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Bright Line Rules for Nonprofits Can Bring Dark Money into the Light

by Emily Peterson-Cassin

As the Senate Rules Committee meets today to discuss transparency in elections, there’s a valuable asset in the fight against secret money that won’t be on the agenda: an IRS rulemaking that could change the definition for political activity by nonprofits and put a speed limit on dark money spending.

Nonprofits registered under tax code sections 501(c)(4) and 501(c)(6) have been spending millions attempting to sway voters, particularly after the Supreme Court’s devastating decision in Citizens United that allowed corporations to spend unlimited money to influence elections. These political operatives avoid disclosing their donors, and their influence is growing. According to the Center for Responsive Politics, three times more dark money spending has taken place in 2014 than at this point during 2012. This is notable since 2012 was a presidential campaign year and political spending is generally lower in midterm election years.

The IRS’s current, vague standard for what counts as political activity is like a traffic sign that says “go whatever speed you want.” Many nonprofits will go more slowly than they could do safely, cutting back on get-out-the-vote drives and voter registration efforts because they are worried about risking their nonprofit status. But dark money groups willing to push the rules will slam on the gas, knowing that the unclear standard will protect them.

But it doesn’t have to be this way. The IRS is currently engaged in a rulemaking that could clarify the definition of political activity for nonprofits, which will set clear limits and make enforcement easier against those trying to game the system. Stricter enforcement could drive dark money into the light by making registration of nonprofits as 527 groups – which do disclose their donors – a more attractive option. The IRS is set to release a proposal in early 2015.

Bright-line rules defining what is and is not political activity will increase the kind of nonpartisan voter engagement that nonprofits should encourage while forcing those wanting to spend money on tilting our elections to come out and say they’re doing so. The senators in today’s hearing are right to be concerned about the decreasing level of transparency in our elections. However, they must not forget that the IRS should also fix the road signs.

Emily Peterson-Cassin is the Bright Lines Project Coordinator for Public Citizen’s Congress Watch division

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