The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.
Showing posts with label 501 (c)(4). Show all posts
Showing posts with label 501 (c)(4). Show all posts

Tuesday, September 8, 2015

Dark Money And The Buying Of America

Dark Money  

In the politics of the United States, dark money is a term for funds given to nonprofit organizations—primarily 501(c)(4) (social welfare) and 501(c)(6) (trade association) groups—that can receive unlimited donations from corporations, individuals, and unions, and spend funds to influence elections, but are not required to disclose their donors.[1][2]
Non WIKI 501(c)(4) definition 

For clarity, the vast majority of dark money entities are hidden under a the cloak of the 501(c)(4) organizations. The very organizations the IRS placed under close scrutiny int he lead up to the 2012 General Elections.  Regardless of legal strategy from the Right the IRS scrutiny was good for the nation, even with consideration of the scrutiny only slowing the proliferation of such dark money organizations.

A few of these groups are Koch brothers money machines

The Right will quickly throw-out arguments than Unions contribute far more to political campaigns than the Koch brothers. Well, the comparison is a component of an argument much like a desert mirage. 

‘Dark Money’ Debate: Two Views on Whether the Term is Fair Game

As the rules around campaign finance have changed, so has our vocabulary. Yet while the term “dark money” has gone mainstream – referring to dollars flowing in from nonprofit groups that are not required to disclose their donors – there is disagreement over whether the phrase is too loaded to be used by journalists. Organizations branded with the label claim that it unfairly suggests sinister intentions. Groups advocating for more disclosure in campaign finance, however, insist it is appropriate shorthand.

This week, reporter Robert Faturechi speaks with leaders from both sides of the debate. First up: Brad Smith, former chairman of the Federal Election Commission (FEC), who remains a powerful voice in calling for less federal regulation of money in politics. He’s followed by Larry Noble, formerly the top lawyer for the FEC and now with the Campaign Legal Center, which supports strong enforcement of campaign finance laws. Both sides make a case for the merits or drawbacks of the phrase “dark money” and take their best shot at recommending alternatives they’d like to see.

Photo: Men walk outside the New York Stock Exchange on Wall Street. (Jeff Hutchens/Getty)

Highlights from their conversations:
  • Smith says reporters should avoid using the language because “it’s not intended to be a neutral term; it’s intended to create an atmosphere of alarm in the listener that makes it harder for the listener to evaluate objectively what’s going on.” (8:45)
  • A zero-tolerance policy against any political spending without public disclosure can come with high costs, says Smith, including the loss of privacy, harassment for voicing one’s political views, and a chilling effect on the advancement of new ideas. (12:10)
  • Noble says “dark money” is fair, as it represents “the opposite of sunlight.” In several Supreme Court cases on campaign spending, including Citizens United, justices have emphasized the importance of disclosure and transparency. (20:32)
  • Disclosure matters for voters, says Noble, because “you can often tell more about a candidate…by who’s supporting them than you can by what they say.” He argues that only with disclosure can the public know to whom candidates are beholden. (23:56)
    Listen to this podcast on iTunesSoundCloud or Stitcher. For more on Faturechi’s reporting on campaign finance, read his latest, Could Scott Walker’s Legal Victory Expand PAC Superpowers?
    End Propublica

    Note the impact of Dark Money after the Citizen's Untied ruling from the Roberts Court.


    Wednesday, June 5, 2013

    Morning Java: IRS Scandal? Really! How About Citizens United Scandal?

    The issues surrounding the IRS and its "targeting" of conservative groups poses a bit of a dichotomy for me.  

    First, I am not one who relishes government peeping at its citizenry unless that citizen has proven via their actions they are a direct threat to the greater society. All to often, we read or hear about a vile acts and wonder, "Now, why was that person not under arrest, or why was that person no being watched?"  I will grant backing away from my conviction regarding government scrutiny in that case and that case only.  In  fact, I found it most distasteful to read about the FBI's involvement in the psychical "squashing" of the Occupy Wall Street movement, even though I knew physical manifestation of the movement would be very short-lived. The FBI must have infiltrated, spied upon, and guided local authorities in strategies to rid cities of the physical encampments.

    As a liberal, rest assured I would be mighty upset if the IRS targeted groups that carried "liberal" titles. I will add, however  conservative groups generally choose identifiers that denote themselves as conservative. 

    On a secondary basis, I recognize that there are times when dynamics place pressure points of systems and those systems need additional "propping-up"; for lack of a more expedient term. One such dynamic was the Citizens United SCOTUS Decision in 2010.  It should be noted that the Koch Brothers are major contributors to the founding of citizen's United.  Do you think for one second the Koch Brothers have interest in so called, "social programs" regarding federal governance? Enough said on that point, for now. Post Citizens United the number of requests for 501 (c)(4) certification grew exponentially. despite Justice Alito's consternation and mouthing, "that's not true  at the President State of the Union Speech, the president's words became prophetic.

    Ability to engage in politics
    Not supposed to engage in any political activities, though some voter registration activities are permitted
    May engage in political activities, as long as these activities do not become their primary purpose
    Politics is what 527s are *required* to do
    Endorsing Candidates
    CANNOT Endorse Candidates
    CAN Endorse Candidates
    CAN Endorse AND Field Candidates
    Campaign Spending
    Permitted but taxed
    Some lobbying
    Substantial lobbying
    No direct lobbying
    General Political Advocacy (not related to legislation or the election of candidates.)
    Yes, as an educational activity.)
    Yes, provided it is not the primary activity of the organization
    Able to accept unlimited, tax-deductible donations
    Able to accept unlimited, non tax-deductible donations
    Able to accept limited (based on FEC regulations), non tax- deductible donations.
    Donor Reporting
    Donors kept anonymous.
    Donors kept anonymous.
    Donors are publicly reported.
    Must apply with the IRS

    Outside the Beltway published the following analysis, and for me it seems very credible and laden with facts.
    The following chart, included in the IRS audit, demonstrates that in the wake of Citizens United, there was a marked increase (~40% a year) in the number of 501(c)4 applications being submitted to the IRS.
    Let me note that this period—2010 to 2012—also saw the maturation of the Tea Party. And research into Tea Party communities shows that the accepted wisdom was that new Tea Party chapters should immediately file as 501(c)4 organizations. Ironically, of the three organization tax designations in question—501(c)3, 501(c)4, and 527—only 501(c)4 allows for a group to self-declare their status without first filing with the IRS. The advantage to filing is official recognition, which is only necessary if an outsider challenges the group’s 501(c)4 status. Otherwise, for all intents and purposes, the only thing required to operate as a 501(c)4 is to say that you‘re a 501(c)4. 
    Getting back to the IRS scandal, the broader point I’m trying to make is that, whether intentional or not, the very structure of 501(c)4, combined with the Citizens United decision, and the rise of the Tea Party, unexpectedly transformed the 501(c)4 from simply being about social welfare to being about politics. And that this was, generally speaking, a relatively rapid change.The scenario so far is as follows.
    We have Tax law written as far back as 1959 without modification for post Ronald Reagan 1980s GOP politics.

    We have a selectively crafted SCOTUS heavily stacked with judicial activist by GOP presidents. Heck, the SCOTUS could have included the Neanderthal Robert Bork. Did you know Bork was Romney's Chief Legal Advisers?

    We have a Citizens United decision in favor of an organization the the Koch Brothers heavily support and fund.

    We have  a Koch Brothers funded tea party replete with anti-government sycophants, armed  domestic terrorist brandishing weapons in public, racist signage and placards and a need for funding operations. As you know, people with people dislike two things about contributing. They generally do not want to be taxed, and in the case of political contributions they have no desire to have their names associated with their contributions. Thus, the circular and existential threat of Citizens United.

    We have the coming 2011/2012 election campaigns with a green Citizens United light for secretive contributions.

    What we really have is the smell of a rat!

    I have read reports that progressive groups were also delayed in approval of certification. Moreover, there are reports not of one request was denied. They were to a point all approved.  

    The IREHR, Institute for Research & Education on Human Rights published a detail piece on May 17th. The piece includes data related to certification denials. 


    Friday, May 24, 2013

    IRS, 501 (c)(4), Opportunity For Abuse, Greed And Political Malfeanse

    A serious problem from the late 1950s that was fueled by the conservatives on the SCOTUS via Citizens United.

    Open Secrets. Educating where others do not dare! Marc Antoine, while you read (if you wish)

    II. Sunland
    III. Madrid
    ________________________________ - Center for Responsive Politics

    Outside Spending: Frequently Asked Questions About 501(c)(4) Groups

    The number of politically active nonprofits has surged following the 2010 Supreme Court decision in Citizens United v. FEC, as has their spending. Most of that growth comes from 501(c)(4) or "social welfare" organizations. Read the guide below to learn more about these groups.

    What is a 501(c)(4)?

    A 501(c)(4) is a "social welfare" organization, in IRS terminology. In fact, the law requires these groups to be "operated exclusively" for the promotion of social welfare." But the IRS finalized a regulation in 1959 that allows the groups to participate in some political activity as long as politics isn't their primary purpose. Many of the most prominent issue groups have long existed as 501(c)(4)s -- groups like the National Rifle Association and the Sierra Club.
    The unwritten rule is that these groups must spend less than half of their resources on political activities. Critics bemoan the lack of guidelines, but the IRS will only go so far as to say they use the "facts and circumstances" of each case, looking at a variety of factors, to determine whether an organization's primary purpose is or is not political. Most tax lawyers suggest that, to avoid risk, at least 50.1 percent of their efforts must go toward "social welfare" activities, meaning they must be devoted to "promoting in some way the common good and general welfare of the people of the community," according to the IRS.
    Other 501(c) organizations include 501(c)(3) groups, which are charities that can accept tax-deductible donations. Politics is mostly off-limits for them. Others -- 501(c)(5)s (labor groups) and 501(c)(6)s (business associations) -- can be politically active, within limits. Donations to these groups aren't tax-deductible. The numerical designations of these organizations come from the provisions of the Tax Code that apply to them.
    What is social welfare? 
    Social welfare is a somewhat ambiguous term. According to IRS regulations, a social welfare organization "must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements)." Because that furthering of common good may require some degree of activism or advocacy, the IRS has determined that "Seeking legislation germane to the organization's programs is a permissible means of attaining social welfare purposes."
    Involvement in political campaigns is not social welfare activity. But it's allowed as long as it is less than half of what the organization does.
    Examples of groups that have long existed as 501(c)(4) organizations include: the National Rifle Association, the Sierra Club, the League of Conservation Voters, Planned Parenthood and the National Organization for Marriage. Most of these organizations have been active in lobbying -- and more recently, since the Supreme Court's 2010 decision in Citizens United v. FEC, they also have been otherwise involved in politics. But they also pursue other activities related to promoting their cause. Since Citizens United a number of groups that seem to be largely about politics have also emerged, and these top CRP's list of top-spending political nonprofits. This list includes: Karl Rove's group, Crossroads GPS; the Koch brothers-affiliated Americans for Prosperity; and the liberal Patriot Majority.
    What are the benefits and responsibilities of having 501(c) status? 
    501(c) organizations can operate without incurring tax liability. Another major benefit, for many groups, is the ability to collect donations without disclosing donors. That can help a donor to a charitable group feel comfortable that other organizations won't come knocking at his or her door for similar contributions. The lack of disclosure can also help disguise the true nature of a highly political organization. For instance, the Center for Responsive Politics has found examples of so-called "grassroots" groups that appear to be primarily funded by one wealthy individual. In other cases, corporations have been able to make donations to politically active groups that take controversial stands on hot topics without disclosing to shareholders or customers that they are involved. Perhaps the biggest problem with the nondisclosure is that citizens barraged with political messages may not be able to consider the credibility, and possible motives, of the funders of those messages.
    All nonprofits must file 990 tax forms, which are publicly disclosed on sites such as Guidestar. In addition, organizations must give them directly to any member of the public who requests them. These forms detail a group's revenue, primary activities, major vendors, grant recipients and members of its board of directors. Often they will also disclose the highest-paid employees. Nonprofit groups cannot be in the business of making money for shareholders or any individual. The 990 forms can help the public get a sense of an organization and who may be benefiting from it. Groups are also subject to IRS audits to ensure that they aren't benefiting any shareholders or individuals. And 501(c)(4) groups may also be scrutinized to ensure they are indeed carrying out social welfare activities and not existing primarily as political groups.
    What are the downsides? 
    The downside for 501(c)(4)s is that they must abide by certain rules and regulations, and, in theory, oversight by the Internal Revenue Service. For groups that want to be politically active, alternative corporate structures are available, such as super PACs and "527" groups -- and those groups aren't limited to spending just 49.9 percent of their resources on politics. However, they are required to disclose their donors. Essentially, a 501(c)(4) is an inefficient way to spend money politically -- unless there is a high premium on keeping the identity of donors secret.

    What is the significance of the Citizens United Supreme Court decision for nonprofits? 

    It's true that 501(c)(4)s existed prior to the Citizens United decision, and it's also true that there were other types of politically active nonprofits in existence, specifically 527 groups, made famous in the 2004 election by the Swiftboat Veterans for Truth organization. However, these groups were limited in how they could spend their money. They could hire lobbyists or spend money to make general ads about topics important to their cause, which many people refer to as "issue ads", but they couldn't directly involve themselves in political campaigns. And they had to identify their funders to the public.
    The Citizens United decision is best known for allowing corporations to spend money from their general treasuries on political campaigns -- so long as they don’t coordinate directly with the candidates they are backing. Nonprofits are corporations, too, and are subject to the same new rules as for-profit corporations. So, with the Citizens United decision, nonprofits were suddenly free to begin spending money to directly advocate for and against specific candidates. Previously, a group like Swiftboat Veterans could create advertisements that encouraged voters to consider the record of a candidate, as it did with 2004 Democratic presidential candidate John Kerry, but could not urge viewers to vote for or against him. Citizens United changed that.
    Essentially, Citizens United allowed 501(c)(4) groups to participate in political activities just like other groups already had been doing. But, unlike most of the other groups, which are under the oversight of the Federal Election Commission and must disclose their contributors and expenditures, 501(c)(4)s fall are overseen by the IRS. They must make filings with the FEC when they spend money explicitly advocating for or against a candidate, as well as when they buy issue ads that run in the weeks close to an election, but they aren't required to provide detail about where they're getting their money or how they're spending much of it.
    Since the Citizens United decision, the number of groups applying for 501(c)(4) status has dramatically increased, more than doubling in the years following the ruling, according to a May 2013 Treasury inspector's general report. The money spent by these groups on politics -- or at least the money we know is being spent (see below) -- has also skyrocketed. The Center for Responsive Politics estimates that in the 2012 election, 501(c) groups spent at least $333 million and that's only the money we can track. That's an increase of 53 percent from 2008, the last election before Citizens United, when the same type of groups spent just $159 million.
    Do we know how 501(c)(4) groups spend their money? 
    We know how 501(c)(4) groups spend some of their money. We can see on their 990 forms what major vendors they hire and what groups they give money to. But 501(c)(4) groups often submit vague explanations for how money is spent with vendors, such as "consulting" or "fundraising," and are not obligated to say what the money purchased with any specificity.
    A 501(c)(4) group that spends money explicitly advocating for or against a candidate (known as an independent expenditure) has to report that spending to the FEC.
    What is the IRS' role in enforcing campaign finance law? 
    The IRS' job is not to enforce campaign finance law. Its purpose is to make sure that all of these 501(c) groups qualify for their tax-exempt status. Only a small number of the 501(c) groups that are in existence appear to be active in political campaigns. The reasons for creating this class of groups have nothing to do with enabling them to be politically active.
    The IRS scandal of May 2013 arose because agency employees, faced with a rising number of applications for 501(c)(4) status after the Citizens United decision, tried to create ways to weed out groups that seemed overly political. According to the Treasury Inspector General for Tax Administration, they used "inappropriate criteria" -- such as searching for the words "patriot" and "tea party" in groups' names -- to identify applications for tax-exempt status for review. To date, though, there has been no in-depth examination of the most politically active 501(c) groups -- at least, not one that has been shared with the public.
    How could the (c)(4) loophole be closed? 
    A number of suggestions have been made to try to fix the problem of political organizations gaming the system and using the (c)(4) loophole to shield the identities of their donors. The most straightforward is to ban 501(c)(4) groups from being involved in politics at all. That is in fact what the law says, but the language was, in effect, weakened when the IRS began applying the "primary purpose" test; that put the IRS in the business of making judgments about what activity is political.
    Alternatively, social welfare organizations could be required to disclose the identity of their donors if they participated in political activity. Others have suggested that IRS officials draw a "bright line" delineating exactly how much political activity is acceptable, and then enforce it. The current understanding that groups may spend up to 49.9 percent of their resources on political activity was drawn from rules barring groups from having politics as their primary purpose, but exists nowhere in law or regulations.
    While many have no time for such descriptive and detail screeds, that same number will ignore the issue, and they will suffer deeply form their indifference. ~The Pardu