Tester rebuke of IRS 'dark money' rule passes Senate

U.S. Sen Jon Tester wrangled just enough votes Wednesday to get Senate approval for his bill to turn back a new Internal Revenue Service practice allowing nonprofits to keep the names of major donors off their books.

The Democratic senator from Montana, elected to this third term last month, was targeting an IRS policy shift favoring “dark money” groups. In July the IRS began advising nonprofit organizations that they no longer had to list the names of major donors – contributors of $5,000 or more – from disclosure filings.

Tester and other lawmakers who voted 50-49 to block the IRS, said that lack of disclosure was going to be a boon for a particular group of nonprofits that spend millions of dollars trying to shape public opinion on political issues, while stopping just shy of actually telling the electorate who to vote for.

Opposing lawmakers, all Republican, said the IRS had afforded major donors a right to privacy, with which Congress shouldn’t meddle.

Those election year ads that encourage voters to call an incumbent and tell them to vote no on a particular issue are typically paid for by nonprofit “social welfare” groups registered under the 501(c)(4) section of the federal tax code. And by sticking to an issue and not attacking a candidate outright, these groups avoid the stiffer reporting requirements of the Federal Election Commission.

Nonetheless, they’ve become a major source of election-year messaging and spending. In Montana’s 2018 Senate election, where spending reached a record $72 million, dark money groups on the left and right were big spenders.

The risk of the government not knowing who contributes to these nonprofits is significant, Tester said, laying out a scenario in which foreign governments and nefarious actors could anonymously fund campaigns to influence public opinion.

“When you don’t know who’s contributing the money, how do we know it’s not the Russians, that it’s not the Saudis, or other nations that are infiltrating our elections?” Tester said in a recorded Senate floor speech. “Our adversaries are always looking for the weakest link to try to destroy our country and destroy our democracy. Today, one of our weak links is our broken campaign finance system.”

Republican Sen. Susan Collins, of Maine, sided with Democrats to secure a prevailing majority, though it’s unlikely the measure will go further. Tester, in partnership with Sen. Ron Wyden, D-Ore., was relying on the Congressional Review Act to bring his measure to a vote. The CRA allows Congress to reject major rules made by federal agencies. And, important to lawmakers of the minority party, CRA allows as few as 30 lawmakers to bring a challenge of agency rules to a vote.

The next step would be compelling House lawmakers to rebuke the IRS rules, but that isn’t likely. Republicans will have a strong majority in the House until Jan 5 when the consequences of the 2018 election take root and Democrats assume the majority. By January, the Tester’s CRA will expire and Senate Democrats will have two fewer seats than they do currently, they’ll need more than one Republican to pull off a win like Wednesday’s CRA vote.

Montana’s Republican Sen. Steve Daines was among the 49 lawmakers voting against the CRA. Though Daines is up for re-election in 2020 and will surely be targeted by dark money groups, he said in an email that donors deserved their privacy and that requiring the IRS to collect the names of major donors meant weaponizing the tax system.

Treasury Secretary Steve Mnuchin announced on July 16 that nonprofit groups like the League of Conservation Voters and Americans for Prosperity wouldn’t have to identify major donors to the IRS, as required under the Obama administration.

“This effort increases the temptation for abuse of power and puts Montanans’ and Americans’ freedom in danger. Democrat and Republican administrations alike in the past have attempted to weaponize the IRS for political purposes, and this is no different,” Daines said. “The political games here are crystal clear because nothing has changed with regards to public availability of information since Secretary Mnuchin’s announcement.”

The names of the donors are redacted, meaning that tax forms inspected by the public aren’t very revealing. That redaction means the money trail from one nonprofit to another can’t be followed upstream. Although expenditures are disclosed, meaning that nonprofits funneling money to other groups do create a downstream trail, that path is the only traceable scent in the dark money universe and difficult to follow.

Asked if he would support disclosure of major donors if the information was collected by an election-specific agency, like the Federal Elections Commission, Daines said he wouldn’t.

Last July, Tester introduced the “Spotlight Act” to make the IRS collect and make public donations to nonprofits in three different tax classifications. The bill did not advance.

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