Supreme Court decision may illuminate Ohio dark money
Supreme Court decision may illuminate Ohio dark money
By Lucia Walinchus
Ohio Center for Investigative Journalism, EyeOnOhio.com
COLUMBUS, Ohio – The identities of many political donors can no longer be hidden behind a nonprofit shield, a D.C. Circuit judge recently ruled, in a case that started in Ohio.
The Supreme Court’s decision not to issue an emergency stay on that ruling sent election groups scrambling to comply with new disclosure rules just weeks before Nov. 6.
Advocates of greater political transparency said the ruling would give voters a better view into who was trying to shape their thoughts through political ads. Advocates for donor confidentiality predicted the ruling could inhibit some people from speaking on their own behalf.The case began in 2012 after Ohio Senator Sherrod Brown faced a $6 million attack campaign funded by a conservative 501(c)4 called Crossroads GPS, which did not reveal the names of its donors. Citizens for Responsibility and Ethics in Washington (CREW) complained to the FEC, which deadlocked 3-3 along partisan lines. After the FEC declined to investigate, CREW sued in 2016.
On Aug. 3, the D.C. Circuit Court agreed with CREW, and gave the agency 45 days to adopt a new rule. On Tuesday, the Supreme Court declined to grant an emergency stay in the case. Attorneys can still pursue a normal appeal.
The DC court’s ruling, by Chief Judge Beryl A. Howell, said that by failing to require disclosure of donors the FEC had blatantly undercut Congress’ statutory goal of “fully disclosing the sources of money flowing into federal political campaigns, and thereby suppress[ing] the benefits intended to accrue from disclosure, including informing the electorate, deterring corruption, and enforcing bans on foreign contributions being used to buy access and influence to American political officials.” [Read the full opinion.]
Unlike tax-deductible organizations (i.e. charities), tax-exempt organizations (such as labor unions and chambers of commerce) can give to political causes, so long as that is not their “primary purpose.” Super PACS can raise unlimited funds but under campaign finance laws they cannot hide their donors.
“The thing is, the IRS has never defined what ‘primarily’ means,” said Robert Maguire, Political Nonprofit Investigator at the Center for Responsive politics. He said that some tax-exempt organizations have “found it’s very easy to spend 60, 70, 80, 90, even at times 100% of their money on election-related activity without any discipline or oversight from the IRS or FEC.”
Marc Owens, former head of the Tax Exempt and Government Entities Division at the IRS, said nonprofit regulation is difficult from a political and financial standpoint. “Resources have been cut dramatically though the work has increased,” he said.
As of Wednesday, nonprofits had reported spending about $62.5 million on the election according the Center for Responsive Politics, a nonpartisan group that tracks election spending.
The Ohio Center for Investigative Journalism contacted all 13 nonprofits who have so far contributed money to political ads in Ohio. according to the FEC. Twelve did not respond to repeated requests to comment.
Scott Hogenson, a spokesman for the 60 Plus Association, said that they don’t list donors, but that their decision to operate as a nonprofit had nothing to do with hiding donors’ identities, as they have been registered as a nonprofit for over 25 years.
“Our goals for the future are the same as our goals for the past. We want to do everything we can to preserve Social Security, Medicare, and to do what we can to educate people on issues of importance to America’s senior citizens,” he said.
According to a report released this week on undisclosed money in politics, nationally, groups reported spending more than $800 million on campaign activities to the FEC between January 2010 and December 2016. That figure that doesn’t include most internet and social media advertisements, which weren’t part of the 2002 overhaul of campaign finance laws and therefore need not be publicly reported.
The issue became especially pronounced after the Supreme Court’s 2010 Citizens United ruling, said Michael Beckel, research manager at Issue One, a nonpartisan ethics think tank based in DC who released the report.
“Citizens United led to an explosion in dark money spending. This ruling allowed certain corporations, and certain nonprofit corporations, which generally aren’t required to disclose their donors, to spend unlimited money on advertisements that expressly call for the election or defeat of candidates. So we see brand-new vehicles popping up, like mushrooms after a rain,” he said.
In some case, donor secrecy may prevent voters from easily discerning the motives of the organizations that are sending them political messages.
Take, for example, the Conservative Leadership Alliance. It has a “Super PAC” that has publicliy reported spending $93,000 in political ads. And it has a tax-exempt corporation, CLA Incorporated, that has reported spending $1.6 million in this election cycle, including $56,500 in Ohio, without reporting the names of its donors.
Both organizations are registered to the same address and have the same treasurer on their filings — Marc Himmelstein, a former FirstEnergy lobbyist.
The Conservative Leadership Alliance Inc. says that it promotes conservative leadership. But its negative ads helped to sink the primary congressional candidacy of Christiana Hagan, a thoroughly conservative member of the Ohio House of Representatives.
Hagan landed on CLA’s bad side after she refused to support a measure to allow FirstEnergy to collect an additional $300 million annually from ratepayers.
Hagan says she thinks voters deserve to know who is funding political ads.
“I think it’s important for voters to be able to discern the context of the information they’re receiving,” she said. “When this dark money PAC can come in at the 11th hour with zero to no identification of their sources, it’s nearly impossible for the average person to discern the truth from lies.”