The rise of dark money in 2016, unlimited and anonymous

Published Sept. 5, 2015

It looks like any political ad, opening with Sen. Marco Rubio warning that "evil is confronted or defeated or it grows and it spreads." A narrator marks the day President Barack Obama announced the Iran deal, a nuclear bomb exploding on the screen.

"Congress can stop it," the ominous voice says. "Marco Rubio is leading the fight. Tell your senators to join Marco Rubio and defeat Obama's deal with Iran."

Shown nationally on Fox News as Rubio runs for president, the ad is not from the Florida Republican's campaign or one of the super political action committees that has injected hundreds of millions of dollars into politics.

It is the work of a nonprofit group — and you will never know who paid for it.

On the surface, the ad failed; Obama secured the votes Wednesday to withstand a congressional challenge to the Iran deal. But the seven-figure buy enhanced Rubio's profile and underscores a major shift in politics.

Nonprofits long have been used by organizations aligned with political bents, including the Sierra Club and the National Rifle Association, to promote "social welfare." Then came the landmark 2010 U.S. Supreme Court decision Citizens United, which said corporations and unions were effectively the same as individuals and could spend directly on politics.

That decision gave birth to super PACs and put nonprofits on steroids — with spending exceeding $300 million in 2012, double the amount of the previous election. Then, the nonprofits were mainly run by partisan groups with a broad range of targets.

The 2016 election marks the rise of nonprofits aligned with specific candidates. Rubio is one of eight GOP presidential contenders, including former Florida Gov. Jeb Bush, benefiting from the extra muscle.

The groups, formed under section 501(c)(4) of the tax code, are limited in how much they can spend on direct political activity, but they have a key advantage over super PACs: anonymity for donors.

Critics call it dark money.

"We're seeing the collapse of campaign finance regulations," said Larry Noble, a former general counsel of the Federal Election Commission who is now with the reform-focused Campaign Legal Center.

"It's very distressing how easily presidential campaigns are just ignoring the law. They are trying to find every way around them and through them, and relying on the fact the laws are not being enforced."

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Nonprofits fall under IRS jurisdiction, not the FEC, which oversees super PACs. Nonprofits are supposed to promote "social welfare," but organizers have exploited vague regulations about what that means and how much political activity can be involved.

While the law governing nonprofits, dating to 1913, says groups must operate "exclusively" for the promotion of the public good, IRS guidelines state, "to be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community."

Political operatives from both parties have seized on the disconnect between "exclusively" and "primarily," and have concluded they are on safe ground if they spend less than half their budget on politics. An IRS commissioner recently said as much, though there's nothing in law that spells that out.

The lack of specificity and a low threat of enforcement have made the vehicles more attractive to campaigns. "People are saying, 'We can get away with it,' " said Miriam Galston, a law professor at George Washington University who is an expert on the subject.

The groups often say they are producing "issue ads" that add to the public benefit. The Rubio Iran spot never expressly urges people to vote for him, let alone mentions he's a candidate. But it's a clear platform for the candidate while providing donors anonymity.

"They're actually more dangerous," Noble said. "At least with super PACs, the press can report on who the contributors are, what they want."

The IRS in 2013 announced it was looking at ways to rein in nonprofits. The proposal came to a halt amid revelations the IRS had targeted the tax-exempt status of tea party groups. Now officials indicate they will wait until after the 2016 election.

"I'm fairly pessimistic about anything happening. It's the wild west now," said Paul Streckfus, a former IRS official who writes a newsletter about tax-exempt organizations.

Other reform advocates hold out hope, though a lot rides on who wins the presidency. Republicans have generally opposed any tightening on free speech grounds. Legislation in Congress has gone nowhere.

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"Ultimately people have a First Amendment right to participate in the American political process," Rubio said recently when asked about the group running the ad on his behalf. "Obviously I can't interact or coordinate anything with them. I just ask every group out there to comply with the law."

Conservative Solutions Project, which produced the ad, insists it does not back any specific candidate and is "advocating for conservative solutions to the problems facing the country." Spokesman Jeff Sadosky said, "We look forward to working with the IRS to ensure we comply with every rule and regulation regarding 501(c)(4)s."

The group was started by Warren Tompkins, a veteran South Carolina operative with close ties to Rubio. It has raised at least $15.8 million — exceeding the $9 million Rubio himself raised as of the last reporting period. So far the group has produced two ads, both featuring Rubio talking about Iran.

Conservative Solutions Project's website lists an agenda that tracks closely with the themes Rubio is pitching on the campaign trail: reform the tax code to increase growth and opportunity; limit business regulation; increase military strength; and improve access to education "so that all Americans have a chance to pursue their dreams."

Tompkins also launched a pro-Rubio super PAC called Conservative Solutions PAC, which has pulled in more than $16 million, as of the last reporting period, almost all from a handful of wealthy individuals, including Miami billionaire Norman Braman ($5 million) and Oracle founder Larry Ellison ($3 million).

Contributions to Rubio's direct campaign are limited to $2,700 for the GOP primary, so the value of outside, ostensibly independent groups is immense. Rubio's campaign declined comment.

Spending by social welfare and related groups increased from $5.2 million in 2006 to $174 million in the 2014 midterms, according to the Center for Responsive Politics. In the 2008 presidential cycle, spending was $163 million versus $336 million in 2012 — more than doubling.

Most of the spending has come from conservative groups, according to the Center for Responsive Politics, but liberals have joined in as well; one nonprofit, Priorities USA, boosted Obama's re-election and never revealed its donors.

Aside from Rubio and Bush, the other candidates aligned with nonprofits are Republicans Rick Perry, Bobby Jindal, John Kasich, Rick Santorum, George Pataki and Mike Huckabee.

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Bush is a pioneer in the big money era.

Well before he officially launched his presidential campaign in mid June, a super PAC and a nonprofit were set up. Because he was not a candidate, Bush toured the country raising money for the Right to Rise PAC and it has taken in more than $100 million so far.

Less visible was the nonprofit Right to Rise Policy Solutions, established in February by Bill Simon, a former Walmart executive who worked in the Bush administration in Tallahassee.

The nonprofit has not produced advertising yet, and aides say it will be policy driven, but it has served as a warehouse of sorts for Bush staff. Several people have been employed by the group and have moved over to Bush's campaign. Simon is now Bush's campaign treasurer, though he was a volunteer with the nonprofit. Taking Simon's place is David Johnson, a Tallahassee operative closely tied to Bush.

A spokesman, Paul Lindsay, would not say how much the nonprofit has raised or whether some came from corporate sources; reporting to the IRS is not required until next year.

"Some donors probably do not want their names to be out there on issues like this and holding them up to different attacks from Democrats," Lindsay said.

Still, the secrecy clashes with Bush's public calls for transparency.

Bush has released emails from his time as governor, for example, and has said he will release the names of "bundlers," fundraisers who collect a lot of checks from individuals.

"Governor Bush is committed to transparency," spokeswoman Kristy Campbell said. "Right to Rise Policy Solutions is an independent organization. We would refer any requests regarding their plans to the organization."

Contact Alex Leary at Follow @learyreports.