The Washington PostDemocracy Dies in Darkness

Political nonprofits seek answers after court decision targeting ‘dark money’

Demonstrators gather outside the Supreme Court in 2013 as the justices hear arguments on campaign finance. This week, the high court declined to stay a lower-court ruling that required politically active nonprofits to disclose donors.
Demonstrators gather outside the Supreme Court in 2013 as the justices hear arguments on campaign finance. This week, the high court declined to stay a lower-court ruling that required politically active nonprofits to disclose donors. (Susan Walsh/AP)

As politically active nonprofits scramble to figure out the implications of a recent court decision requiring them to disclose some of their donors, experts said one thing is clear: There will be ways around the new rules.

Groups could accept money through shell corporations, said campaign finance lawyers and advocates of more regulation of money in politics. They could shift money to allied super PACs. They could adjust their ads so they come right up against the line that would trigger disclosure.

Such jockeying has become commonplace as advocates push for more transparency about political contributions, particularly the giving from undisclosed donors they call “dark money.”

“It’s always been kind of a cat-and-mouse game about disclosure,” said Richard Hasen, an election law expert at the University of California at Irvine. “I don’t think people who are heralding the end of ‘dark money’ are going to be satisfied with what we end up seeing.”

Some of the biggest players in politics are nonprofits that don’t disclose their donors, including Americans for Prosperity on the right and the Sierra Club on the left. They typically influence elections by raising millions of dollars and running independent political ads urging voters to contact their lawmakers, or calling for the election or defeat of a specific candidate.

These groups have proliferated since the Supreme Court’s landmark 2010 Citizens United decision, which allowed corporations, including nonprofits, to spend unlimited money on political activity separate from candidates.

Nonprofit advocacy groups historically have not been required to publicly disclose their donors, as political committees must. But last month, in response to a long-running lawsuit from transparency advocates, a federal judge threw out a decades-old rule that allowed the groups to withhold donors’ identities, broadening the type of donors who would now be subject to disclosure.

The Supreme Court on Tuesday declined to intervene in the case and did not grant an emergency request to stay the ruling by Chief U.S. District Judge Beryl A. Howell. The ruling is under appeal, but Howell’s decision went into effect immediately.

Conservatives and right-leaning groups said Howell’s decision raises First Amendment concerns about donor privacy and participation.

The ruling “imposes egregious limits on free speech, which is the foundation of a free society and the backbone of our democracy,” Bill Riggs, spokesman for the Koch-backed Americans for Prosperity, said in a statement.

“Ultimately, this ruling will result in fewer voices, less diversity of viewpoints and a chilling effect in political dialogue — weakening our democracy, not protecting it,” he said.

Political nonprofits must now name many of their donors under federal court ruling after Supreme Court declines to intervene

Despite the expected efforts to protect donors’ identities, the decision will no doubt shed more light on the contributors to politically active nonprofits, although exactly how much is uncertain as groups and federal officials take stock of the decision.

“The bottom line is, we do not know yet how much disclosure we’re going to get,” said Fred Wertheimer, president of Democracy 21, a group that advocates for reducing the role of big money in politics. “What we know here is that this is a breakthrough decision, because the court clearly recognized that Congress wanted the donors disclosed who were funding election activities. But we are going to have a ways to go.”

In the absence of new regulation, nonprofit groups are left in a gray area, which could lead to new methods of avoiding disclosure and maintaining donor privacy, lawyers and advocates said.

One way groups could avoid disclosure is by having their donors give money through limited liability companies, or LLCs. It is almost impossible to figure out who finances LLCs or who set them up.

Another technique could be to accept donations and then give them to a connected super PAC. Such a transfer may not be considered a direct political expenditure, allowing the nonprofit to avoid disclosing its financiers.

It is unclear what will ultimately be permitted. The Federal Election Commission must now write a new rule, which will take at least several months. With a bare-minimum quorum, the FEC frequently deadlocks, which may lead to further delays in crafting the rule.

Still, some groups have begun shifting more activity to allied super PACs in anticipation of the ruling. Others are suggesting that donors give instead to an affiliated super PAC so that there is less confusion about the rules, even though it means their names will be publicly disclosed.

Donors are starting to ask how closely the public will follow their contributions and how often super PACs will be reporting their names, according to one GOP strategist who raises money for nonprofits and super PACs, and requested anonymity to speak about private donor conversations.

What is a 501(c)(4), anyway?

Some nonprofits expect that they will still be able to raise money for certain nonpolitical purposes — such as education programs — without disclosing donor identities, while separately carrying out political advertising campaigns.

But Wertheimer said such a strategy could push the envelope on what a “political purpose” is.

Similarly, some groups may begin using donors’ money for ads that do not specifically call for the election or defeat of a candidate — which triggers disclosure — but come as close to it as possible by attacking a candidate’s stance on a particular issue, or by urging voters to call lawmakers to tell them they support or oppose their position on an issue.

Asked about the impact of the ruling, some nonprofits suggested that it would be minimal because political activity is a small aspect of their work.

“The Chamber’s political program is just one (relatively small) piece of what the organization does” as a nonprofit, Blair Latoff Holmes, spokeswoman for the U.S. Chamber of Commerce, wrote in an email.