HUNTSVILLE, Ala. -- Under federal tax rules, 501(c)(4) organizations are not required to disclose who is giving them money.
That means Gov. Robert Bentley’s Alabama Council for Excellent Government doesn’t have to say how it raised $90,000 in 2015. The contribution total was included in the nonprofit group’s 990 tax form obtained by WHNT News 19.
Registration of politically-oriented 501(c)(4) groups has grown tremendously since the U.S. Supreme Court’s Citizens United ruling in January 2010, said Brendan Fischer, associate counsel for the Campaign Legal Center in Washington, D.C.
“The number of 501(c)(4) registrations has exploded, and increasingly 501(c)(4)s have been used as a means to influence elections without disclosing donors,” he said. “I expect in this election cycle, we will continue to see the use of 501(c)(4)s as a means of wealthy donors secretly influencing elections
The Citizens United decision allowed unlimited political spending by corporations and other groups.
In the Citizens United ruling the court’s majority found that contribution limits by corporations didn’t serve as an effective barrier to political corruption.
In opening the no-limits door, the court found that while there would be increased giving, those donations would be subject to scrutiny, allowing voters and shareholders to see the political process at work.
Justice Anthony Kennedy spelled out the argument in his majority opinion.
“The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way,” the justice wrote. “This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
But Fischer said it hasn’t worked out that way. The 501(c)(4) groups and their donors haven’t faced disclosure requirements, helping increase their popularity and effectively keeping voters in the dark.
“Broad majorities of the public, across the political spectrum support transparency, support disclosure of sources of elected officials’ financial support,” he said. “The problem happens with elected officials, oftentimes elected officials don’t want to publicly disclose the sources of their support.”
Fischer said the IRS and the Federal Election Commission have not enforced the disclosure laws that are on the books.
It’s fairly technical, but the IRS has shifted the definition of what constitutes a 501(c)(4) over time. The legal definition reads: “Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees …”
Fischer said the IRS has read the “exclusively” language in the statute to mean “primarily” and that means up to 49 percent of a group’s actions can be political.
And the working definition “social welfare” has also been the subject of controversy. The IRS wound up in a firestorm in 2013 after it was accused of targeting conservative groups setting up 501(c)(4)s. The question was whether the groups were more political in nature than the rules seemed to allow.
The IRS website today says that 501(c)(4)s can be engaged in politics.
“The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office,” according to the IRS. “However, a section 501(c)(4) social welfare organization may engage in some political activities, so long as that is not its primary activity.”
Fischer argues it’s a misuse of the tax code to allow what he calls “political committees” to operate behind the walls of the 501(c)(4)s.
“I think the growing use of dark money political vehicles, the growing use of 501(c)(4)s as a means of secretly influencing elections, is one of the many, apparently unintended consequences of Citizens United,” he said.
In 2010 the U.S. House of Representatives passed the Disclose Act, which would require corporations to spell out political giving. The measure died in the U.S. Senate after a filibuster.
The bill’s sponsor U.S. Rep. Chris Van Hollen, D-Maryland, reintroduced again in 2015, but it hasn’t been taken up for a vote.