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The Year in Political Money: Less Transparency, More Deregulation | Rules of the Game

Campaign spending trends were not as sensational this year as in 2012, when super PACs and other outside groups pumped more than $1 billion into politics, three times what they spent in the previous presidential election cycle.

Still, 2013 marked several important political money milestones that signal where campaigns are headed next. Perhaps invariably, elections continue to march toward less transparency and more deregulation, and lawmakers and federal agencies remain too paralyzed by discord to respond.

It was a bad year for disclosure, both on the legislative and regulatory fronts. Congressional Democrats lost no time reintroducing the transparency bill known as the DISCLOSE Act, which had come close to passing in the previous Congress. But the bill was quickly overwhelmed on Capitol Hill by politically charged disputes over immigration, health care and the federal budget.

Advocates of campaign finance limits managed to generate more than 600,000 public comments urging the Securities and Exchange Commission to require corporations to more fully report their political spending. Both the SEC plan and the DISCLOSE Act had set out to shed light on unreported political spending in the wake of the Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling, which deregulated independent campaign spending, including by social welfare and trade groups exempt from disclosure rules.

But the SEC backed away from its public disclosure agenda, omitting from its to-do list for 2014 any mention of a corporate disclosure rule that the agency had once flagged as a priority for this year.

Disclosure fared somewhat better in the states, where legislators and election officials in California, New York and elsewhere moved to pull back the curtain on politically active tax-exempt groups, which as a whole spent more than $300 million in the previous election. California’s Fair Political Practices Commission slapped a record $1 million fine on two Arizona nonprofits with ties to the billionaire conservative donors Charles and David Koch for failing to disclose the donors behind a multimillion-dollar ballot initiative campaign.

At the same time, more than a half-dozen states where unrestricted super PACs have flourished moved to relax limits on contribution to candidates, in part to put them on a more level playing field with outside groups.  Advocates of easing the campaign finance rules also continued their push for federal deregulation, mounting a constitutional challenge to the overall limit on what one individual may give to political parties and candidates in a single election cycle.

Known as McCutcheon v. FEC, the challenge received a receptive audience at the Supreme Court during oral arguments in October. The court’s conservative justices, who continue to hold the majority, cast the aggregate limit as a burden on donors, and some argued that political parties should not face stricter limits than outside groups. If the high court rules that aggregate contribution limits are unconstitutional, watchdogs warn that it would weaken the current ban on unrestricted “soft” money donations to the political parties, and set the stage for yet another challenge to the limits on contributions made directly to candidates.

Politically active nonprofits dominated the headlines in 2013, both because of the scandal over the Internal Revenue Service’s targeting of tea-party-affiliated groups, and because tax documents filed in November shed long-overdue light on how such groups moved money around last year. Three congressional committees launched IRS investigations this year, which are still ongoing, and several top tax agency officials were ousted or left under pressure.

The agency responded with draft rules aimed at more consistently regulating political activity by tax-exempt groups, but these just dragged the IRS further into controversy. Advocacy groups on both the left and right argue that the IRS restrictions will squelch constitutionally protected voter mobilization and pre-election issue advertising campaigns. Democrats say the rules are long overdue and should probably go further.

The FEC, in the meantime, had another roller-coaster year. In April the agency, down one commissioner, earned a dubious distinction: All five of its remaining commissioners were serving expired terms. The Senate confirmed two new commissioners this fall, a Democrat and a Republican, who came in with pledges to work together and issue long-overdue FEC regulations for the post-Citizens United campaign world. But so far there’s no sign that FEC deadlocks or backlogs have disappeared.

It all sets the stage for yet another round of highly contentious campaign finance fights in 2014, which is already shaping up as a high-stakes midterm that will feature plenty of undisclosed, unrestricted money. If 2013 is any indication, the next wave of big money will draw plenty of headlines but little regulatory response.

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