THE NEW SOFT MONEYCitizens United, 527s, 501(c)s and the Rise of Super PACs

PRIOR TO CITIZENS UNITED…

Outside groups certainly spent money

Some had as much or more impact than Super PACs Swift Boat Vets Ashley’s Story Willie Horton

First three done through “527 committees”

WHAT IS A 527?This is Section 527 of the Internal Revenue Code.

Defines tax treatment of political org incomenot taxed: contributions

taxed: capital gains on investments

Has very little to do with election law

HOW THE IRS DEFINES “POLITICAL ORGANIZATION”

“influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization…”

Federal, state and local campaign and party committees and PACs are organized under Section 527 of the Internal Revenue Code

Most are also regulated, and must disclose information, to their relevant governing bodyFECState election overseers

THE OLD 527S DIDN’T TRIGGER REPORTING REQUIREMENTS They did not run express advocacy ads No “Vote for Jones” No “Vote against Smith” Instead: Will Smith ever stop beating his wife?

They did not donate to federal candidates

They did not donate to political parties or PACs

Under federal rules, they were not federal committees

WHICH IS NOT TO SAY THAT THIS IS WHAT THEY REALLY WERE…

FEC fines three 527s for Taking excessive contributions

Taking corporate contributions

Express advocacy This was 2006 Sounds a lot like what Super PACs do

Post Citizens United, these aren’t violations

ENTER CITIZENS UNITED

501(c)4 organization (i.e., not a 527 political organization)

Doesn’t disclose donors Made a documentary about Hillary Clinton Critics called it a hit piece

Wanted to air 30 second ads for it in Jan. 2008

Asked FEC if this were permissible

FEC SAID NO CU’s ads mentioned a federal candidate

Would run within 30 days of a primary

In effect, both the ads and documentary... Expressly advocated defeat of Clinton

Paid for straight from a corporate treasury

Donors not disclosed CU not a political organization

FEC applies law, says no to CU

ENTER JAMES BOPP JR.

Represents Citizens United

Two tack strategy Narrow: These aren’t political ads

Broad: FEC violated First Amendment

Is asking the FEC if speech is permissible prior restraint?

Loses in lower court

ON TO THE SUPREME COURT

Ted Olson takes over case for CU

Supreme Court rules in favor of CU

Disclosure doesn’t interfere with speech

Independent ads don’t corrupt

MEANWHILE, IN A LOWER COURT…

527 that raised money only from individuals Wanted to exceed $5,000 limits Wanted to make “express advocacy” (vote for, vote against) independent expenditures

FEC said it couldn’t accept more than $5,000 Sued After Citizens United, District Court ruled it could exceed limits, had to register with FEC

THIS LEADS TO…

Super PACs File letter with FEC

Take unlimited money from… Individual Corporations, including C4s

Labor Unions

CAN ALSO COORDINATE FUNDRAISING WITH CANDIDATES…

Remember James Bopp Jr.?

He starts Republican Super PAC

Plans to coordinate fundraising

Won’t coordinate spending

Democratic groups ask FEC if it’s ok

FEC says yes

MEMBERS OF CONGRESS SOLICIT FUNDS FOR THEM

Can only solicit limited donations from individuals, PACs

Majority PAC did this ahead of the FEC ruling

Romney has attended super PAC fundraisers

Top Gingrich donors give to “his” super PAC

Obama has one too—Priorities USA Inc.

HOW TO RESEARCH SUPER PACS

Most people are looking at the PACs themselves

Who are their donors? Who do they support? Who works for them? Your interest is a little different…

SUNLIGHT MAINTAINS A LIST OF ALL SUPER PAC FILERS

Groups file letter with FEC

Say they won’t contribute to or coordinate with candidates

Can raise unlimited funds from any source

Useful resource for figuring out who’s a super PAC

THEY REPORT DONORS TO THE FEC

So far, we’re seeing individuals

Note that employers are listed

Big contributions

HOW TO SEARCH ACROSS SUPER PACS FOR DONORS

Only place to do this now is OpenSecrets.org

Donor Lookup is clunky But they have data If you’re looking for company donors, enter them in the donor field

Pain in the neck, but worth the effort

So far, we’re not seeing too many donors spread across multiple super PACs

NOT ALL CONTRIBUTIONS EASY TO FOLLOW

F8 LLC Gave $1 million to Romney’s super PAC, Restore Our Future

Address is in Provo, Utah

That’s all the information you get

So who is F8 LLC?

SECRETARY OF STATE FILINGS CAN HELP

KSTU-TV WENT TO THE ADDRESS

Eli Publishing run by Steven Lund

Lund works for Nu Skin

F8 LLC’s agent is Jeremy Blickenstaff

Not clear that Blickenstaff is source of funds

Blickenstaff used to be at Nu Skin

Lund’s son-in-law

AND WHAT IS NU SKIN?

Top donor to Mitt Romney’s campaigns & PACs

Mail order cosmetics firm

Not clear what their interest in Romney is

They haven’t lobbied since 2002

BUSINESSES CAN ALSO DONATE TO 501(C)4 & (C)6 ORGANIZATIONS

THESE GROUPS DO NOT HAVE TO DISCLOSE DONORS

They can also contribute to super PACs

Businesses look for anonymity

Work through largest group possible

Chamber of Commerce, industry associations

Don’t want to alienate customers

THE IRS HAS INFO ON 527S…

Somewhat surprisingly, IRS is now the best source for 527 data.

Center for Public Integrity had a better database, but it’s good only through part of 2005

OpenSecrets.org has one as well, but not as thorough as CPI

Campaign Finance Institute also has some info, but not a database…

After clicking on “Charities &Non-Profits” click “Political Orgs”

Lots more clicks to come…

HERE WE ARE Busy, user-unfriendly search page

It defaults to searches of form 8871, which are the initial registrations

Sometimes (especially when a 527 just surfaces) that’s all you have

Let’s look though at 8872…

Click on the “Search 8872” under the advanced search tab…

From Nov 2000 to present, you can search for all sorts fo data…

NOTES ON USING 527 SEARCH ON IRS Good news – you’ve got digital data that you can search

Bad news – it’s a stupid search engine. If you type “Soros, George” you’ll get no results.

There’s no name standardization, or even spellchecking

Because IRS does not check spelling, or standardize names, it’s always a good idea to look at the forms of the 527s you’re following

NOTE THAT 527S DONATE TO LOCAL CANDIDATES…

WHEN 527S FIRST APPEAR, YOU WON’T KNOW WHO’S CONTRIBUTING TO THEM

WHEN TO LOOK FOR 527 FILINGS

Under IRS regulations, 527s are required to file their form 8871 (the initial filing declaring tax exempt status) 30 days after they’ve raised $25,000 for their exempt activities

The first form 8872 isn’t filed until an organization has raised $50,000; it can be filed quarterly (April 15, July 15, etc.) or monthly in election years, and monthly or semi-annually (twice a year) in non-election years

RESOURCES FOR DIGGING INTO THEM

Guidestar.org and the Foundation Center both have 990s online

IRS has 990s as well in the same place they have 527 reports

If you don’t know that an organization has donated, hard to to know which C4 to look at

Does a business share lobbyists with a C4?

THERE SHOULD BE A LITTLE DISCLOSURE AROUND C6S

In 2007, Congress passed HLOGA

Changed rules for disclosure

Groups list active participants in lobbying on their websites

Links are buried in lobbying forms and hard to find

Call C6s to find out if they have a list

Campaign Finance Institute and Center for Responsive Politics track some 501(c)4 activities

Worth noting that not every active C4 group triggers federal disclosures

Also, new C4s can be particularly hard to trace

State incorporation records can help

WE KNOW THAT CORPORATIONS DO DONATE TO THEM…

BUT THERE’S NO REAL DISCLOSURE That doesn’t mean reporters can’t insist on it

Ask the organization for a list of its donors

Always point out, when covering them, that they do not release the names of their donors (unless, of course, they do so voluntarily)