Non-Profits Have a Dark Side Americans Don't Know About


As if the ability to make unlimited contributions to super PACS wasn’t enough, rich political donors are now turning to tax-exempt social welfare organizations to funnel millions of dollars into political campaigns anonymously. NPR and the Center for Responsive Politics (CRP) have uncovered a number of social welfare groups that claim to not engage in politics, but dole out money from undisclosed donors to other politically active organizations.  

Individuals, unions, and corporations can already anonymously pour unlimited amounts of money into super PACs, and now they've found a second way to circumvent campaign finance laws using social welfare organizations. The IRS does not require social welfare organizations — also known as 501(c)(4)s, their designation in the tax code — to disclose their donors publicly. Social welfare groups are also allowed to participate in political campaigns for or against any candidate for public office. Super PACS, on the other hand, are prohibited from directly coordinating their actions with campaigns and candidates.

The NPR/CRP investigative series highlights one especially well-funded social welfare group, the Wellspring Committee. Since its founding in 2008, Wellspring has raised $24 million, and given about $16.9 million to other 501(c)(4)s.

This chart shows Wellsping's alarming relationships in the non-profit world (NPR)

To maintain their tax-exempt status, social welfare groups cannot commit more than half of their resources to partisan political activities. However, there is a giant loophole in tax law. Any money that groups like Wellspring give to other social welfare organizations does not count as political spending — even if the recipient groups spend the money on political campaigns. 

As a result, social welfare groups can circumvent the cap on political spending. And remember, social welfare groups are not required to publicly disclose their donors.

Opponents of stricter campaign finance regulations often argue that it's an individual's right to make political contributions of whatever size they want. Any limits on campaign donations violate free speech rights, they claim. Cleta Mitchell, a top campaign finance attorney, told NPR and CRP that conservative donors should be able to remain anonymous, because they "risk harassment by liberal activists when their names are disclosed."

The NPR-CRP investigation was only able to identify three of Wellspring's donors, who together accounted for just 1% of the group's revenues.

If political candidates can keep their donors a secret, how can the average voter know whose interests they truly represent? Is it really more important to protect rich donors' rights to "free and private" political expression than to work towards more transparent campaigns?

Even if you equate free speech with unlimited, secret contributions, there is no denying that anonymous political spending detracts from transparency in politics. Without stricter campaign finance laws, "dark money" from a handful of social welfare groups and super PACs will continue to cloud our political system.