New IRS Rules Will Allow Dark Money to Thrive

This image was removed due to legal reasons.

The rich have become incredibly adept at using our confusing tax code to their advantage when it comes to influencing politics. On Monday night, the IRS announced new rules that will make it even easier.


Until now, donors who made contributions of more than $5,000 to 501(c)(4) social welfare groups and 501(c)(5) business associations—which include many influential right-wing organizations—were disclosed to the IRS. These donor names weren’t released to the public, but sometimes they ended up becoming public anyway, either through leaks or court orders. Under the new rules, these donors won’t need to be disclosed to the IRS at all.

According to a New Republic article from 2013, the rise in the conservative 501(c)(4) has to do with increasing leniency from the IRS. These groups funded much post-Tea Party “grassroots” conservative activism.

This status is intended for organizations that, unlike charity-focused 501(c)(3)’s, intend to engage in some advocacy or lobbying on a particular issue related to their mission. But under IRS rules, this advocacy must be for the general “social welfare”—and not geared toward political elections. Courts have granted some leeway in this regard, saying that groups are allowed to engage in some election activity as long as it is “insubstantial.” The IRS has allowed this gray area to expand to the point where groups must have a “primarily” social welfare mission, which many groups have happily taken to mean that elections can consume up to 49.999 percent of their resources.

This surge [in 501(c)(4) groups advocating for conservative policies] is driven by two factors. One is the series of court rulings, such as the Supreme Court’s Citizens United decision, that encourage political operatives to use 501(c)(4)’s as a way to funnel huge undisclosed donations into television ads, regardless of the IRS rules for the groups. The other is the swell in grassroots activism that is coming almost entirely from the right thanks to post-2008 tea party ferment.

In 2013, there was an uproar from the right when it was found that the IRS had used search terms like “patriot” to find groups who were using these channels to funnel dark money to campaigns. But as the New Republic points out, the real problem was that the IRS spent its time chasing after small grassroots 501(c)(4)s, instead of the massive, influential groups.

At the same time it was sending long questionnaires to groups like a tea party outfit in Waco, the IRS was doing precious little to rein in the groups that were making a true mockery of the law on 501(c)(4)’s—outfits like Crossroads GPS, the organization co-founded by Karl Rove that spent $71 million last year. This spending was undeniably geared toward influencing the 2012 election but, unlike regular super PACs such as its sister group American Crossroads, Crossroads GPS was not required to disclose the source of the funds. All told, the 501(c)(4)’s spent $254 million in last year’s election, nearly three times what they spent in 2010. And yes, most of this spending was on behalf of the Republican side.

Now, under President Trump, the IRS has overcorrected, allowing an even wider berth for shady political groups to keep their donors secret. As Democrats collectively lose their minds about Russian influence in the 2016 election, maybe it’d be prudent to and address the homegrown dark money that’s poisoned our democracy for years before Russian bots or collusion with Putin.