The Cost of Nonprofits

Ever since the Citizens United decision in 2010, American elections have been deluged with campaign spending conducted through the much-maligned super PACs. But at the very least, super PACs are required to disclose their donors. The same does not hold for 501(c)(4) organizations that were allowed to spend unlimited, anonymous funds on elections so long as 51 percent of the funds were going toward “social welfare.” But a newly proposed IRS regulation would rightly do away with this dangerously opaque influx of money—and it couldn’t come soon enough.

Crossroads GPS, the conservative advocacy group runby the Republican king-maker Karl Rove, spent more than $70.5 million alone on Republican candidates. Social welfare 501(c)(4) groups collectively spent a staggering $305 million in the 2012 election cycle, all without the donor disclosure needed for other political committees. When a loophole is largeenough to let through hundreds of millions of dollars in mysterious spending, something has gone terribly wrong.

That loophole was not created through an act of Congress, but through an internal rule at the IRS that could soon be corrected. A 501(c)(4) organization is classified by the IRS as one that “is operated exclusively for the promotion of social welfare.” In contrast to the stark language, the 51-percent rule went largely unchallenged, but now the vague standard has proven itself to be inadequate for policing the new political landscape.

Though it appears that large-money races are here to stay given the Supreme Court’s recent attitude toward campaign finance reform, there is no need for these donations to be given in secret, where the media and electorate are left in the dark on the possible motivations of their elected officials.

Opponents of campaign finance regulation may argue that capping donations and mandating donor disclosure infringes on free speech, but how can the marketplace of ideas function if we don’t know who is selling the wares? A report on the environmental impact of the Keystone Pipeline would elicit different reactions if it were written by Transcanada, the oil company that stands to make billions from its completion, than if it were written by Greenpeace.

But when wealthy individuals and corporations are able to funnel their dollars anonymously, that essential element for effective public discourse is missing. Instead, the public is left without a clue as to the motives lurking behind the slickly-produced ads. Candidates implicitly bend their ears toward the increasingly necessary independent expenditure groups to ensure their political survival.

All this happens under closed doors. But light can be shone on this murky area of campaign finance law with a simple reinterpretation of the rules—one that does not run afoul of federal laws or Supreme Court decisions.

It might be a simple change, but it’s an important step forward.