Little Light for Dark Money

Posted November 11, 2012 at 4:33pm

At least $6 billion was spent on the 2012 election, by all accounts, but several hundred million more dollars are likely to remain hidden. And the biggest donors of much of the money will never be known.

The Center for Responsive Politics, which tracks political money, expects to document more than $6 billion spent by candidates, political parties, political action committees and other players. But a lot of money is in the shadows, masked by tactics such as multiple transfers between networks of nonprofits.

“Money is exchanging hands in strange ways,” says CRP executive director Sheila Krumholz. “It’s sloshing back and forth between individuals and organizations.”

More than $1 billion came from outside groups such as super PACs and politically active tax-exempt groups, by CRP’s tally. The super PACs must, in theory, report their donors to the Federal Election Commission, although advocates of change argue in court that FEC disclosure rules are too lax. But it will be a while before super PAC spending is reported.

By CRP’s estimate, at least an additional $100 million to $200 million was spent “off the books” by election-oriented nonprofits, such as 501(c)(4) social welfare groups and 501(c)(6) trade associations, which don’t disclose their donors.

Such groups poured millions into campaign-style ads that targeted candidates, which the groups say need not be reported because they omitted words such as “vote for” or “vote against,” and therefore constituted policy advocacy, not electioneering.

The biggest non-disclosing spenders include Crossroads GPS, the conservative nonprofit steered by Republican operative Karl Rove; Americans for Prosperity, another right-leaning group backed by the billionaire industrialists Charles Koch and David Koch; and the U.S. Chamber of Commerce.

Crossroads GPS organizers have said they were on track to spend $250 million in tandem with the group’s affiliated super PAC, American Crossroads. The latter reported spending less than half that to the FEC, meaning that the bulk of the Crossroads operation’s money flew under the radar.

Americans for Prosperity told the FEC that it spent $36.6 million on campaign activity, but the group also paid for millions’ worth of “issue” ads that go unreported, and The Washington Post pegged the group’s budget at closer to $100 million. News outlets estimated the U.S. Chamber of Commerce’s campaign budget at anywhere from $50 million to $100 million.

So how much did such groups actually spend, and where did the money come from? Their organizers aren’t saying. A few clues will surface when they file the Form 990 that nonprofits must submit to the IRS.

But when? Nonprofits can choose whether to file according to a fiscal or calendar year, meaning that the earliest 990s would come in anywhere from May 15 to Nov. 15 of next year. Groups may request an automatic three-month extension, and a second three-month extension if the IRS grants it, which the agency usually does.

That means some 990 forms could trickle in as late as May of 2014. Even then, the forms reveal nothing about individual donors. The form requires only basic information such as the names of board members, officers and key employees. Nonprofits must report grants of $5,000 or more to other groups — but funding sources remain private.

Even direct campaign spending by candidates, parties, PACs and super PACs won’t be fully reported to the FEC until the end of the year. A post-general-election report is due Dec. 6; a year-end report is due on Jan. 31.

And some groups will simply disappear and take their chances that the IRS has too few staff and resources to chase them down. That’s a pretty good bet, tax experts say.

“I believe we’ll never know much, because I believe a number of the organizations will never file a 990,” said University of Miami Law School professor Frances Hill. “They’ll simply fade away and dare the IRS to find any traces of them.”