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W.H., Watchdogs rail against ‘dark money’ provision tucked into House bill

The House Appropriations Committee approved a spending bill last week that included little-noticed provisions to hobble executive branch efforts to mandate campaign finance disclosure by federal contractors and other corporations.

The bill would also prohibit the IRS from moving ahead with a rule defining political activity for nonprofits.

The restrictions were tucked into a 157-page financial services funding bill. The vote occurred June 17, as the White House was considering renewed requests from public interest groups and congressional Democrats to issue an executive order mandating contractor disclosure.

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A White House spokesman declined Wednesday evening to discuss plans for future executive orders, but criticized the House committee action while confirming ongoing White House concern over “dark money” contributions to politically active non-profit organizations.

“We believe Republicans should be taking steps to fix the campaign finance system, not trying to protect their ability to accept dark money,” spokesman Eric Schultz said in response to the language approved by the Appropriations committee. Dark money refers to funds spent on elections by nonprofit organizations that do not disclose their donors.

Increasingly, allies of both major political parties have used “social welfare organizations,” formed under Section 501(c) 4 of the tax code, to participate in elections using undisclosed contributions. Groups such as Crossroads GPS on the right, founded in part by Karl Rove, and Patriot Majority on the left, founded by allies of Senate Minority Leader Harry Reid (Nev.), have spent huge sums — more than $200 million during the 2014 midterm elections, according to some estimates.

When the spending measure was approved last week, Appropriations Committee chairman Hal Rogers of Kentucky called it “an important bill” that “makes great strides in reining in wasteful spending, and stopping harmful and unnecessary bureaucratic overreach.”  Among other things, the legislation was intended to “protect the right of free speech and political involvement,” according to a statement prepared by the GOP majority.

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The spending bill, which provides funding for the Treasury Department, the judiciary, the Securities and Exchange Commission and other agencies, would not only limit executive branch efforts to require contractor disclosure. Section 129 would prohibit the IRS from moving ahead with a rule defining political activity for nonprofits. Section 625 would prohibit the SEC from creating a rule requiring public companies to disclose their political spending. The bill, drafted by the Appropriations Subcommittee on Financial Services, was approved on a vote of 30-20.

“If this legislation passed as is we would be foreclosed on any means of dealing with post Citizens united spending,” said Lisa Gilbert director of Public Citizen’s Congress Watch organization. “It would mean that the Internal Revenue Service, the SEC and the president would be incapable of acting.”

Increasingly the spending debate has broken down along party lines. Democrats – adopting the mantle of “reform” — call for more disclosure while Republicans and allied business groups, such as the U.S. Chamber of Commerce, say that anonymous donations are a protected right.

Appropriations bills have carried language protecting contractors against executive branch disclosure requirements since 2011, when a draft of an Obama executive order on the topic leaked publicly.

This year, reform advocates say they noticed a clear uptick in the number of provisions tucked into the spending bill written initially by the House Appropriations Financial Services subcommittee.

Like other spending bills, the financial services legislation has become something of a Christmas tree, with amendments that address conservative concerns over topics ranging from abortion, the Affordable Care Act, and blocking the Federal Communications Commission from implementing a net neutrality order.

Public Citizen has led a coalition of organizations to petition the SEC and the White House for action.  A recent study of the top 15 recipients of federal contracting dollars by Public Citizen found that less than half  fully disclose their contributions to 501(c)(4) organizations.

The Brennan Center at NYU, an ally of Public Citizen in this debate, has been making the case for similar action.  The organization’s deputy director, Lawrence Norden, expressed distress over the inclusion of provisions that would protect disclosure by contractors.

Norden tallied hundreds of thousands of dollars in contributions collected by committee members from firms doing business with the federal government.

“It is especially troubling that they would slip into a massive appropriations bill provisions that will make it impossible for the public to ever know how much money those contractors are secretly spending in our elections.  Whoever slipped this in made no announcement, never mind holding a hearing or having a public discussion about it,” Norden said.

The committee’s spokesperson, Jennifer Hing, confirmed that the amendments were in the current version of the financial services appropriations bill. It’s unclear when or if there will be a floor vote on the bill but campaign finance reform advocates said they hoped an executive order was in place before the legislation was considered by the full House and Senate, which like other appropriations bills, may not occur until late this year. In any case, it is not clear that a legislation branch prohibition would survive a court test of presidential power.

On Wednesday, 104 House members and 26 Senators called on Obama to issue an executive order permitting greater government reach — requiring companies that do business with the federal government to fully disclose their political contributions.

“With public funds come public responsibilities, and any company receiving federal tax dollars should be required by executive order to fully disclose their political spending in a timely and accessible manner,” wrote House Democrats in a letter to Obama that was circulated by Rep. Anna Eshoo (D-Calif.).

Federal contractors have been generous donors to members of Congress, according to public reports filed by political action committees.

However, contractors have opposed efforts to mandate greater disclosure, saying rules targeting contractors would discriminate against them.

“This is an important election law issue but it has nothing to do with government contractors,” said Alan Chvotkin, executive vice president at the Professional Services Council, a trade association representing contractors. “Government contractors as a class should not be singled out for different treatment than others in the executive process. The proposed executive order would have the effect of denying contractors or their senior officials a right available to others.”