PD Editorial: Lights out on rules for dark money

As recently as June, the head of the Internal Revenue Service promised new rules to curb the exponential growth in dark money spent on political campaigns.

“We’d be much better off if we had clearer definitions and a clearer roadmap,” IRS Commissioner John Koskinen told the Center for Public Integrity, a nonprofit organization that tracks campaign spending.

Koskinen was right.

Dark money - campaign expenditures by nonprofit groups that exploit a loophole in IRS regulations to hide their donors - may be the worst development in U.S. politics in the past decade.

From $6 million in the 2004 election, it grew like kudzu to more than $300 million in the 2012 presidential election cycle. According to the Wesleyan Media Project, dark money paid for almost half of the TV ads in federal and gubernatorial elections in 2014. And there’s every reason to believe new records will be set in 2016.

That makes it all the more discouraging that Koskinen, testifying on Capitol Hill last week, reversed course on his promise to end this cloak-and-dagger spending.

Koskinen told a House subcommittee that the IRS won’t offer any dark money rules before 2017 because he doesn’t want anyone to think the agency is trying to influence the outcome of next year’s election.

Make no mistake, dark money donors are trying to influence the outcome, and they want to do so without leaving any fingerprints.

Under post-Watergate reform laws, candidates, initiative committees and even big-money super PACs must itemize any donations of $100 or more, naming donors and their employers.

No such rules apply to nonprofit organizations formed under the guise of “social welfare,” a category that includes homeless shelters and humane societies. So how did social welfare become political warfare?

That wasn’t the intent of Section 501(c)(4) of the federal tax code, which governs tax-exempt groups formed “exclusively” for “social welfare.”

“Exclusively” inexplicably became “primarily” in the implementing regulations, and political opportunists pounced, creating left- and right-leaning nonprofits that promise anonymity to donors who bankroll attack ads.

What difference does it make?

To understand a political message, voters need to know who is delivering the message. And taxpayers need to know who is trying to influence government decisions.

The solution is simple: Restrict social welfare groups to their intended purpose, and require political advocacy groups to comply with disclosure laws.

Unfortunately, a deadlocked Federal Election Commission has failed to deal with this issue. And Congress, which has buried disclosure legislation, took a step backward as a House committee inserted language in a recent spending bill that prohibits the Securities and Exchange Commission from requiring that publicly traded corporations disclose campaign spending.

Follow the money? Good luck.