The 2014 midterms were the darkest election yet for congressional races. Reported spending by “dark money” groups -- 501(c) organizations that don’t disclose their donors to the public -- jumped from $135 million in 2010 to nearly $170 million in 2014, despite only a modest increase in the overall cost of the election.
Dark money didn’t just grow in 2014, though -- it morphed in a way that will almost certainly have a major bearing on the upcoming 2016 elections. In three Senate races -- two of them being the pivotal Kentucky and North Carolina contests -- some of the biggest spenders were a new breed of dark money organization: ones that are geared specifically towards the election of a single candidate.
For example, the Kentucky Opportunity Coalition spent $7.6 million opposing Democrat Alison Lundergan Grimes — all to the benefit of Senate Minority (soon to be Majority) Leader Mitch McConnell. That’s more than any other organization, including parties and super PACs, spent in the race. But unlike those other groups, KOC -- a 501(c)(4) “social welfare” organization that isn’t supposed to have politics as its primary purpose -- didn’t have to disclose a single a donor.
The group was founded in 2008 by operatives who would later have ties to the dark money powerhouse Crossroads GPS. But the group never raised much, if any, money -- until 2014.
With the day-to day-operations of the group in the hands of a former McConnell campaign staffer, KOC suddenly had enough money to buy more than 12,000 ads, more than all but the candidates themselves. Every single ad run by the group and every single video on the group’s YouTube page mentions either McConnell -- the beneficiary of this group’s activities -- or Grimes, according to a detailed report by the Center for Public Integrity.
In North Carolina and Oklahoma, Carolina Rising and Oklahomans for a Conservative Future were created by people close to the candidates they supported months before each group began spending millions in the races.
And really, why wouldn’t a candidate want their own dark money group operating as an extension of their campaign? The benefits extend well beyond the fact that such a group wouldn’t be required to disclose its donors -- whether those donors be wealthy individuals, corporations or unions -- to the public.
First, consider how long it would take for the IRS to actually catch wind of such a group’s existence. Here’s the scenario: Operatives close to a 2016 presidential hopeful set up a new 501(c)(4) in January, 2015, and begin collecting unlimited contributions. The first piece of paper that organization would be required to file with the IRS would not be submitted until November 15, 2016 -- precisely one week after the presidential elections.
This delay is a consequence of two factors. First, 501(c)(4) organizations and other non-charitable 501(c)s are not required to notify the IRS of their existence before they begin operating. It’s referred to as “self-declaring,” and it is perfectly legal. Just open your doors for business and then, when the time comes, file your annual returns with the IRS.
Those forms are normally due five-and-a-half months after the end of a group’s fiscal year, making the due date for our theoretical organization’s paperwork mid-May. But all organizations get an automatic three-month extension as a matter of course, along with another optional three-month extension, which most organizations take.
Put that all together, and you could operate your 501(c)(4) for a year, then wait another eleven-and-a-half months to file, and in November of 2016, all the IRS would know about your organization would be what you did in 2015. By the time you filed your 2016 returns in late 2017, you could have long since closed up shop. The fact is, we may have no way of knowing who funded the main presidential candidates next cycle until the election is long over.
Compare this to super PACs, which can also raise unlimited funds and spend heavily on politics. A super PAC has to file a statement of organization with the Federal Election Commission within 10 days after raising or spending $1,000. This filing includes names and contact information for the people in charge of the group’s operations, as well as other details.
And these statements are posted immediately to the FEC’s website, as are the regular detailed financial reports that super PACs are required to file throughout the year. By contrast, the IRS still has no public database, let alone a searchable one, of annual returns they receive from 501(c) organizations. To get the documents, a member of the public has to participate in a ridiculous system that requires faxing or mailing printed forms to the IRS, which will send the hard-copy filings 60 days later; alternatively, one can choose to pay more than $2,000 -- no joke -- for monthly DVDs that come in the mail.
If you’re keeping score at home, that’s 10 days for super PAC information that’s posted online with downloadable data, compared to more than 23 months for (sketchy) 501(c) organization info, on hard copy or DVD only.
By starting in early 2015, our new 501(c)(4) can strategize directly with the candidate they will ultimately support in the elections, despite federal election rules against coordination between outside groups and candidates. That’s because none of those hopefuls will actually declare their candidacy until sometime in late 2015 or early 2016. This allows for months of conferring between candidates-to-be and nominally independent, nonpolitical social welfare organizations.
This element of non=coordinated coordination is present with super PACs too, and some of 2016’s not-yet-candidates already have their very own such groups – think Hillary Clinton and John Bolton. Still, there’s a world of difference between the disclosure we’ll get from them and what we’ll learn from the dark money groups.
What this means is that in addition to the super PACs that have been acting in some cases essentially as extensions of campaigns, there are now darker pools of candidate-specific funding to which corporations or individuals who wish to remain publicly anonymous can contribute.
Either way, you can be sure the candidates will know who the donors are. They’ll know who they need to thank, and whose calls they need to answer once they’re in office.