Super PACs are required by federal election laws to disclose the names of individuals and corporations who contribute money to them. But a disclosure loophole allows super PACs to also accept contributions from nonprofit groups classified as 501[c] or social welfare organizations under the Internal Revenue Service tax code.
Under that tax code, 501[c] groups are not required to disclose contributors. That means they can make contributions to super PACs in the name of the social welfare entity without having to disclose where it got the money. Those 501[c] nonprofit groups can spend unlimited amounts of money on independent election expenditures to super PACs under the U.S. Supreme Court’s 2010 ruling on Citizens United.
Some examples of nonprofit 501[c] groups that are contributing to super PACs are the pro-Barack Obama Priorities USA, which has contributed large sums of money to the liberal super PAC Priorities USA Action, and Karl Rove’s Crossroads GPS, which has given money to the conservative super PAC American Crossroads.
In its federal filings, the social welfare entity Crossroads GPS describes its mission as being dedicated to educating, equipping and engaging American citizens.
Fixing the Loophole
One legislative proposal aimed at closing the loophole was the DISCLOSE Act of 2012. The bill would have required all organizations including social welfare groups that spend $10,000 or more during an election cycle to file a report within 24 hours and identify its donors. DISCLOSE was an acronym for Democracy is Strengthened by Casting Light on Spending in Elections.
Similar legislation was introduced in the U.S. House of Representatives and U.S. Senate in 2010. The House passed its version by the Senate failed to reach an agreement on the proposal.
The bill’s author, Democratic U.S. Sen. Sheldon Whitehouse of Rhode Island, said his proposal was an attempt to unveil the secrecy surrounding mysterious social welfare organizations believed to be operated instead by rogue political groups. The legislation was meant to block wealthy interests from using shell corporations to secretly funnel money to super PACs.
Filibuster Threat Kills DISCLOSE Act
Republicans in the U.S. Senate mustered enough votes to filibuster the legislation in July 2012. The bill needed a filibuster-proof 60 votes to move forward but died in a 51 to 44 vote on a procedural motion.
President Barack Obama was sharply critical of the Republicans. In a written statement, he wrote: “They had the opportunity to support a bill that would prevent the worst effects of the Citizens United decision and require groups or special interests who are trying to influence elections to reveal their donors so the public will know who’s funding their political ads.
"This bill should have received broad, bipartisan support. Unfortunately, Republicans chose to block it. Instead of standing up for the American people, Republicans stood with big banks and oil companies – special interests that certainly don’t need more clout in Washington."
Opposition to DISCLOSE Act
Several social welfare organizations expressed opposition to the DISCLOSE Act, including groups that oppose abortion rights who argued the legislation would strip First Amendment protections for political speech. They claimed the bill would expose donors to such 501[c] groups to harassment and intimidation.
In a letter, the National Right to Life Committee wrote:
"NRLC is the furthest thing from a ‘shadow’ group. Our organization’s name and contact information always appear on our public communications, and we openly proclaim the public policies that we advocate. But there is very little in this bill, despite the pretenses, that is actually intended to provide useful or necessary information to the public.
"The overriding purpose is precisely the opposite: To discourage, as much as possible, disfavored groups (such as NRLC) from communicating about officeholders, by exposing citizens who support such efforts to harassment and intimidation, and by smothering organizations in layer on layer of record keeping and reporting requirements, all backed by the threat of civil and criminal sanctions."