Dark Money Spending Rises Above $100 Million as IRS Ends Donor Reporting Rules

Political groups that don’t fully disclose their sources of funding have already spent more than $100 million to influence 2020 races, a figure that is sure to rise as “dark money” backed super PACs unload their unprecedented cash reserves.

Dark money groups such as political nonprofits that don’t disclose their donors have spent nearly $14 million to influence 2020 races, according to Federal Election Commission filings. “Grey money” outside groups that disclose a portion of their funding — such as super PACs that take money from shell companies or political nonprofits — have spent over $89 million.

By choosing to keep their donors secret, these groups leave voters in the dark as to exactly who is funding their political activities. Under a new Trump administration regulation, the Internal Revenue Service won’t know either.

The IRS finalized a rule this week that will exempt some dark money groups from disclosing their donors to the IRS. Many of 501(c)(4) nonprofits affected by the new rule already don’t disclose their donors to the public. But some experts have expressed concern that the elimination of donor reporting could hurt government investigators’ efforts to uncover the illegal use of foreign money in U.S. elections.

The Trump administration attempted to enact the rule last year, but a federal judge in Montana blocked it, arguing that the government needed to go through a public comment period first. Two 501(c)(4)s that don’t disclose their donors, FreedomWorks and People United for Privacy, directed thousands of their supporters to the IRS website to support the proposed rule.

The Treasury Department noted the rule would prevent the IRS from leaking confidential donor information as the agency did in 2013.

Groups that argue for stricter campaign finance rules opposed the IRS rule. Campaign Legal Center President Trevor Potter, a former Republican FEC commissioner, said this week the rule would leave federal agencies such as the recently restored FEC “without another tool to enforce the campaign finance laws under-girding our democracy.”

“Enforcement agencies need every tool available to safeguard our elections against foreign interference,” Issue One Executive Director Meredith McGehee said in a statement this week. “Congress must now step up and strengthen our transparency rules to ensure foreigners aren’t using opaque tax-exempt organizations to meddle in our elections.”

The IRS has rejected any role policing foreign money in U.S. elections and generally doesn’t share donor records with other federal agencies unless there is a court order. But the rule change still stands to lend momentum to wide-ranging efforts to errode donor disclosure.

Conservative groups attempted to eliminate nonprofit donor reporting to the IRS through the courts but judges repeatedly ruled that government requests for the names of donors are not a violation of the First Amendment.

David Keating, president of the Institute for Free Speech, which argues against campaign finance restrictions, said this week the rule “will encourage more people to give and protect groups that criticize government.”

Dark money groups have spent close to $1 billion influencing elections in the decade since the Citizens United Supreme Court decision that opened the door for political nonprofits to make independent expenditures. That total doesn’t include dark money groups’ issue ad spending boosting candidates without explicitly pushing for votes, which is not disclosed to the FEC outside of a reporting window shortly before elections. When counting these kinds of ads, more than half of all TV ads related to 2020 elections are sponsored by dark money groups.

With so little information available, only a few politically active nonprofits are known to have taken money from foreign sources. The U.S. Chamber of Commerce runs political ads to influence elections and receives some money from foreign companies, but the business group says it does not use those funds on election activities. The National Rifle Association, which spent $31 million to back Donald Trump in 2016, received a relatively miniscule amount of cash from Russian nationals but also gets funding from foreign companies and reported spending on overseas fundraising for the first time last year. The gun rights advocacy group has said it does not use foreign money on its election activities.

Dark money accounts for just 6 percent of total outside spending reported to the FEC this cycle, a low figure compared to nearly 9 percent at this point in the 2016 cycle and 14 percent in the 2018 midterms. However, spending by groups that only partially disclose their donors makes up nearly 40 percent of 2020 outside spending, a record high.

That’s because dark money groups are increasingly funneling their cash to super PACs, which can then spend that money freely. Each of the top congressional super PACs affiliated with party leaders in the House and Senate are partially funded by dark money. The top outside spender this cycle is Democratic group Priorities USA Action, which receives millions from its nondisclosing nonprofit arms. The hybrid PAC has spent nearly $22 million this cycle and hopes to shell out $200 million before the Democratic convention.

Researcher Anna Massoglia contributed to this report.