No doubt about it, large unlimited donations are flowing into SuperPACs from rich individuals and corporations aimed at influencing who is elected at all levels of government in 2012. With the SuperPACs and other forms of political committees regulated by the federal and state election agencies, or by the IRS under section 527, at least we know who the donors are. But when political campaign expenditures are made by various forms of nonprofit, tax-exempt organizations, such as 501(c)(4) social welfare groups (like Crossroads GPS) or 501(c)(6) business associations (like the US Chamber of Commerce), there is no general law requiring their donors to be identified. So secret money in the millions, once again, flows in. A number of Senators and members of the House of Representatives have proposed a new DISCLOSE 2012 Act to force public disclosure of secret donors in federal elections. A similar bill failed by one vote in 2010. If the new Act passes, will it solve the problem? It might help, but it wouldn’t be enough. In 29 pages, the Act is cumbersome at best.
You see, the underlying problem is that while 501(c)(3) charities are prohibited from any political campaign activity, the IRS has permitted, over decades, many of the other 501(c) categories to engage in a large amount of political intervention So long as the “primary” work of the organization serves an approved nonpartisan purpose, most of us in the nonprofit bar advise that it can make political expenditures of up to 49% annually and still qualify as tax-exempt. The main problem that frustrates any disclosure regime is that the IRS allows these 501(c) groups to be tax-exempt despite their multiple purposes and multiple programs.
It is very difficult to create rules that accurately trace political spending back to original sources in a multi-purpose organization. How far back do you go? Do you count the dollars first-in first-out or last-in first-out? Do you allocate the spending proportionately over all the donors? Do you let the organization say that the money came from investments, T-shirt sales, and small donors, and not from any big donors?