NYC public advocate: State, local governments must lead efforts to regulate dark money

Introduction

Local jurisdictions should take the lead in regulating politically active nonprofit organizations, according to a new report slated for publication today by New York City Public Advocate Bill de Blasio and the Coalition for Accountability in Political Spending.

“State and municipal governments should not wait for the IRS to enact reforms,” asserts the report, an advance copy of which the Center for Public Integrity obtained.

“Regulations are needed immediately to close loopholes in the law which allow 501(c)(4) organizations to spend on elections without disclosing their donors and spending in the same manner as independent expenditure groups and political action committees,” it continues.

The 29-page document assesses the increased political activity of so-called “social welfare” nonprofits in New York’s congressional elections since the 2010 U.S. Supreme Court’s Citizens United decision, which in part granted nonprofit corporations the ability to expressly advocate for the election or defeat of federal elections.

According to the report, 32 nonprofits registered with the Internal Revenue Service under Sec. 501(c)(4) of the U.S. tax code were active throughout the Empire State in 2012. Collectively, they participated in New York’s U.S. Senate race and 20 U.S. House races.

Four years earlier, only six such nonprofits together reported political spending in three House races.

Not only did the number of politically active nonprofits climb, but their expenditures also increased, with the groups spending nearly $7.2 million in 2012, up from less than $430,000 in 2008.

The report further notes that social welfare nonprofits accounted for about 11 percent of the total spending in the four New York state congressional races where such groups were most active.

That’s about the same percentage as super PACs, which are designed to fund political advertisements but must publicly disclose their funders.

Candidates, meanwhile, accounted for about 47 percent of spending in these four races, while political action committees, labor unions and trade associations accounted for the remainder.

“If 501(c)(4)s are to engage in elections in the same manner as these political entitites, disclosure regulations must match,” the report urges. “These disclosures provide essential information not only to voters, but also to prospective donors, who need to know where their money is going.”

The office of New York City’s public advocate and the Coalition for Accountability in Political Spending also discovered that none of the 10 most politically active nonprofits in New York were based in the state.

Instead, all were based in the Washington, D.C., metro area, including Crossroads GPS, the nonprofit co-founded by GOP strategists Karl Rove and Ed Gillespie — it ranked as the No. 1 spender in New York — and anti-tax activist Grover Norquist’s Americans for Tax Reform, which ranked No. 2.

Prior to serving as the public advocate, De Blasio managed Hillary Clinton’s U.S. Senate campaign in 2000 and was later elected to be a member of the New York City Council. He’s currently a mayoral candidate.

As the public advocate, he’s championed reforms regarding corporate politicking and has repeatedly spoken out against Citizens United. In 2010, he founded the Coalition for Accountability in Political Spending, which is a bipartisan group dedicated to greater transparency and accountability in corporate political spending.