This term is used to refer to spending by independent advocacy groups on federal (and, increasingly, state and local) elections. In particular, the term references money that is contributed to those groups by anonymous sources—which occurs when those groups claim nonprofit status as social welfare groups instead of political organizations—501(c)(4) groups—or when some other aspect of the contribution process enables donors to mask their identity (such as contributing under the guise of a limited liability corporation or other shell corporation, or as another nonprofit whose members are not disclosed).
According to Trevor Potter (former chair of the Federal Election Commission) and Bryson Morgan, in the Campaign of 2004, after the passage of the Bipartisan Campaign Act of 2002 (McCain-Feingold), 96.5 percent of funding sources were fully disclosed. In the subsequent midterm, that number had only budged by a couple of percentage points. By the Campaign of 2012, $1.03 billion (approximately) was spent by outside groups on campaign-related activities. Of that, it has been estimated that more than 40 percent of those funds involved undisclosed sources. The amount of undisclosed spending in the Campaign in 2016 is expected to climb even higher for a variety of reasons, including early attempts by candidates (Jeb Bush in particular) to raise funds outside of traditional candidate committees in order to facilitate unlimited (and perhaps undisclosed) donations, and the lack of FEC and IRS enforcement of existing campaign finance regulations and tax laws that would otherwise serve to limit such contributions.
While critics of Citizens United have argued that the Supreme Court’s decision to permit independent advocacy groups to engage in unlimited spending (as long as it is not coordinated with a political party or candidate), the Court has, in fact, always upheld the principle of disclosure. In Citizens United, Justice Kennedy even argued that rational, informed citizens could decide for themselves how to evaluate the speech of outside groups—a presumption based on the notion that citizens would know the identities of the groups engaging in the outside spending and who their donors were. Kennedy’s assumptions were quickly upended as independent advocacy groups sought out loopholes in the tax code that permitted them to keep their funding sources secret from the public.
The portions of the tax code being used to conceal donors’ identities were designed by Congress for social welfare and educational groups, and the IRS prohibits their use by entities whose primary activity is electioneering. (The language of the original 1954 tax code says that the organizations must operate exclusively for social welfare purposes. A 1959 IRS regulation interpreting this law suggests that organizations need only operate primarily for social welfare purposes. This later interpretation has created the loophole.) However, this restriction is rarely enforced. Beginning in 2012, under pressure to do something to stem the tide of dark money in American politics, the IRS began to more carefully scrutinize groups claiming 501(c)(4) status—a process that conservatives, and Tea Party groups in particular, claim targeted them unfairly. In fact, the overwhelming majority of political groups claiming to be social welfare nonprofits have, in fact, been conservative groups, and during this time, many of the newly formed Tea Party organizations were organizing themselves in this fashion as well. However, there is evidence that the IRS conducted searches for Tea Party groups in particular, as part of an investigation of possible abuses of the tax code, fueling concerns that the organization had underlying partisan motives. The IRS actions provoked a backlash, particularly among Republicans, who held congressional hearings in 2013 to determine whether the IRS was engaging in partisan politics. Under pressure to limit their scrutiny of 501(c)(4) groups, the IRS opted for a new tactic: to attempt to protect the integrity of the tax code by educating groups about its meaning, and to signal its intent to uniformly enforce the code at some future date.
In the spring of 2014, the IRS announced new rules governing the conduct of 501(c)(4) groups in order to provide clearer guidelines for what types of political activities such groups could engage in without losing their tax exempt (and non-disclosure) status, including prohibitions on direct and indirect participation or intervention in political campaigns on behalf of or in opposition to a candidate for public office and direct or indirect candidate activity. The new rules were opposed by a variety of conservative and liberal advocacy groups, as well as the American Civil Liberties Union. Under political pressure to leave the current regime intact, the IRS declared in May 2015 that it was suspending the rules for the Campaign of 2016 and would be considering additional revisions after further public input. The Campaign of 2016 is marked by an explosion of dark money contributions and election-related spending by dark money groups.
See also Campaign Finance Reform; 501(c) Group; 527 Group
Potter, Trevor, and Bryson B. Morgan. “The History of Undisclosed Spending in U.S. Elections and How 2012 Became the Dark Money Election.” Notre Dame Journal of Law, Ethics, and Public Policy 27, no. 2 (2013): 383–479.
Smith, Melissa M., and Larry Powell. Dark Money, Super PACs, and the 2012 Election. New York: Lexington Books, 2014.
“Democrat in Name Only” (DINO). See RINO
DINO. See RINO
Dirty Tricks. See Negative Campaigning
Drill, Baby, Drill! See Energy Issue