States are joining to discover source of 'secret money' in politics

They want trade, advocacy groups to reveal donors
2013-05-05T00:00:00Z States are joining to discover source of 'secret money' in politicsMatea Gold, Chris Megerian and Mark Z. Barabak Mcclatchy Newspapers Arizona Daily Star

WASHINGTON - Early last month, state lawyers and election officials around the country dialed into a conference call to talk about how to deal with the flood of secret money that played an unprecedented role in the 2012 election.

The discussion, which included officials from California, New York, Alaska and Maine, was a first step toward a collaborative effort to force tax-exempt advocacy organizations and trade associations out of the shadows.

The unusual initiative was driven by the lack of progress at the federal level in pushing those groups to disclose their contributors if they engage in campaigns, as candidates and political action committees are required to do.

"There is no question that one of the reasons to have states working together is because the federal government, in numerous arenas, has failed to take action," said Ann Ravel, chairwoman of California's Fair Political Practices Commission, who organized the call with officials from about 10 states.

The 2012 campaign set a high-water mark for independent groups, which unleashed more than $1 billion into federal races, more than three times as much as in 2008, according to the nonpartisan Center for Responsive Politics.

The bulk of that spending was by "super PACs," which must disclose their donors. But nonprofit advocacy groups and trade organizations, which do not have to reveal their financial backers, accounted for nearly $310 million. Among them were the conservative Crossroads GPS, the liberal Patriot Majority USA and the U.S. Chamber of Commerce. The actual influence of such organizations was far greater, as tax-exempt groups also poured tens of millions of dollars into election-related activity that they were not required to report.

Advocates for disclosure say it is essential for the public to know who is trying to influence elections. But opponents say making donors public would infringe on their privacy and could intimidate some from participating in politics.

Increased scrutiny

For now, state officials who participated in the conference call are sharing information on their campaign-finance regulations and experiences with advocacy groups in their states. But the agencies may move to team up on investigations and work together to pressure federal agencies to do more.

The push by state regulators comes as scrutiny of nonprofit groups is gaining new attention at the federal level. On Capitol Hill, Sen. Carl Levin, D-Mich., plans to use his influential post as head of the permanent subcommittee on investigations to press for greater oversight of these groups. And the Securities and Exchange Commission is considering a rule to require publicly traded corporations to reveal their political donations.

But disclosure advocates acknowledge they face a steep climb in Washington.

"I have no reason to believe this is going to be easy," said Sen. Lisa Murkowski, R-Alaska, who unveiled a bipartisan disclosure bill with Sen. Ron Wyden, D-Ore., last month. She is the first GOP senator to sponsor such a measure in recent years; it is not clear whether other Republicans will come aboard.

"Unless both sides realize that disclosure is important to all of us, it's not going to happen," Murkowski said.

Focus on 501(c)4 Groups

Much of the focus is on "social welfare" organizations set up under section 501(c)4 of the tax code, which can engage in elections as long as politics is not their primary purpose. Such organizations have proliferated since 2010, when the Supreme Court ruled in the Citizens United case that corporations could spend unlimited sums on elections. The decision also applied to unions and many nonprofit groups.

State officials criticize multiple federal entities as failing to respond swiftly to the new environment. The Internal Revenue Service has asked some nonprofits for more information about their activities, but it has not indicated whether it has launched any formal investigations. Also, measures to compel disclosure have stalled in Congress and at the Federal Election Commission.

In California, the Fair Political Practices Commission recently issued a series of subpoenas as part of an investigation to uncover the source of $11 million involved in two ballot measures last fall.

The money passed from Americans for Job Security, a Virginia nonprofit, to the Center to Protect Patient Rights in Arizona, to another Arizona nonprofit called Americans for Responsible Leadership, and then to the conservative Small Business Action Committee in California.

The committee was working against Gov. Jerry Brown's tax-increase measure and in support of another measure intended to curb the ability of unions to raise money for political activity. The source of the money remains unknown.

Lawmakers in more than a dozen states have proposed legislation to force such groups to disclose their donors. Maryland Gov. Martin O'Malley signed a measure Thursday requiring independent groups that make election-related donations or expenditures of $6,000 or more in a four-year election cycle to disclose information about their top donors. It will take full effect in 2015.

"There is no question that one of the reasons to have states working together is because the federal government, in numerous arenas, has failed to take action."

Ann Ravel,

chairwoman, California's Fair Political Practices Commission

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