Nonprofit Newswire | Donor Confidentiality vs. Accountability in Political Advertising?

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March 10, 2010; ProPublica | Confidentiality of donors to nonprofits has long been a core tenet of the nonprofit sector, meant to limit the nonprofits’ critics’ ability to harass and deter their donors. The large unmonitored flows of corporate and special interest funds into partisan “issue ad” electioneering may have changed things so significantly that the public good will be better served by disclosure than confidentiality of the sources of donations for these election purpose.

Why were corporations and special interests pleased with the Supreme Court decision allowing them to spend money on electioneering ads? It’s not just because they were suddenly freed by the Court to engage in candidate-specific advocacy, but it’s also that they could do so through tax exempt entities such as trade associations that could camouflage corporations’ contributions.

If a corporation were to run its own ads—for example, a pharmaceutical company or health insurer paying for ads specifically criticizing the pro-health reform votes of specific members of Congress—the public and the corporation’s shareholders would know and possibly be highly displeased (corporations have to reveal their identities and expenditures on their own election advertising). But if they gave money to a business trade association, for example, say Big Pharma or the Chamber of Commerce, that is, a tax exempt trade association (often a 501(c)(6)), there would be no way to know exactly how much the corporation is spending on electioneering, since the nonprofits do not have to disclose the sources of the funds that pay for their election advertising).

A former vice chairman of the Federal Election Commission said that this defeats the FEC effort to compel transparency in the political contributions of corporations and individuals. Of course, as weak as the disclosure might be for corporate spending on election ads at the federal level, just imagine how much weaker and more chaotic disclosure (or the lack of disclosure) is regarding corporate election ads in state and local elections where there are few if any rules for FEC-style disclosure of corporations’ direct spending on election ads and other political activities).

Obviously, there are risks for the corporations, for example, they may find that they’ve given to a (c)(6) like the Chamber which ends up taking a position on a policy issue contrary to the corporation’s desires or interests or they may run ads that might be a little more aggressive and impolite than the corporation feels comfortable with.

Congressman Chris Van Hollen (D-MD) and Senator Charles Schumer (D-NY) are planning to introduce a bill that would compel nonprofit or tax exempt groups to reveal the identities of the groups funding their political ads. If Van Hollen and Schumer succeed, the American public will get to know who is paying for political speech. But the opponents of this law won’t just be the Chamber of Commerce and corporate trade associations. Expect tax exempt organizations from the left as well as the right to oppose being required to disclose the funders of their political speech.—Rick Cohen