When two political organizations look alike and talk alike, why aren't they held to the same standard of public disclosure? A full year after the 2012 presidential election, the public is just now getting a peek into the explosion of money that played so big a role in last year's political season in the form of so-called "social welfare" groups. But there is little to see, thanks to a gaping loophole in federal law that Congress refuses to address. Secrecy in financing political campaigns is antithetical to democracy, and Congress should at least require the same disclosure for this political activity as it does for political action committees.
Nearly four years after a divided U.S. Supreme Court rewrote the book on campaign finance with its Citizens United decision, 2012 federal tax returns for 501(c)4 organizations are just becoming public. Most lack any information about their biggest donors. Republican kingmaker Karl Rove, for example, was never shy last year about how much money he expected American Crossroads, his political action committee, and his so-called social welfare group, Crossroads GPS, to spend on campaigns in support of conservative candidates: $250 million. But more than 11 months after Crossroads attack ads flooded America's living rooms, particularly in toss-up states such as Florida, voters have no way of confirming which special interests were footing the bill.
Federal tax law has allowed Rove to cloak the donor list for Crossroads GPS, which raised nearly $180 million. American Crossroads, which as a PAC must disclose donors, raised $117.5 million. What is known about Crossroads GPS: $22.5 million of the group's funding came from a single, anonymous source. Another anonymous donor handed over $18 million; another, $10 million. All told, 50 undisclosed donors plowed at least $1 million or more into the organization.
Crossroads GPS told the IRS that of the $180 million it raised, $75 million was spent on political advertising in 2012 — roughly the same amount it claims to have spent on "grass-roots mobilization and advocacy." Never mind, as the journalism website ProPublica has reported, that when Crossroads GPS was applying for nonprofit status in 2010, it told the IRS that money spent on elections would be "limited in amount, and will not constitute the organization's primary purpose."
Rove is not the only master at exploiting this loophole in the law to collect dollars for his political efforts. Both conservative and liberal groups have done so. But he is by far the leader. ProPublica reported that the amount Crossroads GPS told the Federal Elections Commission that it had spent on political ads was nearly twice as much as the next highest-spending social welfare group last year, Americans for Prosperity. That group is backed by conservative billionaire brothers Charles and David Koch. Because of the same loophole, voters don't know if the group is spending the billionaire brothers' money or someone else's.
President Barack Obama proposed last week that nonprofits such as Rove's Crossroads GPS be subject to tighter restrictions on political activity. The Internal Revenue Service and the Treasury Department also will clarify how much "social welfare" activity these groups have to do to keep their tax-exempt status. Those would be positive steps, but the real issue is openness about who gave how much money to whom and for what.
Democracy is supposed to be about giving every voter equal power. But when wealthy corporations and others hide behind the claim of "social welfare" to anonymously contribute millions to support political campaigns, the political system is corrupted. Congress should tighten up the social welfare statute to force this activity back into full disclosure.