“The Real IRS Problem”: The Post Citizens United Explosion Of Undisclosed Political Campaign Spending
Americans of all political stripes should be outraged at the recent revelation that the Tea Party was unfairly targeted by the IRS before last year’s election. The IRS should never base its decisions on political preferences or ideological code words, regardless of what bureaucratic challenges it may face. But the lesson that the right is drawing from the IRS’s misdeeds — the lesson that threatens to dominate the public conversation about the news — is wrong.
We’re seeing a knee-jerk reaction, particularly from the Tea Party and their allies in Congress, that is threatening to turn the IRS’s mistakes into an indictment of “big government” writ large. Some are already trying to tie the scandal to the Right’s favorite target, Obamacare, and to the Benghazi conspiracy theory.
The danger of this frame is that it will discourage the IRS from fully investigating all nonprofit groups spending money to influence elections. And it will distract from the core problem behind the IRS’s mess: the post-Citizens United explosion of undisclosed electoral spending.
Before the Supreme Court’s decision in Citizens United, only a limited number of nonprofit 501c(4) groups could spend money to influence elections — those who did not take contributions from corporations or unions. But Citizens United lifted restrictions on corporate spending in elections, setting the stage for individuals and companies to funnel unlimited money through all corporations, including c(4)s and super PACs in an effort to help elect the candidates of their choice. Spending by c(4)s has exploded since Citizens United, since the decision allowed any c(4) nonprofit corporation that didn’t spend the majority of its money on electoral work to run ads and campaign for and against candidates. And c(4)s, as long as they follow this rule, don’t have to disclose their donors under the laws currently in place.
The IRS, then, was forced to play a new and critical role in policing this onslaught of electoral spending. IRS officials clearly made poor choices in how to confront this sudden sea change and those mistakes should be investigated and properly addressed. But strong oversight of this new wave of spending remains critically important and clearlywithin the IRS’s purview.
If we let understandable concerns about bad decisions by the IRS lead to weakening of campaign finance oversight, our democracy will be the worse off for it. Instead, we should insist that the government strengthen its oversight of electoral spending — equally across the political spectrum. We should pass strong disclosure laws that cover all political spenders, including c(4)s. And we should redouble our efforts to overturn Citizens United by constitutional amendment and reel back the flood of corporate money that led the IRS to be in this business in the first place.
By: Michael B. Keegan, The Blog, The Huffington Post, May 15, 2013
As we’re learning more about the IRS giving heightened scrutiny to conservative groups filing for tax-exempt status, we should make one thing clear: If what we’ve heard so far holds up, the people involved should probably get fired, and new safeguards should be put in place to make sure nothing like it happens again. And let it be noted that liberal publications, at least the ones I’ve seen, have all taken that position and have been discussing this story at length.
Now, let’s see if we can understand the context in which this happened. There’s an irony at work here, which is that it may well be that the IRS employees involved were trying to obey the spirit of the law but ended up violating the letter of the law, while for the organizations in question it was the opposite: they were trying to violate the spirit of the law, but probably didn’t violate the letter of the law.
Let’s take the first part, the IRS employees. When a group files for tax-exempt status, the IRS investigates it, asks it some questions, and determines whether it qualifies under section 501(c)(3) or 501(c)(4). The difference between them is that a 501(c)(3) is supposed to be a genuine charity, like your local food bank or Institute for the Study of Foot Fungus, while a 501(c)(4) is still primarily devoted to “social welfare” but is allowed more leeway to engage in some political activities like lobbying and participation in elections, so long as the political activities make up a minority of its time. The biggest practical difference is that donations to (c)(3) groups are tax-deductible, while donations to (c)(4) groups are not.
Once the Supreme Court said in the 2010 Citizens United decision that (c)(4) groups could engage in “express advocacy” (i.e. explicitly saying “Vote for Smith!”), the IRS got flooded with new applications for (c)(4) groups, and its job was to determine if these groups were actually “social-welfare” organizations that also did some politicking on the side, or if they were groups whose main purpose was actually political, in which case, according to the law, they should be denied (c)(4) status. We know very little at this point about what the IRS employees in Cincinnati did and why, but the generous interpretation is that since so many of the applications they were getting in 2010 and 2011 were from Tea Party groups that looked a lot like their sole purpose was to elect Republicans, they looked for some way to handle them all together, so they searched for applications with words like “Tea Party” and “Patriot” in their names and subjected them to extra scrutiny.
Even if their motivations were innocent and they were just struggling to find ways to wade through all these applications and do their jobs properly—in other words, if there was no violation of the spirit of the law—it was still improper for them to sort the applications this way, because it could mean in practice that an ideological test was being applied to which groups got heightened scrutiny. But now let’s look at the other half of the story, the groups applying for tax-exempt status.
The truth is that a great many of the groups that request 501(c)(3) and 501(c)(4) status, of all ideological stripes, are basically pulling a scam on the taxpayers. Maybe that’s a bit harsh, but at the very least they’re engaged in a charade in which they pretend to be “nonpartisan” when in fact they are very, very partisan. For instance, nobody actually believes that groups like the Center for American Progress on the left or the Heritage Foundation on the right aren’t partisan. When there’s an election coming, they mobilize substantial resources to influence it. They blog about how the other side’s candidate is a jerk, they issue reports on how his plans will destroy America, and they do all sorts of things whose unambiguous intent is to make the election come out the way they want it to. CAP and Heritage, along with many other organizations like them, are 501(c)(3) charities, meaning as long as they never issue a formal endorsement and are careful to avoid any express advocacy, they can maintain the fiction that they’re nonpartisan (keep getting tax-deductible contributions, which are easier to obtain than those that aren’t tax-deductible).
And that fiction is even more exaggerated when you get to the (c)(4) groups, particularly the new ones. For instance, when Karl Rove’s Crossroads GPS applied for 501(c)(4) status, it explained to the IRS that it was a social-welfare organization for whom influencing elections wouldn’t be its primary purpose. Instead, the group said “Through issue research, public communications, events with policymakers, and outreach to interested citizens, Crossroads GPS seeks to elevate understanding of consequential national policy issues, and to build grassroots support for legislative and policy changes that promote private sector economic growth, reduce needless government regulations, impose stronger financial discipline, and accountability in government, and strengthen America’s national security.” It claimed that 50 percent of its activities would be “public education,” 20 percent would be “research,” and the remaining 30 percent would be “activity to influence legislation and policymaking.” On the section of the form where the group has to state whether it plans to spend any money to influence elections, it wrote that it “may, in the future” do so, but “Any such activity will be limited in amount, and will not constitute the organization’s primary purpose.”
As everyone knows, this is a joke. Crossroads GPS was created for one purpose and one purpose only: to get Republicans elected. Maybe they found a way to stay within the letter of the law, but there’s no question they were violating its spirit. And the same is true of Priorities USA, the pro-Obama group created in advance of the 2012 election by a couple of former White House staffers. Both are actually twin groups, a (c)(4) and a super PAC, which allows the people running them to keep within the letter of the law by moving spending around between the two. (Stephen Colbert and Trevor Potter memorably explained how all this can be done.)
Without knowing anything about the particular Tea Party groups that were subjected to heightened scrutiny (we’ve only heard about a few so far), the broader context is that you have a lot of groups of all political persuasions that are essentially trying to pull a fast one on the IRS, and through them, the American taxpayer. Keep in mind that tax-exempt status is a gift that we give to groups that can demonstrate they deserve it. Perhaps this part of the tax code should be made stricter, or perhaps it should be made looser so all these charades can stop. But either way, this wouldn’t be a bad time to start that discussion.
By: Paul Waldman, Contributing Editor, The American Prospect, May 13, 2013
“SCOTUS Naive On Super PACs”: Insulated From The Machinations Of Political Campaigns And Campaign Finance Realities
When the Supreme Court paved the way for unlimited independent spending in elections with its Citizens United decision, the justices assumed a key protection to prevent corruption: The expenditures would be truly independent, so it would make it impossible for a candidate and a donor to engage in a quid pro quo. In theory, this makes sense. If there’s no coordination between the independent groups like super PACs and candidates — and coordination remains technically illegal — then donors will fund independent expenditures purely out of their own political beliefs and not in the expectation of getting anything in return.
In practice, however, this distinction completely breaks down because groups are often established to fund a single candidate, as opposed to a broad cause, and there are plenty of ways to communicate intentions or expectations without violating narrow coordination laws.
A new report from Public Citizens shows just how absurd it is to assume that outside groups are truly independent. Of all the major super PACs and 501(c) nonprofit groups that engaged in the 2012 election, about half backed a single candidate exclusively, effectively making themselves auxiliary organs of the candidate’s campaign, the report found. Generally, these groups were “founded, funded or managed by friends, family members, or recent campaign aides of the candidate they supported,” the report adds.
The most obvious examples are Priorities USA, the Obama super PAC founded by a former White House aide, and Restore Our Future, the Romney super PAC founded by the general counsel of Romney’s 2008 presidential campaign. These groups allowed wealthy donors who had already maxed out their donations to either candidate’s official committee to give unlimited additional funds to the auxiliary super PAC to support their candidates.
Meanwhile, another 30 percent of spending came from groups designed specifically to aid the parties. For instance, the Democratic-affiliated House Majority PAC acted as an auxiliary to the Democratic Congressional Campaign Committee. All of this is aboveboard.
In total, candidate-specific and party-allied groups accounted for more than 65 percent of all spending by outside groups in the 2012 elections, including seven of the top eight groups, according to the report. Among super PACs alone, that percentage climbs to 74.4 percent.
“The emergence of entities using unlimited contributions to aid candidates and parties with which they have close relationships threatens to gut the anticorruption policy underlying campaign finance laws, which the court claimed it did not intend to weaken,” Taylor Lincoln, the research director of Public Citizen’s Congress Watch, and his co-authors wrote.
In its Citizens United decision, the Court approvingly quoted from an earlier decision, Buckley v. Valeo, observing that in independent expenditures, “The absence of prearrangement and coordination of an expenditure with the candidate or his agent not only undermines the value of the expenditure to the candidate, but also alleviates the danger that expenditures will be given.”
Clearly, if independent expenditures de facto operate as direct contributions, the distinction is meaningless and the supposed protection of independence is destroyed. This was obvious to almost everyone before the decision — except for the justices, apparently. They are insulated from the machinations of political campaigns and campaign finance realities, which is usually a good thing, but it allowed them to base a major overhaul of the nation’s campaign finance laws on a flawed and naive understanding of the world.
None of this is particularly surprising to anyone even vaguely aware of the campaign finance dynamics of the 2012 cycle, but the report adds critical numbers and details.
By: Alex Seitz-Wald, Salon, March 5, 2013
After declaring a new national post-election holiday yesterday—Liberal Schadenfreude Day—we’re starting to think it should be a week-long celebration. So much to gloat over after all these years of despair! Our favorite gloat-worthy item on Thursday came courtesy of the Sunlight Foundation. The money-in-politics watchdog did a nifty calculation of the returns that 2012’s big spenders got for their money. It’s not complicated math: Sunlight simply calculated how much outside groups (super PACs, non-profits, and political committees) spent per “desired result” in Tuesday’s elections—supporting candidates who won, in other words, or opposing candidates who lost.
The two groups that fared the worst? Coming in dead last, in terms of “desired results,” was the National Rifle Association’s optimistically named National Political Victory Fund, which spent $11 million for a success rate of less than one percent. But the biggest money-waster of all, you will be eternally gratified to hear, was Karl Rove’s American Crossroads super PAC, which forked out a whopping $104 million and had a “desired result” rate of 1.29 percent. That’s right, folks: The great genius of American Republicanism wasted more of his donors’ money than anyone else. (His non-profit group, Crossroads GPS, did marginally better—a 14-percent “desired result” rate.) Looked at one way, though, American Crossroads had a kind of perfect score: The super PAC supported zero candidates who won on Tuesday.
And whose money paid the highest dividends? Planned Parenthood’s two political funds—both with much less money than the aforementioned conservative groups—both had success rates of more than 97 percent. The League of Conservation Voters notched up a 78 percent score. And labor groups got some serious bang for their bucks: The SEIU’s two outside spending groups, for instance, had “desired results” in 74 percent and 85 percent of the races in which they invested.
The delightful takeaway: There’s a certain block-headed, bespectacled campaign wizard who’s going to have some serious explaining to do to some of the nation’s richest conservatives. For the man formerly known as “Bush’s brain,” it appears that his memorable Election Night meltdown actually wasn’t the lowlight of his week. And those mega-millions might be just a tad bit harder to come by in 2014 and 2016.
By: Bob Moser and Jamie Fuller, The American Prospect, November 8, 2012