Senate votes to prevent ‘dark money’ from getting even darker

A “dark money” measure introduced by Senators Jon Tester (D-Mont.) and Ron Wyden (D-Ore.) narrowly passed the Senate Dec. 12. (Bill Clark/Roll Call/Getty Images)

The U.S. Senate on Wednesday narrowly approved a resolution to overthrow a new Treasury Department policy that no longer requires some 501(c) tax-exempt nonprofits — including politically active 501(c)(4) “dark money” groups — to disclose donor names and addresses in tax returns submitted to the IRS.

Under prior policy, donor names and addresses were only reported to the IRS, which was required to keep that information confidential from the public to protect the identities of donors.

Senators Jon Tester (D-Mont.) and Ron Wyden (D-Ore.) forced the vote under the Congressional Review Act to repeal the new guidance, enacted by the Treasury in July.

The resolution passed 50-49, with every Democrat and Independent voting in favor, along with Sen. Susan Collins (R-Maine), who blasted dark money groups’ influence over the Brett Kavanaugh confirmation battle shortly before the biggest dark money spender in the confirmation process spent $5 million thanking her for her vote. Republicans opposed the measure, but Sen. Thom Tillis (R-N.C.) did not cast a vote.

The resolution still needs House approval and a signature from President Donald Trump, or override of a presidential veto, to repeal the new rule. If approved, the Treasury would be prohibited from reissuing the rule or one similar to it.

Treasury Secretary Steven Mnuchin said the decision was done in part to prevent leaking of confidential donor information, which occurred in 2013 when the IRS posted unredacted tax forms revealing donors to the Republican Governors Association Public Policy Committee.

The Center for Individual Freedom reported lobbying the White House and Treasury Department to support “executive action to eliminate the Schedule B” leading up to the release of the Treasury Department’s policy. It then continued “correspondence with U.S. House and U.S. Senate expressing general opposition to efforts aimed at reversing the recent decision by the Treasury Department and IRS to eliminate the Schedule B Form filing requirement for certain 501 (c) organizations,” spending $60,000 on lobbying overall through the third quarter, according to most recent disclosures available from the Senate Office of Public Records.

Wyden noted the Treasury’s decision was announced the same day Maria Butina — accused of infiltrating the National Rifle Association (NRA) — was arrested for allegedly acting as an agent of the Russian government.

While the new policy would not impact the information directly available to the public, it would cripple the IRS’ ability to determine the legitimacy of other information that is reported — potentially increasing the burden rather than reducing it.

Already, regulators are struggling to adequately address noncompliance by politically active nonprofits, with a recent Inspector General report on nonprofit political activity finding that the IRS did not “adequately document research related to the allegation, tax-exempt laws evaluated, or the rationale,” failing to forward more than 1,000 cases of impermissible activity to the appropriate oversight committee. Without the names and addresses of donors even being reported to the IRS — the federal regulators tasked with oversight of whether there is “undue influence over the operation of the organization” — it becomes nearly impossible to determine if reported donors to groups spending millions of dollars on elections may come from foreign sources.

The NRA spent a record $54.4 million to help elect President Donald Trump, and as a dark money nonprofit, does not disclose its donors to the public. In a letter to Wyden, the group admitted to taking $2,512.85 from “people associated Russian addresses” and “about $525” from two Russian nationals living in the U.S.

As a 501(c)(4), the NRA’s nonprofit arm is affected by the Treasury Department’s change. The policy does not apply to tax-exempt groups organized under section 501(c)(3) or section 527.

Montana Gov. Steve Bullock filed a lawsuit in an attempt to reinstate old donor disclosure rules one week after the Treasury announced its new policy.

The influence of anonymously-funded advertising campaigns in Montana was the subject of the documentary “Dark Money.” Tester often speaks out against dark money, despite benefiting from dark money influence in each of his last two Senate elections.

“We refuse to allow special interests to buy our democracy and this move will help us force a vote that will draw a clear line between those who are defending our country from dangerous dark money and those who are doing nothing to stop it,” Tester said in an October statement.