At the heart of the crooked dark money game and the hijacking of elections by phony front groups is the abuse of the federal tax code.
Thanks to the U.S. Supreme Court's preposterous decision three years ago in the Citizens United case, corporations are considered people and have been freed to spend as much as they want to influence American elections. This ruling has led to a proliferation of nonprofit corporations devoted to meddling in elections. Most of these outfits are organized under section 501c4 of the Internal Revenue Code.
But it's not just the Citizens United decision that has unleashed the 501c4s politically speaking. The IRS deserves a substantial share of the blame.
Federal law says 501c4 groups have to "exclusively" work to promote social welfare. When the IRS wrote rules to implement the statute, the agency ignored the plain meaning of the law. IRS rules say 501c4 groups have to "primarily" focus on social welfare work, while the law Congress passed says "exclusively."
Exactly how federal bureaucrats could see the word "exclusively" and interpret it to mean "primarily" is a mystery. But this word play has devastating consequences for democracy. The IRS rules are allowing nonprofit organizations that have been granted tax-exempt status for the purposes of doing social welfare work to devote close to half of their resources to warping election outcomes. And because social welfare nonprofits do not have to publicly disclose those who donate to their cause, who's behind this election activity can be cloaked in secrecy.
There is a simple solution to the explosion of dark money-fueled electioneering by 501c4s. Reclassify all 501c4 groups as 527 organizations.
Groups organized under section 527 of the federal tax code can do as much politicking as they want, but they have to disclose their donors, while 501c4 social welfare nonprofits can keep their funding sources secret.
The IRS is about to be sued over its misinterpretation and misapplication of federal law. Here's hoping this lawsuit succeeds in forcing the IRS to bring its rules and its enforcement in line with that law.