Earlier this month, I wrote about the challenges 501(c)(4) “social welfare” organizations pose to the political process.
Specifically, advocates worry these groups can raise as much money as they want without the same standard of disclosure SuperPACs or campaign committees are held to. They can also funnel at least some of that money into elections.
Now, we have clear examples of the secrecy 501(c)(4) groups can take advantage of, due to the release of two tax forms earlier this month.
As Politico reported, Crossroads GPS, a Karl Rove-backed group, raised nearly $180 million and spent close to $190 million in 2012. Combined with spending from an affiliated SuperPAC, American Crossroads, Rove’s groups spent around $300 million.
Conservative groups aren’t the only ones taking advantage. Politico also reported the liberal group Priorities USA raised a comparatively paltry $10.7 million from donors, none of whom had their identities disclosed. Their affiliated SuperPAC, Priorities USA Action, spent another $75 million in 2012.
Looking in particular at GPS’ Form 990, the form all tax-exempt groups must submit to detail their financial activity, a few things jump out. Much of GPS’ money came from large donations — several donations were in the seven figures, and three were in the eight figures, Politico reported, the largest being $22.5 million. Priorities’ biggest single contribution, meanwhile, was $2 million.
Additionally, each donor remains anonymous. Of the $300 million brought in by the two Rove-linked groups, most went to Crossroads GPS, indicating many donors favored secrecy even though the 501(c)(4) couldn’t use much of that money on elections.
The lion’s share of GPS’ spending — $74.5 million — was reportedly going toward advocacy, with $74.2 million going to direct political activity.
Since politics cannot be a social welfare group’s “primary function,” GPS was likely on the right side of the law. (The IRS just released a new definition of what constitutes “political activity,” but it hasn’t yet been made official.)
An additional $35 million went to other nonprofits, most of it to Grover Norquist’s Americans for Tax Reform (ATR), which spent more than $15 million on the 2012 elections.
There’s some concern this might affect GPS’ balance, according to a recent report on how ATR spent that money.
In essence, politics might not be the primary activity of GPS. Even so, discreet contributions still provided GPS with an indirect political footprint. And as the Huffington Post reported, many ads from Crossroads GPS were essentially attack ads, which still call for a candidate’s defeat, but do not technically count as a political activity.
The potential implications of this secrecy are alarming. As Harold Meyerson noted, there’s no way to know whether these donors were even American citizens. That scenario is scary enough, but the fact that one individual can legally give tens of millions of dollars to influence elections — without the public being any wiser — is perhaps the most serious flaw in our campaign finance system today.
Of course, it could soon get even worse.