The 2012 Vote
|Back to Features|
|Kathleen Ronayne||June 22nd 2011|
Super PACs, a new breed of political action committee that may raise unlimited sums of money to fuel political advertisements known as independent expenditures, are subject to one major condition: they must disclose their donors.
Or are they?
Federal Election Commission rules allow super PACs to legally avoid disclosing individual donors by attributing donations to nonprofit organizations, which are not required by law to reveal their donors.
During the 2010 election cycle, five super PACs utilized this little-used route, attributing all or nearly all of their contributions to nonprofit organizations organized with the Internal Revenue Service under section 501(c)(4) or section 501(c)(6) of the U.S. tax code.Most of these non-profit groups are directly affiliated with the super PACs to which they donated money.
These five super PACs are:
- New Power PAC, which attributed 88 percent—$103,500—of its $118,000 in receipts to Kentuckians for the Commonwealth, the 501(c)(4) group that formed the super PAC.
- ProgressOhio, which attributed essentially all of its funds to the 501(c)(4) nonprofit ProgressOhio.org.
- Environment Colorado Action Fund, which received about 99 percent of its funding from Environment Colorado, a 501(c)(4) organization.
- Protecting America’s Retirees lists essentially all donations as coming from the Alliance for Retired Americans, another 501(c)(4) nonprofit group.
- National Association of Realtors Congressional Fund attributes 100 percent of its funding to the 501(c)(6) trade association that shares its name.
While these super PACs are avoiding having to reveal the actual people, corporations, or unions that are contributing to them, they are doing nothing illegal.
But FEC Chairwoman Cynthia Bauerly says the situation is far from ideal. Issues such as this deserve to be addressed as part of the FEC rule-making process, including opening the issue up for public comment. “Given the changing legal landscape in this area, the sufficiency of the Commission’s rules governing reporting and disclosure deserve serious consideration.”
Some advocacy groups, such as the Campaign Legal Center and Public Citizen, say the real problem lies in rule making by the FEC that changed some of the disclosure requirements laid out in the 2002 Bipartisan Campaign Reform Act.
“Our view is that the FEC has undermined federal disclosure statutes through its own rule-making process,” said Paul Ryan, an attorney for Campaign Legal Center, which is currently in a lawsuit with the FEC regarding some disclosure rules.
Of the $118,000 New Power PAC raised during the 2010 cycle, it spent about $12,000 on electioneering communications, according to research.
Although the majority of the PAC’s contributions come from a 501(c)(4) nonprofit group, Kentuckians for the Commonwealth chose to form a separate super PAC because members thought it might bring more attention and light to the issues the group is passionate about, said Statewide Chairman Steve Boyce.
“This might sort of create a different kind of impact or something new that would make people stop and think and look with new eyes about what it is we’re saying,” Boyce said about the group’s rationale for creating a super PAC.
The average household donation to the organization and the super PAC is $140, Boyce said.
The organization also has a 501(c)(3) branch, and the 501(c)(4) group and super PAC make up a small part of the organizations overall budget, he said.
The organization does not disclose its members or donors, Boyce said, because it advocates issues that may lead to retaliation from other community members—such as the organization’s position that coal extraction should face more regulation. For this reason, and because the contributions are small, Boyce said he does not believe non-disclosure is out of line with the organization’s policies.
Meanwhile, the ProgressOhio super PAC brought in more than $31,000 in donations during the 2010 election cycle, and spent more than $18,000 on independent political expenditures.
The organization produced issue-based video advertisements that appeared on its website during the 2010 election cycle, said Brian Rothenberg, executive director. One ad, against U.S. House candidate Tom Ganley (R-Ohio), did appear on television, and ProgressOhio spent $9,412 on the ad. ProgressOhio also spent another $9,000 on a video against U.S. Senate candidate Rob Portman (R-Ohio).
Most of the money involved in making the videos went to legal costs and production, Rothenberg said.
ProgressOhio did not solicit donations for the super PAC from individuals, but rather self-funded through the 501(c)(4) group’s treasury.
When asked why the group formed a super PAC in the first place, rather than funding the ads directly, as 501(c)(4) organizations may do, Rothenberg said he thought forming the super PAC would make things more transparent. If he had not formed the super PAC, no one would be able to track what the organization spent on the advertisements, which featured specific candidates.
By law, however, even nonprofit organizations must report the cost and target of their independent political expenditures, even if they don’t have to reveal who provided funding for them.
Scott Reiter, managing director of the National Association of Realtors, said the super PAC is a fund established by the association for the exclusive purpose of making independent expenditures using association treasury funds, as permitted by the 2010 U.S. Supreme Court decision in Citizens United v. Federal Election Commission.
“We believe this reporting is that which is required by the Federal Election Campaign Act and Commission regulations, and that it provides clear, complete and fully transparent notice of the source of the funds used by the Fund to make its independent expenditures,” Reiter said.
Protecting America’s Retirees and Environment Colorado Action Fund did not respond to requests for comment.
Rules that allow organizations to fuel independent expenditures and electioneering communications without fully disclosing the source of funding are undermining the purpose of campaign finance disclosure laws, says Ryan of the Campaign Legal Center. “The voters are denied critical info as to who is trying to influence their votes through political ads.”
Five minimally disclosing super PACs, along with how much money they raised during the 2010 election cycle and what percentage of that was attributed to nonprofit organizations that are legally allowed to keep their donors secret:
- New Power PAC raised $118,323, of which 87.6% came from nonprofit sources.
- ProgressOhio raised $31,187, of which 98.3% came from nonprofit sources.
- Environment Colorado Action Fund raised $182,332, of which 99.0% came from nonprofit sources.
- Protecting America, s Retirees raised $171,050, of which 99.4% came from nonprofit sources.
- National Association of Realtors raised $1,105,625, of which 100% came from nonprofit sources.