Tobacco giant funded conservative nonprofits

Introduction

Tobacco giant Reynolds American Inc. last year helped fund several of the nation’s most politically active — and secretive — nonprofit organizations, according to a company document reviewed by the Center for Public Integrity.

Reynolds American’s contributions include $175,000 to Americans for Tax Reform, a nonprofit led by anti-tax activist Grover Norquist, and $50,000 to Americans for Prosperity, a free-market advocacy outfit heavily backed by billionaire brothers Charles and David Koch.

The tobacco company’s donations are just a fraction of the nearly $50 million that those two groups reported spending on political advocacy ads during the 2012 election cycle, almost exclusively on negative advertising. Federal records show that Americans for Prosperity alone sponsored more than $33 million in attack ads that directly targeted President Barack Obama.

But the money, which Reynolds American says it disclosed in a corporate governance document at the behest of an unnamed shareholder, provides rare insight into how some of the most powerful politically active 501(c)(4) “social welfare” nonprofits are bankrolled.

Reynolds American is the parent company of R.J. Reynolds Tobacco, which makes Camel and Winston brand cigarettes.

“The shareholder specifically requested that we disclose information about 501(c)(4)s, and in the interests of greater transparency, we agreed,” Reynolds American spokeswoman Jane Seccombe said.

Large corporations — tobacco companies or otherwise — almost never release information about their giving to such groups, and it’s most unusual for the groups themselves to voluntarily disclose who donates to them.

These groups, which obtain their nonprofit status because they say their “primary purpose” is not political activity, are generally under no legal obligation to detail their funding sources. Super PACs and other recognized political committees, by contrast, must report the names of their contributors who give more than $200 and the amounts they give.

Yet during the 2012 election cycle, various social welfare nonprofit organizations, emboldened by the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision in January 2010, spent more than $250 million to promote or attack federal political candidates, according to the nonpartisan Center for Responsive Politics. The source of most of that money remains a mystery.

Reynolds American’s other contributions last year to 501(c)(4) groups include $100,000 to the Partnership for Ohio’s Future, an organization run by the Ohio Chamber of Commerce that spent several million dollars in a failed 2012 ballot initiative campaign to uphold a law limiting public workers’ collective bargaining rights. It also gave $12,500 to the National Taxpayers Union, a 501(c)(4) group that backed Republican candidates last year with modest expenditures.

Ohio Chamber of Commerce Executive Vice President Linda Woggon told the Center for Public Integrity she wasn’t aware that Reynolds American planned to disclose its donation to Partnership for Ohio’s Future.

But Woggon said she did not have a problem with officials there doing so, adding that “the decision is up to the company.”

Americans for Prosperity, which in 2011 reported to the IRS it received more than $25.4 million in contributions and grants, “leaves it up to our supporters” to decide whether to reveal their donations,” spokesman Levi Russell said.

“It’s their right, and we respect it,” he said.

Officials at Americans for Tax Reform, which in 2011 reported to the IRS that it received nearly $4 million in contributions and grants, did not reply to several requests for comment.

Within the tobacco industry, Reynolds American competitor Lorillard, which manufactures Newport brand cigarettes, has no nonprofit donation disclosure policy in place.

Ronald Whitford, the company’s associate general counsel, said Lorillard “could look at possibly enhancing disclosure in the future.”

Altria, the world’s largest tobacco company, does make contributions to politically active nonprofit organizations, spokesman Bill Phelps said — but he would not name any beneficiaries.

Altria’s corporate policy only requires it disclose its contributions to 501(c)(4) nonprofits in narrow circumstances, none of which applied to its 2012 donations, Phelps said.

For example, Altria, which makes Marlboros, the top-selling cigarettes, would publicly disclose a contribution if a nonprofit used at least $50,000 specifically for “political activities” as defined by the Internal Revenue Service — but only if the nonprofit informed Altria of this fact.

The IRS considers political activity to be the “participation in, or intervention in, any political campaign on behalf of (or in opposition to) any candidate for public office.”

Therefore, by its own rules, Altria would not disclose contributions that a 501(c)(4) used to fund so-called “issue advertisements” that are sometimes barely distinguishable from ads that directly advocate for or against a politician.

Politically active nonprofit groups such as Americans for Prosperity and Crossroads GPS, which was co-founded by GOP strategist Karl Rove, together spent millions of dollars on these kinds of communications last year.

Reynolds American’s written corporate policy on nonprofit donation disclosure is similar to that of Altria. But the policy “represents the minimum disclosure threshold,” said Seccombe, the company spokeswoman.

Reynolds American specifically acknowledged its donation to Americans for Tax Reform “because of expected stakeholder interest, not because the contributions were intended to be used or were in fact used for ‘political activity’ as that term is meant for purposes of the Internal Revenue Code,” Seccombe added.

She declined to speculate on which 501(c)(4) organizations Reynolds American will donate to this year. But officials will release information on its 2013 donations early next year, she said.

The company’s actions, although limited and hardly in real time, “set a precedent” and are “to be commended,” said Bruce Freed, president of the Center for Political Accountability, which tracks and advocates for political transparency by corporations.

“We just haven’t seen this with other companies related to their giving to (c)(4)’s,” Freed said.