Congress's new year-end budget deal has some fantastic news for rich people and corporations that want to spend anonymously on politics.
Two policy riders in the deal would effectively block the IRS and the SEC from making new regulations to require greater disclosure of dark money groups' donors and corporations' political spending.
If approved, these new regulations — which have long been demanded by campaign finance reform supporters — would be off the table for the rest of the Obama administration. And the deal would ensure that the basic status quo for anonymous spending on politics will stay in place for the 2016 elections.
Campaign finance reform supporters were appalled. "These provisions will ensure that the American public has much less information than it needs to make informed and responsible choices about who is funding the groups that are spending hundreds of millions of dollars to influence our federal elections," UC Irvine law professor Rick Hasen writes at Election Law Blog.
And though these provisions were primarily pushed by Republicans, Democrats signed on to this deal too — even though they frequently criticize dark money in public. Democratic leaders were willing to concede on this issue in a way they refused to do for, say, the efforts to defund Planned Parenthood.
White House/Dem officials awfully happy with what they got in year-end tax/spending deal— John Harwood (@JohnJHarwood) December 17, 2015
The deal is great for dark money nonprofits
The first controversial election finance provision in the deal states that during fiscal year 2016, no funds used by the Department of Treasury (including the IRS) can be used:
"...to issue, revise, or finalize any regulation, revenue ruling, or other guidance not limited to a particular taxpayer relating to the standard which is used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4) of the Internal Revenue Code of 1986."
That's a mouthful. But the purpose of it is to prevent the IRS from discouraging a great deal of "dark money" electoral spending that has long seemed legally questionable.
In general, if you want to start a group that's primarily for spending money on elections, you're supposed to start a PAC or Super PAC — and you'll have to publicly disclose your group's donors.
However, certain other types of nonprofit groups have long been allowed to spend some money on elections without disclosing their donors publicly. One way to do this is by registering as a "social welfare" group under section 501(c)(4) of the tax code. Issue advocacy groups, like environmental or gun rights activists, have done this for decades.
But recently, there's been more and more of this "dark money" spending from groups that look like a whole lot like they're all about election spending — and are just calling themselves social welfare groups as an excuse to keep their donors secret. Karl Rove, the Koch brothers, and allies of Democratic Senate Leader Harry Reid have all been affiliated with this type of spending.
Campaign finance reformers have long argued that this spending is illegal and has nothing to do with social welfare, and that the IRS should crack down on it — or at the very least, that the IRS should clarify what would be a real social welfare group and what wouldn't. (For instance, a recently formed group spending hugely on pro-Marco Rubio ads seems particularly dubious.) It was widely expected that, if the IRS adopted any new rules, they'd be tougher on political dark money than the status quo.
Yet the provision in the new budget deal prevents the IRS from moving forward. The agency has been blocked from issuing any general guidance or regulations on which sorts of groups count as social welfare groups and which don't. Which means that the status quo — where dark spending has been soaring — will remain in place.
The deal is great for corporations that want to spend secretly on elections
As if protecting dark money nonprofits wasn't good enough, the deal does a solid for corporations too — it prevents the SEC from making any new rules or regulations that would force them to disclose political contributions (including to dark money nonprofits):
For years, the SEC has been under pressure to do just that. As the Los Angeles Times's Michael Hiltzik writes, a 2011 petition to the agency calling for corporate disclosure "attracted 1.2 million public comments, the most in the SEC's history."
But now, even if the agency wanted to issue a rule to this effect (which isn't clear), it won't be allowed to do so if the budget deal becomes law.
Democrats agreed to this deal
Though congressional Republicans were the driving forces behind both of these provisions, it's worth noting that many other controversial policy riders they had pushed were stripped out of the final bipartisan deal. Democrats fought back hard against efforts to defund Planned Parenthood and overhaul refugee screening, and they managed to spike both from the final deal.
Yet despite frequent complaints from Democrats about dark money's influence, these two campaign finance provisions stayed in. So either Democrats reluctantly agreed to accept them as part of a compromise — or they didn't care very much about taking them out in the first place.
It's not entirely clear what went on behind the scenes here. But it is clear that though dark money spending has overwhelmingly benefited Republicans in recent years, Democrats are learning fast. One of Reid's close allies runs Patriot Majority USA, a group that raised $30 million in 2014. Half of that came from just five anonymous donors, according to Michael Beckel of the Center for Public Integrity. Now this new deal seems like it will go yet further to make dark money a bipartisan affair.