by Matt Sarge
The Obama Administration recently proposed new IRS rules that could begin to reign in campaign spending by tax-exempt outside groups that expanded significantly since the Citizens United case in 2010. The current rules allow for non-profits to engage in political activity and lobbying so long as they are also “improving social welfare.” The new IRS rules would place a limit on the political spending of these non-profit groups, which would either lead to reduced political activity or registering as an explicitly political organization (such as a PAC).
Non-profits are currently exploited as vehicles for political spending because of the anonymity they offer to donors. Political non-profits are not required to disclose donors identities, unlike Super PACs and political parties. The new rules are controversial given both the vested interest that many prominent voices have in allowing for robust campaign expenditures. Additionally, given the recent scandal surrounding IRS treatment of Tea Party affiliated groups, any IRS rule changes that can be seen as limiting political speech are likely to ignite opposition amongst conservatives. Karl Rove’s Crossroads Grassroots Policy Strategies is a tax-exempt group that would be highly affected by the rule changes and is currently a major financing source for Republican candidates and causes, while the League of Conservation Voters would be the largest group impacted on the Democratic side. However, the rule change to the allowed political behavior of non-profits would have a disproportionate impact of conservative groups, as nine of the ten largest political non-profits in the 2012 cycle were Republican-leaning.
Outside Spending by Type - Center for Responsive Politics
Spending by tax-exempt social welfare groups has been a major source of campaign expenditure growth, more so than unions and trade associations. Because finance rules often affect Democratic-leaning unions differently than the political non-profits that Republicans rely on, campaign finance issues can become politically charged. However, given the recent proliferation in spending by political non-profits, curbing the political activities of the 501c (4) tax exempt groups that flourished in the wake of Citizens United is an obvious attempt to limit the influence of anonymous money in politics.
If the rules are approved, corporate spending on elections is not necessarily going to be curtailed. Given the vast array of options that corporations and mega-donors have for getting their money into an election, the only effect that the proposed rule changes may have is forcing more of that money to go through channels that require disclosure. The SEC recently dropped a proposal that would have required public companies to disclose all political donations to their shareholders. So while corporations may not be required to disclose, more may choose to donate their money through political groups that require disclosure due to the proposed new rules governing political activity of non-profits. In a post-Citizens United world, limiting the influence of money in elections is unlikely – but that influence may have to be a little more transparent.