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Analysis: ‘Dark money’ claims in McMorris Rodgers, Brown debate oversimplify complicated campaign finance laws

September 23, 2018

Some of the most heated exchanges in Wednesday’s campaign debate between Rep. Cathy McMorris Rodgers and Democratic challenger Lisa Brown focused on the role of so-called “dark money” in the campaign.

Each candidate for Eastern Washington’s 5th Congressional District seat accused the other of taking advantage of political donations that aren’t traceable.

McMorris Rodgers, a seven-term Republican congresswoman, pointed out that the only negative ads in the campaign so far from an outside group are attacking her response to family separations at the border. She said Brown’s claims of wanting to eliminate “dark money” rang hollow if Brown wouldn’t repudiate those ads.

Brown retorted that McMorris Rodgers was supported by a GOP political action committee that has set up shop in office space near the Spokane Arena, a group that has accepted millions of dollars from charitable organizations, and that like the liberal group attacking the congresswoman, doesn’t report its donors.

Claims from both candidates oversimplify the complicated landscape of federal campaign finance laws, a system further thrown into limbo by a U.S. Supreme Court ruling this week that could alter spending on midterm election ads.

The congresswoman’s criticism came despite her vote in Congress two years ago that would have kept secret the donors supplying funds to the organization attacking her.

McMorris Rodgers’ claims homed in on Equity Forward, a “social welfare” nonprofit under the U.S. tax code that isn’t required to report to the federal government its electioneering expenses, nor its donors. Earlier this summer, the group claimed multiple six-figure ad buys in the district with ads that overlooked failed legislation the congresswoman supported to end the border separation policy.

“There’s an outside group, I’m not sure who they’re funded by, maybe George Soros,” McMorris Rodgers said in a statement directed at Brown on-stage, referring to the Hungarian-born billionaire and frequent Democratic campaign contributor.

McMorris Rodgers didn’t mention the group by name, and Brown made no attempt Wednesday night during the debate to condemn the ads. The Democrat did so in a follow-up interview on Thursday, while pointing out that, as a group making what are known as “independent expenditures,” they can’t coordinate with official campaigns.

“They’re legally prohibited from coordinating with the campaign. I haven’t done any research on where the money came from,” Brown said.

“I don’t agree with these practices. I would vote to change them,” Brown continued.

Brown has said she supports a Democratic-backed effort in Congress that she said would require donors of groups like Equity Forward to be divulged to federal regulators. The so-called “DISCLOSE” act has been introduced multiple times in Congress as a response to the 2010 Supreme Court decision that eliminated caps on campaign-related expenses by corporations, labor unions and nonprofits.

Brown said the Republican Party, including McMorris Rodgers, has made several procedural moves to avoid an up-or-down vote on the legislation in Congress, while the McMorris Rodgers campaign said that laying those decisions at the congresswoman’s feet is an oversimplification of the process that allows legislation to come to the floor.

Equity Forward does not disclose individual donors, according to a spokesperson for the nonprofit. An analysis by the group Center for Responsive Politics, which investigates the source of money in politics, found that its tax filings appear to be “non-existent,” though its expense reports to the Federal Communications Commission show a business address that matches at least two other nonprofit groups that jointly file tax returns.

The group also doesn’t have to release its expenses or donors to the Federal Election Commission, the agency responsible for overseeing compliance with federal campaign finance law.

“These groups are operating, in essence, without a paper trail,” said Anna Massoglia, a researcher with the Center for Responsive Politics.

McMorris Rodgers voted in Congress to exempt groups like Equity Forward from ever having to disclose their donors to the IRS. It was legislation that passed the House of Representatives in the wake of concern the taxing agency was targeting conservative-leaning groups for audits.

All but one Republican in the House of Representatives and a single Democrat voted in June 2016 to pass the “Preventing IRS Abuse and Protecting Free Speech Act,” a bill that would have prevented the agency from collecting the name, address or any other identifying information of a contributor to any tax-exempt group.

That would have included Equity Forward and would have given the organization the legal ability to permanently avoid disclosing its donors. The bill died in the Senate.

Jared Powell, a spokesman for the congresswoman, said in a statement that the bill was passed in response to the concern at the time, bolstered by a federal investigation, that found the IRS was targeting conservative political groups.

“This legislation was meant to address the history of the IRS in using tax information to politically target conservatives, which was in response to a Government Accountability Office report which found internal flaws at the IRS that could be leading to unfairly selecting Americans for audits ‘based on an organization’s religious, educational, political, or other views,’ ” Powell’s statement said.

The campaign conceded that it appeared the legislation would also apply to Equity Forward.

During the town hall, Brown singled out the Congressional Leadership Fund’s support of McMorris Rodgers’ campaign as evidence she was accepting dark money support. The Congressional Leadership Fund, according to its website, is a super PAC exclusively dedicated to protecting and strengthening a Republican majority in the House of Representatives.

McMorris Rodgers countered, truthfully, that the fund hadn’t financed any ads that have aired in the district. It has reported expenses of $1,600 in efforts to oppose Brown’s candidacy and $1,600 to support McMorris Rodgers, according to the Center for Responsive Politics.

The group, a so-called “super” political action committee that has no limits on the contributions it accepts but can’t give money directly to candidates, has set up an office in the Rock Pointe Towers in Spokane. The door was locked during a visit Thursday afternoon and white sheets of paper covered the windows. Several knocks on its office door went unanswered.

Courtney Alexander, a spokeswoman for the Congressional Leadership Fund, said Saturday that workers had been out knocking on doors in the community on Thursday. The office is used for making phone calls and organizing, she said, and is staffed by one paid worker and several interns and volunteers.

Travis Ridout, a Washington State University political science professor who studies political ads and fundraising, said when people usually refer to “dark money” in politics, they’re talking about groups like Equity Forward, not the Congressional Leadership Fund, which must disclose donors to the FEC.

“Most of what we see in politics is the 501(c)(4)s, who are not required to disclose donors,” Ridout said. “That’s why we refer to them as dark money.”

Massoglia, the researcher with the Center for Responsive Politcs, agreed that Equity Forward’s actions match what is traditionally considered “dark money” in politics.

“Unquestionably, this would be an example of that,” she said.

But federal law doesn’t prevent groups like the Congressional Leadership Fund from accepting money from tax-exempt groups that don’t have to disclose their donors, which is exactly what the group has done.

A review of FEC filings shows that the Congressional Leadership Fund has, in this election cycle, accepted millions of dollars from American Action Network. It has the same tax-exempt status as Equity Forward, though the organization – founded by prominent conservatives Fred Malek and Norm Coleman – has filed federal 990 tax returns, unlike Equity Forward. Those forms don’t disclose individual donors but do show the nonprofit’s total expenditures and receipts.

This system may be completely upended by the recent decision by the U.S. Supreme Court not to hear an appeal by the group Crossroads GPS, a conservative nonprofit, challenging a court ruling that would require it to reveal all donors who have contributed more than $200. The ripple effects of the decision haven’t been felt yet, said Ridout, but national political observers have suggested the ruling might have a chilling effect on groups like Equity Forward and American Action Network.

Both candidates are setting records in fundraising in the closely watched contest for Eastern Washington’s seat. In July, before the primary, the candidates reported having nearly $3 million on hand between the two of them. The next financial report from the campaigns is due to the Federal Election Commission on Oct. 15.

Editor’s note: This story was updated on Saturday, Sept. 22, to include details about the Congressional Leadership Fund’s organizing efforts in Spokane.

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