Correction to This Article
The On K Street column on the April 17 In the Loop page incorrectly said that the Livingston Group had hired Jill A. Schuker. She is an independent consultant.
Clarification to This Article

To Conceal Donors, Some Political Groups Look to the Tax Code

By Jeffrey H. Birnbaum
Tuesday, April 17, 2007

An increasing number of organizations working to influence elections also are working to hide who is paying for their activities.

Several political organizations colloquially known as 527s are relying more on or switching into 501(c)(4) groups, the type of tax-exempt entity that the tax code uses for advocacy groups.

The 527s must disclose who gives them money; 501(c)(4)s do not have that requirement.

The trend, which was discovered by the nonpartisan Campaign Finance Institute, runs counter to one of the basic tenets of modern-day election law -- broad public disclosure. Voters generally have the right to know who is helping to elect their representatives and senators. Armed with such data, they can decide for themselves who, if anyone, is trying to buy their congressional representatives.

A lot of political influence is at stake if such transformations proliferate. In last year's elections, 527s spent $143.2 million. The biggest outlays on the Democratic side came from the Service Employees International Union, Emily's List and America Votes, a coalition of liberal groups. On the Republican side, the big spenders were the Progress for America Voter Fund, the College Republican National Committee and the Presidential Coalition.

There are many reasons that 527s might want to alter their stripes. The main one has nothing to do with concealment: The Federal Election Commission has been cracking down on 527s, insisting they cannot explicitly press for the election or the defeat of candidates.

But in trying to sidestep the crackdown, several 527s have chosen an alternative structure that is harder for the public to track. Tax-exempt groups of various types have always been able to keep their donors anonymous (except to the Internal Revenue Service). The exception to this, made in 2000, is the type of electioneering funds called 527s, which have to publicly name their contributors.

In recent years, one group that has leaned more heavily on its 501(c)(4) is Progress for America, once one of the largest GOP-leaning 527s. Another group is converting outright: the Club for Growth, which supports conservative, anti-tax candidates. According to a letter obtained by the Campaign Finance Institute, the club sees many benefits in its transformation, including secrecy. "Unlike in the past, your donations to the Club will not be disclosed to the public, except in very limited circumstances," wrote Patrick J. Toomey, the group's president.

Some experts doubt that the Club for Growth will be widely imitated. An organization cannot simply change its label to a 501(c); it must also alter its function so that it no longer primarily works on elections. Last week, Public Citizen, the liberal gadfly, formally complained that Americans for Job Security should not be allowed to operate as a 501(c)(6), or trade association, because of its large-scale electoral involvement.

Companies to Reveal Extra Giving

Not every group is trying to duck for cover. Twelve major corporations have agreed to voluntarily disclose where their political giving goes, suggesting that there might be a countertrend among companies to tell the public more about where they are focusing their public policy spending -- even when they do not have to.

Aetna, Colgate-Palmolive, DuPont, FirstEnergy, Pfizer, WellPoint and Xcel Energy will report how much of their payments to trade associations are used for political purposes. Cigna, Chevron, EMC, General Motors and Lockheed Martin will reveal such "soft money" gifts as corporate donations to political advocacy groups.

The corporations were pressured into making these revelations by the Washington-based Center for Political Accountability and several activist pension funds that are demanding more transparency in how the money is spent. And they are not alone. Since 2005, 31 companies have agreed to extra disclosure as well as more board oversight of political expenditures.

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