Money, power and corruption — what else is new? Well, how about the abuse of a once-obscure charity designation, poetically named by the IRS the 501(c)(4)? Through these charities, the use of dark money in politics — that is, money whose source is hidden from the public that is spent influencing government — is on the rise in ways that the United States has never before seen.
Political corruption 150 years ago was a straightforward affair. Men like Boss Tweed used money to create political influence and then used that political influence to generate even more cash. Graft, extortion and favor-granting for political gain were all standard tools of the trade, and Boss Tweed was a consummate professional. At the height of Tweed’s reign, he completely controlled New York City, either directly or through the placement of his cronies at all levels of local government. There was relatively little effort to hide this corruption because everyone who could do something was in on it.
In the current Information Age, there is a strong demand from the American people for transparency regarding money raised for elections. The goal is to ensure complete credibility and to avoid the rise of another Boss Tweed-like character.
Thanks to this public pressure, the US Government has made numerous efforts to force transparency onto political campaigns, mainly through requirements that political fundraisers disclose the identities of their largest donors. Many transparency-focused organizations have arisen to assist the process. These organizations analyze and publish the donor lists for political machines, ensuring that everyone can know where the money comes from.
A Failure to Communicate
Standing in the way of the transparency movement is the recent advent, or reinvention, of the “social welfare” nonprofit organization, otherwise known as a 501(c)(4). On the surface, these groups are nonprofit, tax-exempt organizations raising funds specifically to promote social welfare. And let it be understood that many of these organizations have been well-intentioned for years, and put their money behind causes that they feel are important to the public good.
The official catch, though, is that these organizations cannot create wealth for any individual person, which, given the specific philanthropic charge of these organizations, ought not to be an issue. Boss Tweeds need not apply, right?
Well, not quite. The important perk of these organizations for political machinations is twofold. Firstly, these organizations have unlimited lobbying power and can participate in electoral campaigning in the interest of their social welfare aims. But the real kicker and the source of dark money in politics is organizations not having to disclose the identities of their donors. So, the (c)(4) has lately been reinvented as a way to keep money sources hidden.
It is important to note before diving into the darker parts of this narrative that the (c)(4) was designed with the express purpose of promoting social welfare through the collection and distribution of donated funds. The vast majority of organizations classified as 501(c)(4) are charitable organizations that aren’t politically active. Even then, those that do engage in lobbying and electioneering can use their lobbying power to push charitable agendas. They are fulfilling the role for which the IRS created the 501(c)(4) designation, and have had immeasurable, positive impacts in their respective fields.
But despite the generally kosher use of (c)(4) organizations, there is a startling trend of political funding organizations popping up, seemingly on both sides of the aisle. Just as examples, both the Koch Brothers and Hillary Clinton run their own 501(c)(4)s. These, and numerous other (c)(4)s, raise funds to influence political elections and to see political ends. They put on a social welfare veneer before diving into their respective political games. It’s really no wonder the IRS started cracking down on the use of 501(c)(4) groups in 2013.
While both sides of the 2016 election officially took in north of $2 billion, the $183 million in dark money funds spent in 2016 seems almost paltry. The important thing to understand here is that dark money spending has increased exponentially from a few million per year to hundreds of millions in the 2012 and 2016 election cycles. This trend is dangerous and threatens to further erode the public’s already-dismal trust in our elections. Though the final verdict on the 501(C)(4) will remain out for at least a couple more election cycles, the trend is now being set — dark money spending is a real and growing threat to the transparency demanded by the American people.
Can We Fix It?
Unfortunately, the fix for the (c)(4) is more than a little complicated. Because so many benevolent organizations use the (c)(4) designation, an outright removal would cause the organizations to be taxed as businesses, and many would likely be forced to shutter. Furthermore, the ability to lobby government officials is truly powerful and can help enact real change in the world. Removing the 501(c)(4)’s lobbying power would be as damaging as taxing them.
The only viable solution, it seems, is to bring the 501(c)(4) designation in-line with the rest of our political machine. The IRS must change the rules, and force the (c)(4)s to disclose their donors when those organizations choose to participate in politics. We cannot afford to let the wealthy few influence the many by hiding behind (c)(4)s while the rest of America works to rebuild transparency and trust in our elections.
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