Battle Escalates Over Undisclosed Campaign Cash

Posted October 6, 2010 at 6:02pm

Democrats and Republicans ratcheted up their battle Wednesday over private nonprofit groups that are spending millions of dollars on advertisements in campaigns across the country, largely favoring the GOP, without disclosing their donors.

Sen. Al Franken announced that he’s asked the Federal Election Commission to investigate reports that foreign companies may be funding efforts by the U.S. Chamber of Commerce to influence elections.

“I am profoundly concerned by recent reports that foreign corporations are indirectly spending significant sums to influence American elections through third-party groups, including 501(c)(6) trade organizations,” the Minnesota Democrat wrote. “I am writing to ask that you investigate these claims, enforce existing laws and regulations prohibiting foreign spending in American elections, and strengthen those very laws through new regulations and policy guidance.”

The Chamber of Commerce denied it uses any funding from foreign companies for its political activities.

“These accusations are completely erroneous,” Tita Freeman, vice president of communications and strategy for the chamber, said in a statement. “No foreign money is used to fund political activities. All allegations to the contrary are totally and completely false.”

Republican Senators pushed back against an effort by Senate Finance Chairman Max Baucus (D-Mont.) to get the IRS to probe nonprofit groups that are spending tens of millions of dollars on ads without disclosing their donors.

Baucus wrote a letter last week to the IRS urging the agency to investigate whether tax-exempt organizations, including unions and business groups, are complying with the tax code, which requires that political activity not be the primary purpose of such organizations.

“Is the tax code being used to eliminate transparency in the funding of our elections — elections that are the constitutional bedrock of our democracy?” Baucus wrote.

On Wednesday, Sen. Orrin Hatch (R-Utah) and Minority Whip Jon Kyl (R-Ariz.), wrote to express their concern about Baucus’ request.

“We are worried that the sole purpose of any such effort is to chill the legitimate exercise of First Amendment rights and intimidate Americans who wish to be part of petitioning the government for redress of their grievances,” they wrote.

They called on the IRS to make sure any such probe does not take political considerations into account and requested that an inspector general review any investigation to make sure it is not partisan.

Scott Mulhauser, spokesman for Baucus, fired back late Wednesday.

“This is about following the law,” he said. “It’s pretty simple — the tax code has specific requirements for campaign activities, which clearly include disclosure. The committee’s concern is that many of these special interests are hijacking sections of the tax code to engage in election activities but avoiding the disclosure required by law.”

Democrats have tried to make an issue of the flood of undisclosed corporate cash after the Supreme Court struck down restrictions on such spending in the Citizens United v. FEC case, but they failed to overcome a GOP filibuster of the DISCLOSE Act, which would require the disclosure of contributions made for political purposes.

One of the biggest players in the debate is a nonprofit called Crossroads GPS, established by top Republican strategists including Karl Rove, which is spending millions of dollars on ads in key Congressional districts this year.