Dark Money

By The Goldwater InstituteThe proponents of mandatory reporting of private civic activities have won a major marketing victory by the widespread use of the phrase, “dark money.”  As one commentator put it, “Dark money.  The name itself carries ominous undertones, undertones that critics of this relatively new campaign-finance phenomenon claim reflect a genuine threat to democracy.”[x]  But the term is misleading.  “Dark money” would be more aptly referred to by what those who find free speech objectionable actually support – mandated government disclosure.  The use of such terms is intended to cast suspicion on those who contribute to various civic causes so the debate revolves around ad hominem attacks rather than engaging on the issues.So, what is “dark money”?  It conjures images of shady political operatives greasing the palms of politicians in dark, smoked-filled rooms.  But does it also apply to traditional political activities, like you and your neighbor contributing your time and money to civic and social activities that you support?  And is it really a threat to democracy, or are those who seek to silence the voice of opposition and limit speech the real threats?“Dark money” generally refers to funds spent for political activities by businesses, unions, nonprofit organizations, and individuals who are not required by law to disclose the identities of their donors.  Depending on where supporters of government disclosure draw the inherently arbitrary line, dark money could refer to donations made to the American Civil Liberties Union (“ACLU”) or to your local church or soup kitchen.As a general matter, all spending that calls for the election or defeat of a political candidate or constitutes “electioneering communications” involves some level of disclosure to the government.  In fact, there are more disclosure obligations on the books today than at any other time in our nation’s history.[xi]  Nevertheless, some supporters of government disclosure claim that current laws do not go far enough.  They assert that certain charitable and social welfare organizations, including those organized under § 501(c) of the federal tax code, should be forced to disclose the identities of their individual donors when those organizations engage in political activity, even if that is not their primary function.[xii]Those calling for the elimination of “dark money” are thus attempting to dramatically extend the reach of government-mandated disclosure to a wide variety of organizations, activities, and communications.Advocates for expanded disclosure call for such dramatic and far-reaching regulations despite the fact that “dark money” is not a pervasive element in American politics. Some government disclosure advocates claim that so-called “dark money” expenditures constitute a significant portion of political spending in the United States.[xiii]  But the characterization is inaccurate.  In the 2014 election cycle, the Federal Elections Commission reported approximately $5.9 billion in total spending on federal elections.[xiv]  Of that $5.9 billion, roughly $173 million came from groups that are not required by law to disclose donors.[xv]  This represents a mere 2.9 percent of all spending on federal elections – hardly a significant portion.  In fact, this figure represents a decline from the 2012 election cycle, where such expenditures amounted to 4.4 percent of spending on federal races.[xvi]  As the Center for Competitive Politics observed from the 2012 election cycle, “Nearly all of the organizations that financed such independent expenditures . . . were well-known entities, including the U.S. Chamber of Commerce, the League of Conservation Voters, the National Rifle Association, Planned Parenthood, the National Association of Realtors, the National Federation of Independent Business, NARAL Pro-Choice America, and the Humane Society.”[xvii]  As a result, there is no secret as to what causes and issues such groups support.Under existing campaign finance laws, the identities of these groups must be revealed when making direct contributions to candidates or political parties or engaging in other electioneering communications.  Additionally, donor identities must be disclosed when they specifically earmark their donations to nonprofit organizations to be used for electioneering communications.  Those types of donations can hardly be characterized as “dark money” in need of further regulation when under existing disclosure rules, anyone can see that the NRA contributed to Candidate X and Planned Parenthood contributed to Candidate Y.  The positions of those organizations are well known.  Characterizing those expenditures as “dark money” is, therefore, disingenuous.  But forcing further disclosure of donor identities is at best unnecessary, as donors may contribute to organizations to support the overall mission rather than any specific political candidate.  Their donations are intended to support certain issues, not politicians.Claims that “dark money” is distorting American politics are even more tenuous when leveled at 501(c)(3)s, considering these nonprofit organizations are prohibited from participating in any partisan political activity.