.S. Chamber of Commerce has exceeded $3 million so far, and the group made its first foray into independent expenditures, spending $95,000 supporting Orrin Hatch, R-Utah.
  • Also apparent is the political reach of Starr Foundation president Maurice "Hank" Greenberg, forced out of his former post as head of the AIG Corp., in the midst of an accounding fraud investigation. Greenberg has co-hosted at least one fundraiser for Mitt Romney. He has given $377,000 in political donations to state and federal candidates and political groups since 1990, including $45,000 given to AIG’s PAC.

But other aspects of the influence of groups like the Chamber of Commerce are masked by hidden transactions and cannot be revealed without arduous research and subpoenas:

According to the original complaint that U.S. Chamber Watch, a labor-related group, submitted to the Internal Revenue Service: “The Starr Foundation funneled significant charitable dollars through NCF through CCUSA, a non-charitable organization. It appears that the Starr Foundation funds were intended to support CCUSA’s operations. These operations include substantial lobbying and campaign intervention in support of an agenda that advanced the private interests of AIG and its CEO, Hank Greenberg—both insiders with significant ties to the Starr Foundation.”

The amended complaint, which was also signed by Citizens for Responsibility & Ethics in Washington, the Main Street Alliance, and Corporate Ethics International, added private jets and excessive compensation to U.S. Chamber President Thomas Donohue.

One reason subpoenas may be necessary to prove or disprove the charges: Current campaign finance law make this sort of spending  extremely hard to track.

For many non-profit organizations, the only way to figure out funders is to sift through a combination of FEC and IRS records. Unfortunately the records do not reference one another. Money is cycling from one organization to another, each with different restrictions and tax rules.

The FEC records most federal political spending but does not keep track of organizations' tax status in a way that the public can see which rules varous groups have to follow. There are some kinds of political spending that is never reported to the FEC. The FEC does not track issue ads outside electioneering periods (generally 30 days before a primary election and 60 days before a general election), or online issue advocacy at any time. And while the disclosures that the FEC requires are available throughout the campaign season, the IRS requires nonprofits to file their tax returns only once a year, and offers them eight months worth of extensions if they want to file late.

The Center for Responsive Politics has a great resource listing outside spending groups and their tax status. Unfortunately, these outside spending groups are being created faster than researchers and journalists can keep up. There are many groups that do not have a tax status listed and or if the organization has more than one group, it will list several tax statuses.

The rabbit hole

FreedomWorks Logo

For an example of chasing the money down the rabbit hole, look at Freedomworks on Follow the Unlimited Money.

Starting with these records, we can see that Freedomworks for America is a super PAC. It therefore must follow section 527 of the tax code, and, because it registered with the FEC as an indpendent expenditure-only committee (the more technical name for a super PAC), it must file regular accountings of its finances to the FEC. Freedomworks for America then, reported $4.5 million in political spending to the FEC. But among the group's donations is $1.8 million in in-kind donations from “Freedomworks”.

What's Freedomworks? FEC records list Freedomworks For America, the super PAC mentioned above, and Freedomworks Inc. Political Action Committee. This is a traditional political action committee that abides by limits on spending and donations, files monthly with the FEC, and, if it chooses, can contribute to federal candidates. The PAC had $1.1 million cash on hand at the end of May, its most recent filing.

Perhaps the Freedomworks that gave the $1.8 million, then, is a nonprofit organized under section 501(c) of the tax code. To find out, we need to look at tax records. A search for this in the IRS database yielded no results, though their are some hits on GuideStar, a great resource for finding information on nonprofits, including a group's 990, the publicly available tax form that indicates what kind of 501(c) organization the group is. However, searching for Freedomworks, we are presented with a new problem too many results: Freedomworks Foundation, Freedomworks Incorporated, Freedomworks Inc. and CSE Freedomworks Inc., none of which are exactly “Freedomworks.”

Door No. 1

Freedomworks Foundation, is 501(c)3, meaning that it is a charitable organization. Contributions to it are tax deductible and the charity may not make political expenditures or contributions but may spend a limited amount of its budget on lobbying. The 2010 tax return is the most recent available for Freedomworks Foundation, shows that Freedomworks Foundation is located in Washington D.C., does not have any lobbying expenses and has $2.6 million in net assets. The Freedomworks Foundation gave Freedomworks Inc. $2.3 million for sharing facilities, sharing paid employees, reimbursements and fundraising solicitations for Freedomworks Inc. In a mere two years or so, records will become available showing how much Freedomworks Foundation has given Freedomworks Inc. this year.

Door No. 2

Freedomworks Incorporated is also a 501(c)3 and its 2010 tax return–again, form 990–shows net assets of $258,000. The address is in Minnesota. It states its purpose is to help former prisoners reenter society as “productive citizens and disciples of Jesus Christ.” The list of board members does not overlap with Freedomworks Foundation. The group does not seem to have any relation to Freedomworks Foundation or the Freedomworks PAC or Super PAC. 

Door No. 3

Freedomworks Inc., had $3.5 million in net assets, according to its 2010 tax return. It is a 501(c)4 social welfare organization. These nonprofits may make political expenditures; contributions to these types of organizations are not tax deductible, and, 501(c)3 groups, donors names are not made public. The 990 reveals wide overlap between Freedomworks Foundation and Freedomworks Inc.: Richard Armey, Matt Kibbe, Judith Mulcahy, Wayne Brough, Mary Byrne, Max Pappas, Richard Walker, John Jordan and Adam Brandon appear as leadership for both groups. Under the section of the form which requires nonprofits to list related tax-exempt organizations, Freedomworks Inc. lists: Freedomworks Foundation, Freedomworks PAC, Oregon Freedomworks PAC, Taxpayers Defense Fund, Freedomworks Issues PAC, The Freedomworks Fund, CSE Freedomworks Inc. and League of Freedom Voters. All of these entities are listed at 400 North Capitol Street, NW # 765, Washington, DC.

Door No. 4

CSE Freedomworks Inc is listed by GuideStar and on the 990 of Freedomworks Inc., but does not have a 990 on file with GuideStar.

It is also possible that a new group named "Freedomworks" was created in the last two years. 

The rabbit’s den

Congratulations! You have completed research on one constellation of organizations, and gotten only more questions. To find the money in this election simply repeat this process 101 more times for each organizational donor to a super PAC. You can find this list at Follow the Unlimited Money. Then, you will know where their $49 million went. Or, maybe not. 

Of course, that doesn’t include groups that disclose no donations. As of Monday that totaled another $12.4 million, months before Labor Day, the traditional start of the big money expenditures.