IRS to Propose New Rules for Dark Money Groups

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Republicans depend on the big money of Sheldon Addelson, the Koch Brothers and other corporatist billionaires.  However, the GOP’s biggest financial resource is the secret money funneled through political action groups masquerading as social welfare groups aka 501 c 4 groups.

The benefit of 501 c 4 status is it provides legal cover for political donors to evade the transparency that the Roberts Court said would compensate for unleashing billionaires to buy our government.  The billionaires who pay the GOP to increase corporate welfare while starving children (especially Urban children with bonus points if they can starve more Urban children who are black) aren’t satisfied with merely having the green light to buy politicians in every state and DC.  They want secrecy too.  After all, being outed as someone who believes the only purpose of government is subsidize corporations or the vote should be restricted to property owners can be bad for the bottom line.

As Ruth Marcus pointed out, “Big money is troubling; secret money is toxic” to free and fair elections.

Given the criticism that the IRS received in its handling of 501 c 4 applicants, it is rewriting the rules for 501 c 4’s from scratch and will hold public hearings on the proposed new rules.

This could be resolved simply if the IRS simply applied the relevant text of the Revenue Act of 1913.

Civil leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes.

Today’s 501 c 4 problem really is a result of the IRS’s making.  Back in 1959, the IRS decided to reinterpret the original law with the following:

a]n organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements.

This wasn’t a big problem until the Roberts Court decided that money is speech.  After the Citizens United ruling, applications for 501 c 4 status went through the roof and so did the dark money. As noted by Open Secrets 

Since the Citizens United decision, the number of groups applying for 501(c)(4) status has dramatically increased, more than doubling in the years following the ruling, according to a May 2013 Treasury inspector’s general report. The money spent by these groups on politics — or at least the money we know is being spent (has also skyrocketed. The Center for Responsive Politics estimates that in the 2012 election, 501(c) groups spent at least $333 million and that’s only the money we can track. That’s an increase of 53 percent from 2008, the last election before Citizens United, when the same type of groups spent just $159 million.

As Sarah Jones pointed out a year ago,

According to data released by the Television Bureau of Advertising, local television stations raked in nearly $3 billion in dark money from political ads in 2012. The sources behind that money are rarely revealed to the viewer, sort of like the anonymous trolls of TV.

Changes are needed because anonymous tv trolling is the Republican Party’s propaganda method of choice and it will only get worse.  Obviously, Republicans and their Tea Party of useful idiots will cry persecution if the proposed rule changes result in following the intended law because that would end their ability to troll TV anonymously.  In this case, the simple solution may have the Republicans crying in their tea, but it is also the best solution if we are to regain the transparency that is necessary for an informed electorate to participate in free and fair elections.

Image: Citizens For Ethics

Adalia Woodbury

Former contributor.