Just weeks before last November's election, a little-known Arizona
non-profit made a big splash in California politics -- donating $11 million to a
political group that opposed a tax-hike initiative from Democratic Gov. Jerry
Brown and backed another measure to make it harder for labor unions to collect
dues for political activity.
State regulators, however, did not know where the group, Americans for Responsible Leadership, got its money.
California's campaign-finance agency went to court, forcing the out-of-state organization to reveal that the money came from another Arizona non-profit, the Center to Protect Patient Rights, which in turn said its money came from a third non-profit, Americans for Job Security, a "pro-business" issue advocacy group in Alexandria, Va.
More than seven months after Election Day, however, the individual donors to Americans for Job Security are still unknown to the public.
Long before the Internal Revenue Service scandal erupted over the agency's extra scrutiny of tax-exempt Tea Party groups, campaign-finance watchdog groups have implored the agency to rein in non-profit advocacy groups like these who have the ability to move millions in political money across the country with little transparency about their donors.
A month after the IRS controversy broke, some watchdog groups and Democrats in Congress are trying to shift the focus to the deep-pocketed groups that pumped increasing amounts of what they call "dark money" into politics.
In a recent letter to the House Ways and Means Committee, one of the panels investigating the IRS, two watchdog groups asked lawmakers to "pay equal heed to the other IRS scandal," which they described as the agency's failure to regulate non-profit groups they charge have improperly concealed the identities of moneyed interests trying to shape federal elections.
"We've seen no indication from the IRS that it is doing anything about these big players," said Paul Ryan, senior counsel at the Campaign Legal Center, one of the groups that wrote to the committee.
However, some leading Republicans, including Senate Minority Leader Mitch McConnell of Kentucky, say the IRS scandal makes the strongest case yet that political speech should be anonymous.
Efforts to revive bills in Congress to require further disclosure of non-profits' political activity are "a backdoor effort to discourage those who disagree with the Obama administration from participating in the political process," McConnell said in a recent op-ed in The Washington Post.
"If this scandal has taught us anything," McConnell added, "it is that Washington's ability to target individuals and groups is already too expansive."
Political spending by groups that don't disclose their donors has exploded.
In federal races alone, "last minute" political spending by labor unions, trade associations and other non-profit advocacy groups topped $335 million last year, up from $37.9million in 2004, according to the Center for Responsive Politics, which has tracked the reports non-profits have filed with the Federal Election Commission. More than 80% of the money reported in 2012 came from conservative groups.
The spending is likely to be even higher because many groups only have to report expenditures occurring within 30 days of a primary election or 60 days of a general election. Under a tangled web of federal tax and campaign-finance laws and rules, none of the non-profits were required to disclose their donors.
In California, regulators invoked a state disclosure law to seek the source of the $11 million donation by Americans for Responsible Leadership, which says on its website that it operates under the section of the U.S. tax code that governs 501(c)(4) social-welfare organizations.
"We had interests from outside California who were willing to spend a huge sum of money but who were not willing to be identified," said Ann Ravel, chairwoman of the California Fair Political Practices Commission. "I think voters were offended by that."
The state's campaign regulators and Attorney General Kamala Harris, a Democrat, are continuing to investigate the sources of Americans for Job Security's money. The group operates as a non-profit trade association with the goal of permitting "businesses to work together to promote a strong job-creating economy," according to its IRS filings.
Stephen DeMaura, president of Americans for Job Security, did not return telephone calls. Barrett Marson, a spokesman for Americans for Responsible Leadership, declined to comment.
Other states are moving forward with disclosure efforts. New York Attorney General Eric Schneiderman, a Democrat, last week formally adopted rules that require non-profits that spend at least $10,000 to influence state and local elections to publicly disclose their contributions and expenses. In Montana, a group of GOP lawmakers recently launched a campaign to put an initiative on the 2014 ballot that would require groups that target candidates to identify their financial backers.
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