Michael Luo and Stephanie Strom of The New York Times profiled the rapid growth of political organizations that can receive unlimited contributions but do not have to disclose their donors. 501(c)(4) groups* have become more numerous, and unlike 527’s, do not have to reveal the sources of their funding, which is “arguably more important than ever after the Supreme Court decision in the Citizens United case earlier this year that eased restrictions on corporate spending on campaigns.”
“I can tell you from personal experience, the money’s flowing,” said Michael E. Toner, a former Republican F.E.C. commissioner, now in private practice at the firm Bryan Cave.
The growing popularity of the groups is making the gaps in oversight of them increasingly worrisome among those mindful of the influence of money on politics.
“The Supreme Court has completely lifted restrictions on corporate spending on elections,” said Taylor Lincoln, research director of Public Citizen’s Congress Watch, a watchdog group. “And 501(c) serves as a haven for these front groups to run electioneering ads and keep their donors completely secret.”
Almost all of the biggest players among third-party groups, in terms of buying television time in House and Senate races since August, have been 501(c) organizations, and their purchases have heavily favored Republicans, according to data from Campaign Media Analysis Group, which tracks political advertising.
These organizations are considered “social welfare” groups that are legally allowed to lobby on certain issues, but until Citizens United, were not permitted to explicitly urge voters to vote for or against a candidate. “As a result, rarely do advertisements by 501(c)(4) groups explicitly call for the election or defeat of candidates,” Luo and Strom write, “Instead, they typically attack their positions on issues.” That has changed dramatically since Citizens United, as seen in the rise of organizations like American Crossroads GPS. 501 (c)6 groups that are “business associations” like the US Chamber of Commerce and Americans for Job Security are “spending heavily in support of Republicans.”
But with weak and ineffective regulatory oversight, many of these political organizations disguised as “social welfare” groups can continue to hide their donors from the public eye:
In fact, the I.R.S. is unlikely to know that some of these groups exist until well after the election because they are not required to seek the agency’s approval until they file their first tax forms — more than a year after they begin activity.
"These groups are popping up like mushrooms after a rain right now, and many of them will be out of business by late November,” Mr. Owens said. “Technically, they would have until January 2012 at the earliest to file anything with the I.R.S. It’s a farce.”
Social welfare nonprofits are permitted to do an unlimited amount of lobbying on issues related to their primary purpose, but there are limits on campaigning for or against specific candidates.
I.R.S. officials cautioned that what may seem like political activity to the average lay person might not be considered as such under the agency’s legal criteria.
* People For the American Way is a 501(c)(4) organization.