Secret Political Donors Find Ways To Stay Anonymous

The latest deadline for the presidential candidates and the major superPACs to disclose their finances was Sunday night. The public and the media can find out who has been giving to the candidates, and how that money was spent. But there's a lot of political spending that isn't being reported.

Outside money groups are spending millions of dollars, and the donors remain anonymous. Two recent court rulings could force those groups to file public disclosures, but there already seems to be a way around that.

Unlike superPACs, these big-spending groups don't disclose their donors. They operate mostly as tax-exempt advocacy organizations under section 501(c)(4) of the tax code. It's a status that lets them hide the sources of their money.

Allison Hayward, vice president of policy at the Center for Competitive Politics, says there may be good reasons donors would give to a superPAC in the primaries but think twice about doing so in the general election.

"People wanted to be known for what they were doing, potentially, in the Republican battle," Hayward says. "Maybe now they're less excited that Obama knows what they're doing for Romney, or something like that."

Top-Spending Groups

Tax law says nonprofit groups cannot have partisan politics as their major purpose. Yet so far, these groups have outspent others in the general election — including President Obama's re-election campaign and both national party committees.

Bowdoin College professor Michael Franz is a co-director of the Wesleyan Media Project, which last month compiled a list of the top-spending groups in the TV political wars.

"What we basically did was say, 'Here are the groups that are airing the ads, and here's where they're airing them.' And we listed the names and the number of ads and the total dollars spent," Franz says.

The Wesleyan list shows 10 groups over the million-dollar mark for the general election. Seven of the 10 are nonprofits that don't disclose their donors. Collectively, they spent $30 million.

"The interests, you know, don't want to be at the center of the debate," Franz says. "They want to make the campaigns the center of the debate. And so the [501](c)(4) vehicle is an easy way to do that, without also having the disclosure drive the narrative."

The top spender was Crossroads GPS, co-founded by Republican consultant Karl Rove. Since the Wesleyan analysis was done, Crossroads GPS has announced a $25 million campaign targeting Obama's record.

A 'Cat-And-Mouse Game'

Proponents of disclosure won two victories recently: First, a federal district judge told the Federal Election Commission to resume requiring disclosure of electioneering communications; and second, an appellate panel left the ruling in place while opponents file their appeal.

"Electioneering communications" is the legal phrase for TV ads when they're run close to Election Day.

But Rick Hasen, an election law professor at the University of California, Irvine, says he's not expecting any sudden outpouring of donor information.

"It's been a cat-and-mouse game that's gone on for a very long time," he says.

As soon as the district judge issued the order to the FEC, nonprofit groups started changing their advertising.

One way to sidestep the court ruling is to switch from electioneering communications to more partisan messages that are not covered by the court order.

Hasen points out that then, the most explicit kind of partisan ads would be financed with anonymous money, which is basically the thing that campaign finance disclosure is supposed to prevent.

"It's quite an ironic outcome," Hasen says, "because the whole point of the electioneering communications rules was to avoid loopholes."

Still, that strategy could bring big risks.

The IRS could question why a nonprofit is spending so much money explicitly attacking candidates when it's supposed to be mainly advocating on issues.

But that would likely be a fight for after the election.

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