The New Soft Money by Bill Allison


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Bill Allison, Sunlight Foundation editorial director, explains the rise of super PACs during the free, daylong workshop, "Follow the Money -- Tracking Companies' Influence on Politics."

For more information about free training for business journalists, please visit

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  • The New Soft Money by Bill Allison

    1. 1. THE NEW SOFT MONEYCitizens United, 527s, 501(c)s and the Rise ofSuper PACs
    2. 2. PRIOR TO CITIZENS UNITED…  Outside groups certainly spent money  Some had as much or more impact than Super PACs  Swift Boat Vets  Ashley’s Story  Willie Horton  First three done through “527 committees”
    3. 3. WHAT IS A 527?  This is Section 527 of the Internal Revenue Code.  Defines tax treatment of political org income  not taxed: contributions  taxed: capital gains on investments  Hasvery little to do with election law
    4. 4. HOW THE IRS DEFINES“POLITICAL ORGANIZATION” “influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization…”
    5. 5.  Federal, state and local campaign and party committees and PACs are organized under Section 527 of the Internal Revenue Code Most are also regulated, and must disclose information, to their relevant governing body  FEC  State election overseers
    6. 6. THE OLD 527S DIDN’T TRIGGERREPORTING REQUIREMENTS They did not run express advocacy ads  No “Vote for Jones”  No “Vote against Smith”  Instead: Will Smith ever stop beating his wife? They did not donate to federal candidates They did not donate to political parties or PACs Under federal rules, they were not federal committees
    7. 7. WHICH IS NOT TO SAY THAT THISIS WHAT THEY REALLY WERE…  FEC fines three 527s for  Taking excessive contributions  Taking corporate contributions  Express advocacy  This was 2006  Sounds a lot like what Super PACs do  Post Citizens United, these aren’t violations
    8. 8. ENTER CITIZENS UNITED  501(c)4 organization (i.e., not a 527 political organization)  Doesn’t disclose donors  Made a documentary about Hillary Clinton  Critics called it a hit piece  Wanted to air 30 second ads for it in Jan. 2008  Asked FEC if this were permissible
    9. 9. FEC SAID NO  CU’s ads mentioned a federal candidate  Would run within 30 days of a primary  In effect, both the ads and documentary...  Expressly advocated defeat of Clinton  Paid for straight from a corporate treasury  Donors not disclosed  CU not a political organization  FEC applies law, says no to CU
    10. 10. ENTER JAMES BOPP JR.  Represents Citizens United  Two tack strategy  Narrow: These aren’t political ads  Broad: FEC violated First Amendment  Is asking the FEC if speech is permissible prior restraint?  Loses in lower court
    11. 11. ON TO THE SUPREME COURT  Ted Olson takes over case for CU  Supreme Court rules in favor of CU  Disclosure doesn’t interfere with speech  Independent ads don’t corrupt
    12. 12. MEANWHILE, IN A LOWER COURT… 527 that raised money only from individuals Wanted to exceed $5,000 limits Wanted to make “express advocacy” (vote for, vote against) independent expenditures FEC said it couldn’t accept more than $5,000 Sued After Citizens United, District Court ruled it could exceed limits, had to register with FEC
    13. 13. THIS LEADS TO…  Super PACs  File letter with FEC  Take unlimited money from…  Individual  Corporations, including C4s  Labor Unions
    14. 14. CAN ALSO COORDINATEFUNDRAISING WITH CANDIDATES…  Remember James Bopp Jr.?  He starts Republican Super PAC  Plans to coordinate fundraising  Won’t coordinate spending  Democratic groups ask FEC if it’s ok  FEC says yes
    15. 15. MEMBERS OF CONGRESS SOLICITFUNDS FOR THEM  Can only solicit limited donations from individuals, PACs  Majority PAC did this ahead of the FEC ruling  Romney has attended super PAC fundraisers  Top Gingrich donors give to “his” super PAC  Obama has one too— Priorities USA Inc.
    16. 16. HOW TO RESEARCH SUPER PACS Most people are looking at the PACs themselves Who are their donors? Who do they support? Who works for them? Your interest is a little different…
    17. 17. SUNLIGHT MAINTAINS A LIST OFALL SUPER PAC FILERS  Groups file letter with FEC  Say they won’t contribute to or coordinate with candidates  Can raise unlimited funds from any source  Useful resource for figuring out who’s a super PAC
    18. 18. THEY REPORT DONORS TO THE FEC  So far, we’re seeing individuals  Note that employers are listed  Big contributions
    19. 19. HOW TO SEARCH ACROSS SUPERPACS FOR DONORS  Only place to do this now is  Donor Lookup is clunky  But they have data  If you’re looking for company donors, enter them in the donor field  Pain in the neck, but worth the effort  So far, we’re not seeing too many donors spread across multiple super PACs
    20. 20. NOT ALL CONTRIBUTIONS EASY TOFOLLOW  F8 LLC  Gave $1 million to Romney’s super PAC, Restore Our Future  Address is in Provo, Utah  That’s all the information you get  So who is F8 LLC?
    22. 22. KSTU-TV WENT TO THE ADDRESS  Eli Publishing run by Steven Lund  Lund works for Nu Skin  F8 LLC’s agent is Jeremy Blickenstaff  Not clear that Blickenstaff is source of funds  Blickenstaff used to be at Nu Skin  Lund’s son-in-law
    23. 23. AND WHAT IS NU SKIN?  Top donor to Mitt Romney’s campaigns & PACs  Mail order cosmetics firm  Not clear what their interest in Romney is  They haven’t lobbied since 2002
    25. 25. THESE GROUPS DO NOT HAVE TODISCLOSE DONORS  They can also contribute to super PACs  Businesses look for anonymity  Work through largest group possible  Chamber of Commerce, industry associations  Don’t want to alienate customers
    26. 26. THE IRS HAS INFO ON 527S…
    27. 27.  Somewhat surprisingly, IRS is now the best source for 527 data. Center for Public Integrity had a better database, but it’s good only through part of 2005 has one as well, but not as thorough as CPI Campaign Finance Institute also has some info, but not a database…
    28. 28.  After clicking on “Charities &Non-Profits” click “Political Orgs” Lots more clicks to come…
    29. 29. HERE WE ARE  Busy, user-unfriendly search page  It defaults to searches of form 8871, which are the initial registrations  Sometimes (especially when a 527 just surfaces) that’s all you have  Let’s look though at 8872…
    30. 30.  Click on the “Search 8872” under the advanced search tab… From Nov 2000 to present, you can search for all sorts fo data…
    31. 31. NOTES ON USING 527 SEARCHON IRS Good news – you’ve got digital data that you can search Bad news – it’s a stupid search engine. If you type “Soros, George” you’ll get no results. There’s no name standardization, or even spellchecking
    32. 32.  Because IRS does not check spelling, or standardize names, it’s always a good idea to look at the forms of the 527s you’re following
    35. 35. WHEN TO LOOK FOR 527 FILINGS Under IRS regulations, 527s are required to file their form 8871 (the initial filing declaring tax exempt status) 30 days after they’ve raised $25,000 for their exempt activities The first form 8872 isn’t filed until an organization has raised $50,000; it can be filed quarterly (April 15, July 15, etc.) or monthly in election years, and monthly or semi-annually (twice a year) in non- election years
    36. 36. RESOURCES FOR DIGGING INTOTHEM  and the Foundation Center both have 990s online  IRS has 990s as well in the same place they have 527 reports  If you don’t know that an organization has donated, hard to to know which C4 to look at  Does a business share lobbyists with a C4?
    37. 37. THERE SHOULD BE A LITTLEDISCLOSURE AROUND C6S  In 2007, Congress passed HLOGA  Changed rules for disclosure  Groups list active participants in lobbying on their websites  Links are buried in lobbying forms and hard to find  Call C6s to find out if they have a list
    38. 38.  Campaign Finance Institute and Center for Responsive Politics track some 501(c)4 activities Worth noting that not every active C4 group triggers federal disclosures Also, new C4s can be particularly hard to trace State incorporation records can help
    40. 40. BUT THERE’S NO REAL DISCLOSURE That doesn’t mean reporters can’t insist on it Ask the organization for a list of its donors Always point out, when covering them, that they do not release the names of their donors (unless, of course, they do so voluntarily)