Time to Demand Nonprofit Transparency in Elections?

Print Share on LinkedIn More

February 3, 2012; Source: Los Angeles Times | Today’s political campaign ad financing game is played through “independent” tax exempt organizations such as Super PACs, 501(c)(4) social welfare organizations, and 501(c)(6) business trade associations. “Secretive billionaires,” as President Obama describes them, are behind these organizations that typically do not reveal the names of their donors nor how much they have contributed to pay for the incessant campaign ads. 

Contrary to the impression that President Obama is conveying on the stump, the recruitment of secretive billionaires to pay for the political advertising is being pursued by both parties.  Democrats and even bipartisan groups like Americans Elect are using these campaign financing mechanisms and rejecting calls to reveal their contributors. 

Karl Rove’s Crossroads GPS gets lots of press coverage because it’s big and because of Rove’s presence as a fixture for political commentary on Fox News, but pro-Democratic groups such as Priorities USA, created by former Obama staffers, and American Bridge 21st Century are functioning on the Rove model and the money is flowing in. The nonprofit element of this dynamic is that the PACs, which disclose their funding to the Federal Election Commission, receive substantial grants for “operating expenses” or “overhead and staff expenses” from affiliated 501(c)(4) social welfare organizations which do not disclose their funders.

As a result, the nonprofit sector—through the confidentiality accorded to 501(c)(4)s—is, perhaps inadvertently, “weakening transparency in the political world,” according to Michael J. Malbin, executive director of the Campaign Finance Institute. The Institute’s associate legal counsel, Paul S. Ryan, described the Super PACs as “a single political operation setting up two bank accounts, one of which has the primary purpose of evading disclosure.”

This is a terrible image, and a terrible reality, for the nonprofit sector: the notion that the nonprofit sector is the mechanism for making a corrupted electoral system even worse. The point of political campaign and PAC donor public disclosure is to let the American voter know which special interests, which millionaires, and which billionaires are financing, or perhaps trying to buy, the candidates standing for election. Because of their ability to guarantee secrecy to donors, nonprofit entities can serve as the instruments to mask the identities and presence of well-heeled political influencers. If this happens, nonprofits will play a major role in allowing the unrestrained corporate donors unleashed by the Supreme Court’s Citizens United decision to circumvent the intent of transparency in national election law.

Don’t you really want to know who the electoral puppet masters behind the candidates are? How does it make you feel to know that the instruments for camouflaging these political puppet masters are 501(c) tax-exempt nonprofits? —Rick Cohen

  • Lucy Bernholz

    These are enormous issues for the nonprofit sector. Thanks Rick, for bringing them up. The influence of Citizens United on the nonprofit sector is the topic of our next #ReCodeGood charrette at Stanford – information will be posted in SSIR and on pacs.stanford.edu.


  • AFreechild

    We live in a society in which greater and greater sums of money are becoming amassed by corporations. As a result, these corporations have the ability to wield unlimited political influence without having to disclose their names, threatening to make us a democracy in name only. Sign the petition for a constitutional amendment to overturn the Citizens United ruling http://www.democracyisforpeople.org.