Senators Carper and Coons urge end to unlimited secret spending in elections by tax-exempt groups

WASHINGTON – U.S. Senators Tom Carper and Chris Coons (both D-Del.) joined U.S. Senator Sheldon Whitehouse (D-R.I.) and 12 of their colleagues in calling on the Department of the Treasury and the Internal Revenue Service to put an end to unlimited secret spending in elections by tax-exempt groups. Treasury and the IRS have been collecting comments in connection with a proposed rule change for 501(c)(4) social welfare groups announced in November.

“New IRS regulations must put an end to the use of 501(c)(4) status as a means of evading campaign finance disclosure requirements,” the senators wrote in a letter sent Thursday. “In particular, the new rules must make clear that it is impermissible for political operatives to create what are for all practical purposes PACs, obtain 501(c)(4) status for those PACs, and then spend essentially unlimited money to influence elections without disclosing their donors, as is now common practice.”

Current 501(c)(4) regulations allow groups to collect unlimited, undisclosed donations, and to engage in some political activity so long as their “primary” activities are geared toward “social welfare.” However, as the senators point out in their letter, “Treasury and the IRS have never clarified how much political intervention would violate the primary activity standard, nor have they clarified exactly what activities constitute political intervention.”

A number of these organizations appear to have taken advantage of this lack of clarity by abusing their non-profit status to raise and spend hundreds of millions of dollars for political purposes – all in secret, without disclosing their sources of funding.  In their letter, the Senators argue that these actions are “undermining the integrity of our elections.”

The senators go on to specifically call for:

  • Limiting political activities by 501(c)(4) groups to five to fifteen percent of their total activities;
  • Defining candidate-related political activity to include all expenditures that must be reported to the Federal Election Commission, including independent expenditures and electioneering communications.
  • Ensuring that groups do not use shell companies and other pass-through organizations to evade the new rules. 
  • Exempting activities that legitimately promote social welfare, such as nonpartisan voter registration drives, from the definition of candidate-related political activity.

The proposed rules would not limit political activities or speech by groups organized under a different tax-exempt portion of the Internal Revenue Code, Section 527.  Rather, the rules would limit the ability of groups to use Section 501(c)(4) to skirt existing laws regarding campaign spending disclosure.

Also signing the letter were U.S. Senators Charles E. Schumer (D-N.Y.), Patrick Leahy (D-Vt.), Tom Harkin (D-Iowa), Jack Reed (D-R.I.), Robert Menendez (D-N.J.), Bernie Sanders (I-Vt.), Jon Tester (D-Mont.), Tom Udall (D-N.M.), Richard Blumenthal (D-Conn.), Mazie Hirono (D-Hawaii), Martin Heinrich (D-N.M.), and Elizabeth Warren (D-Mass.).

The letter can be downloaded here.