Dark Money Rules

When responding to charges against Rep. Alexandria Ocasio-Cortez’s dark money problem, Senator Sheldon Whitehouse of Rhode Island attempted to downplay the charges by claiming that dark money is a problem on “both sides of the isle.”  He added however, that he believes dark money occurs “mostly on the Republican side.”  Whitehouse has a long history of accepting dark money and turning his head when his Democratic colleagues accept it from dark money groups.

For those not familiar with the term, dark money  refers to donor contributions to nonprofit organizations that is used to fund political campaigns without disclosure of the donors’ identities.

There is little doubt that dark money controls politics in D.C., on both sides of the isle, but Issue One, a campaign finance watchdog, reported back in January that “liberal groups accounted for 54% of the $150 million in dark money spent on the 2018 midterm election,” bankrolling House, Senate and statewide campaigns.  Conservative groups spent only 31% of the total while nonpartisan groups accounted for 15%. 

Most of the spending in the 2018 mid-term election came from a single group according to Nick Penniman CEO at Issue One.  Majority Forward is a nonprofit controlled by allies of Senate Minority Leader Chuck Schumer which reported $46 million in spending to the Federal Election Commission, or about one-third of the total spent.  Patriot Majority, another group linked to Schumer, spent  an additional $5.7 million.  Most of the money went to defend incumbent Democrats in states Trump won in 2015.

Dark money organizations abound.  For instance, The League of Conservation Voters, one of the nation’s strongest dark money forces, has donated over $175,000 to Whitehouse campaigns since 2006, including $158,651 during the 2018 cycle.  Whitehouse also has ties to liberal billionaire Tom Steyer, who along with his wife, donated close to $123 million to federal candidates, parties, PACS and organizations during the 2018 campaign cycle. Whitehouse has also taken money from the Sierra Club and the Natural Resources Defense Council.  

Demos,  another dark money organization, was cited by the Center for Public Integrity as a dark money group.  A review of the 501(c)3 non-profit group’s most recent tax forms shows that they  garnered more than $7 million in contributions in 2014, with only 7 individuals accounting for more than half of those donations, that ranged from $250,000 to $1.425 million. 

Demand Justice, is  a “project” of the Sixteen Thirty Fund, a D.C.-based 501(c)(4) “dark money organization.  The fiscal sponsor arrangement between Demand Justice and the Sixteen Thirty Fund makes it practically impossible to trace the source of their funding.  Donors who give to Demand Justice no not have to report the money as a direct contribution as it is run through the Sixteen Thirty Fund, a fiscally sponsored organization that does not have to file a tax return to the IRS because of its sponsorship arrangement., that provides an even greater layer of opacity for the groups.

The Sixteen Thirty Fund, uses its donor  funds to provide grants to progressive organizations.  In 2015, their largest grant that exceed $1.9 million went to the League of Conservation Voters Education Fund, which of course is funded by the League of Conservative Voters, an organization activating and rallying environmentalists to political activism.  The Sixteen Thirty Fund  operates with their sister nonprofit  New Venture Fund which provides similar funding and fiscal sponsorship services to center-left organizations.   Both groups are administered by Arabella Advisors, a Washington, D.C.-based philanthropy consulting firm that caters to left-leaning clients. Sixteen Thirty Fund’s board of directors is primarily composed of officers from Arabella Advisors, including the firm’s principal Eric Kessler.

The Sixteen Thirty Fund also received over $4.5 million from the Atlantic Philanthropies, a now-defunct Bermuda-based philanthropic enterprise that funded left-of-center organizations.  Other known funders of Sixteen Thirty include the Tides Foundation and big labor unions that include the AFL-CIO and the National Education Association.

Shielded by the cloak of anonymity these left-wing dark money groups have been permitted to funnel more than $1 billion to benefit candidates or political agendas without contributing directly to campaigns according to the Center for Responsive Politics.  And its legal because of a massive loophole in Section 501(c)(4) of the US Tax Code that allows organizations to make independent expenditures  and conceal donor names as long as politics isn’t the organization’s primary activity. 

But how does one define an organization’s “primary activity”? For decades, the point was largely moot until the Supreme Court ruling in 2010 in Citizens United that loosened restrictions on political contributions.  The court concluded that, like people, corporations and unions could spend unlimited funds for elections.  

Political organizations working to influence the 2016 elections outside party or official campaign structures spent more than $15 million in 2015, and only reported about $5 million of that to the Federal Election Commission (FEC). For comparison, that $5 million alone is more than ten times more than what had been reported at this point in 2011, before the last presidential election cycle.

There are several ways these dark money groups get around IRS regulations.  One is to never report political activity above 49% of the total expenditures.  Some get around this by claiming political activity as education or membership building.  Another way is to make grants to like-minded organizations who in turn spend that money on political activity.  That is why sister organizations are so prominent within the dark money zone.

“In politics, nothing happens by accident. If it happens, you can bet it was planned that way.”  Franklin D. Roosevelt   

Source:  ‘Shadowy’ dark money network behind left-wing causes exposed in New Report, Fox News; How The IRS Gave Up Fighting Political Dark Money Groups By Maya Miller ProPublica, TPM; Dark Money Basics, Open Secrets; How Billionaire Tom Steyer’s $123 Million Helped Democrats In The Midterms, Forbes

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