Feb. 10, 2016 SIGN IN | REGISTER

Rules of the Game: Campaign Finance Rules Too Lax, Some Say

Chris Maddaloni/CQ Roll Call
Wisconsin-based nonprofit Prosperity USA reportedly spent some $40,000 on travel and other costs early in Herman Cain's presidential bid.

But nonprofits face virtually no reporting requirements, meaning that an awful lot of campaign money is now flying under the radar. In 2010, five super PACs attributed virtually all their receipts to undisclosed nonprofits, according to the Center for Responsive Politics.

Most of the biggest super PACs, moreover, operate affiliated nonprofits that raise and spend millions of dollars, but disclose nothing. A pair of watchdog groups has challenged five politically active nonprofits and asked the IRS to investigate.

"The law says a 501(c)(4) has to be an organization that is exclusively devoted to the social welfare," said Tara Malloy, associate legal counsel at the Campaign Legal Center, which filed the challenge along with Democracy 21.

The two groups have asked the IRS to investigate Crossroads GPS; Priorities USA, a Democrat-friendly group set up by two former aides to President Barack Obama; the conservative American Action Network; and Americans Elect, a bipartisan group trying to get an alternative presidential candidate on the ballot.

The watchdog groups have also called on the IRS to clarify its own rules for tax-exempt groups, which have never been clearly spelled out. Court rulings show that social welfare groups may engage in no more than "an insubstantial" amount of political activity, the reformers argue.

By contrast, many Washington players point to the unofficial rule of thumb that social welfare must be the primary purpose, or at least 51 percent, of a 501(c)4 group's activities. That rule of thumb is "just incorrect," Malloy said. She added: "The IRS should be far more true to the original statute."

"They appear to be taking a different view of the nonprofit law than any other group that is practicing under those rules right now," countered Crossroads GPS Communications Director Jonathan Collegio.

Some state officials, however, appear to be taking a harder line than federal regulators. In Kentucky, a circuit court judge recently issued a restraining order barring ads by a group dubbed Restoring America, arguing that it had violated state laws by using undisclosed money from a tax-exempt organization.

In Arizona, Secretary of State Ken Bennett has asked the state attorney general to investigate several tax-exempt groups that he argues are violating the state's disclosure rules. Bennett has also launched an audit of a trio of randomly selected political groups in the state.

"The voters in Arizona clearly feel that these political committees need to be reporting their expenditures and contributors, so they know who's influencing their elections," said Matthew Roberts, Bennett's communications director.

The Supreme Court's Citizens United ruling echoes that sentiment: "The First Amendment protects political speech; and disclosure permits citizens and shareholders to reach to the speech of corporate entities in a proper way."

But as political nonprofits proliferate, secrecy not disclosure is increasingly the norm.

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