1. Shedding Light on Dark Money
A Seminal Event in the Attack on Democracy
We are just over halfway through the 2023-24 Congressional election cycle. It is a good time to look at how much money is being spent to sway public opinion in next year’s elections.
In this first post, I wanted to provide a brief history and discussion of the impact of Citizens United, focusing on how the campaign funding landscape has changed since the 2007-08 cycle.1 That was the last Presidential cycle before the Supreme Court’s Citizens United vs. Federal Election Commission decision. I started my research on the history at the Federal Election Commission website.
Citizens United and How It Upended Campaign Finance
In 2008, political fundraising in the United States was radically changed when a conservative non-profit corporation, Citizens United, was barred by the Federal Election Commission from promoting and airing a film critical of Hillary Clinton. Prior to that time, the 1971 Federal Election Campaign Act and the 2002 Bipartisan Campaign Reform Act, which amended it, prohibited corporations and labor unions from using funds to expressly advocate for the election or defeat of a federal candidate. These “electioneering communications” were defined as any broadcast, cable or satellite communication as well as speech that was publicly distributed within 30 days of a primary or 60 days of a general election. Austin v. Michigan State Chamber of Commerce was the prior controlling opinion. There, the Supremes at the time had ruled that there was
“a compelling governmental interest in limiting political speech by corporations by preventing "the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas."
Citizens United sought declaratory and injunctive relief against the Federal Election Commission (FEC), arguing that the ban on corporate electioneering communications was unconstitutional. SCOTUS chose to hear the appeal of the initial ruling against Citizens United.
When Citizens United was decided by SCOTUS in 2010, the 5-4 majority of the court stated that if they ruled on just the narrow grounds on which Citizens United argued its case, it would have a chilling effect on political speech guaranteed under the First Amendment. Furthermore, they argued that SCOTUS had to exercise its judicial responsibility and overturn precedent. In other words, the conservative majority on SCOTUS took it upon itself to reverse precedent. It also made the leap that associations of individuals, in addition to single individuals, are protected by First Amendment rights. Once that idea was in place, the next step in the logic chain was that the First Amendment could not discriminate based on the identity of the speaker. Following that leap in the logic chain was the idea that you need to spend money to disseminate speech, so limiting the amount of money a corporation could spend on speech is unconstitutional as a limitation on speech itself.
The opinion in Citizens United was written by Justice Anthony Kennedy.
According to the discussion of the ruling on the FEC website:
The Court noted that §441b’s [US Code 441b is the law regulating contributions or expenditures by national banks, corporations, or labor organizations.] prohibition on corporate independent expenditures and electioneering communications is a ban on speech and "political speech must prevail against laws that would suppress it, whether by design or inadvertence." Accordingly, laws that burden political speech are subject to "strict scrutiny," which requires the government to prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest...
…the Court found that the justifications that supported the restrictions on corporate expenditures are not compelling.
…the Court found that Austin’s "antidistortion" rationale "interferes with the 'open marketplace of ideas' protected by the First Amendment." According to the Court, "[a]ll speakers, including individuals and the media, use money amassed from the economic marketplace to fund their speech, and the First Amendment protects the resulting speech." The Court held that the First Amendment "prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech." The Court further held that "the rule that political speech cannot be limited based on a speaker’s wealth is a necessary consequence of the premise that the First Amendment generally prohibits the suppression of political speech based on the speaker’s identity."The Court also rejected an anticorruption rationale as a means of banning independent corporate political speech. In Buckley v. Valeo, the Court found the anti corruption interest to be sufficiently important to allow limits on contributions, but did not extend that reasoning to overall expenditure limits because there was less of a danger that expenditures would be given as a quid pro quo for commitments from that candidate. The Court ultimately held in this case that the anti corruption interest is not sufficient to displace the speech in question from Citizens United and that "independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption." [Emphasis in this quoted section is mine.]
Chief Justice John Roberts, joined by Justice Alito, discussed the reason why the Court should upend more than 100 years of precedent and the principle of stare decisis (“to stand by things decided.”) in this case. Roberts argued that “stare decisis..counsels deference to past mistakes, but provides no justification for making new ones.”
In his dissent, Justice Stevens was joined by Justices Ginsburg, Breyer, and Sotomayor. Justice Stevens was appalled by the majority opinion on three grounds:
"A democracy cannot function effectively when its constituent members believe laws are being bought and sold."
that the Court addressed a question not raised by the litigants (Citizens United) and "changed the case to give themselves an opportunity to change the law". In other words, he believed the decision violated the separation of powers.
that “independent expenditures” could lead to gaining political access and thereby generate more political influence than direct campaign contributions.
Justice Scalia, joined by Justice Alito in full and Justice Thomas in part, attacked Justice Stevens’ dissent based on the Founders’ original intent and understanding of the concept of a corporation. So, in Citizen’s United, the usual band of originalists who are so vocal about using the original intent argument for gun rights seemed to see the situation differently here. Alito said the First Amendment referred to speech and not speakers.”
Justice Thomas wrote a separate concurring opinion in all but the disclosure provisions. Thomas’ argument is that anonymous free speech is protected, so the disclosure of donor lists makes contributors vulnerable to retaliation.
Two months after Citizens United was decided, a second less-known case completed the campaign funding revolution, SpeechNow.org vs. FEC. The Court of Appeals for the DC Circuit held that PACs that didn’t make direct contributions to candidates, parties, or other PACs, the so-called “independent expenditures,” could accept unlimited contributions. The FEC is responsible for issuing “advisories” on what cannot be done as an “independent expenditure”—basically anything that could be construed as a quid pro quo between donors to the PAC and the candidate. What is still legal is for candidates and managers to “discuss campaign strategy and tactics through the media.” The transformation of money into speech, and lots of money into lots of speech, was complete. This was the birth of the super PACs.2
Traditional PACs are still around. They may raise unlimited amounts from individuals, corporations, unions, and other groups to spend on, for example, ads overtly advocating for or against political candidates, ballot initiatives, or legislation. 3 They come in two flavors:
“connected PACs,” also known as “separate segregated funds” (SSFs), have restrictions on who can donate to them, usually managers and shareholders in the case of corporations, or members of the sponsoring organization.
“nonconnected committees” PACs can accept money from any individual, connected PAC, or organization and are usually focused on ideology, like limited government, single issues, like anti-abortion groups, or politicians like Mike Johnson’s Leadership PACs.
A Leadership PAC is a political committee that is directly or indirectly established, financed, maintained or controlled by a candidate or an individual holding federal office, but is not an authorized committee of the candidate or officeholder and is not affiliated with an authorized committee of a candidate or officeholder. Members of Congress and other political leaders often establish Leadership PACs in order to support candidates for various federal and nonfederal offices.
Like other multicandidate PACs, a Leadership PAC may contribute up to $5,000 per election to a federal candidate committee.
Kevin McCarthy was the epitome of fundraising for other members of the House through his leadership PAC. He could not give funds to his own campaign, but he could pay for travel, administrative expenses, consultants, polling, etc.
Understanding Dark Money
How does dark money fit into this new political funding landscape?
Dark money is money that is donated to several classes of nonprofit 501( c) corporations, which are regulated by the IRS and do not have to disclose their donors. These organizations are limited to political activity, making up 49.9% or less of their expenditures. But the icing on the cake is that these 501 ( c) corporations can themselves donate to PACs, so they can hide the identity of original donors because the PAC only reports the 501 ( c) as its donor.
The issue of donor disclosure changed again with the passage of The Taxpayer First Act, described in IRS Publication Pub. L. No. 116-25 Section 3101, which requires electronic filing by exempt organizations in tax years beginning after July 1, 2019.4 According to the IRS:
Among other provisions, this legislation specifically amended IRC Section 527(j) to require the e-filing of Form 8872, Political Organization Report of Contributions & Expenditures, for periods beginning on or after January 1, 2020. Political parties; campaign committees for candidates for federal, state or local office; and political action committees are all political organizations under IRC § 527.
In a small win for transparency in the post-Citizens United world, the IRS provides the links below, which connect to the searchable online database of public filings by Section 527 political organizations. It contains all electronic filings made by 527 organizations. Form 990 is the tax return of the organization, which details donations and inside expenses (administrative costs such as consulting fees and salaries) and external expenses (the recipients of “grants”), and the officers and highest paid employees of the corporations. Form 8872 lists every contributor’s name, address, employer, occupation, contribution amount and date, and year-to-date total contributions, which are due quarterly within 15 days of the end of the quarter and for pre- and post-election periods.
Search Political Organization Disclosures: Search for Forms 8871, 8872 and 990 filed with the IRS.
Download Political Organization Disclosures: Download Forms 8871, 8872 and 990 filed with the IRS.
A similar free public searchable database can also be found at the FEC site.5
Thank you for these disclosures, Georgia and thanks also for your time and effort into researching this. Little annoys me more than the so-called originalists who base their findings on the "intent" of the framers. You are an historian, I am only a history buff, we have read and learned of the conditions of Philadelphia, Pennsylvania, Washington' DC and New York, New York; but neither of us ever claims to know the intent of persons dead for 200+ years. We can read the Federalist Papers to learn more of the thinking of Alexander Hamilton, John Jay, and James Madison - but they are only 3 of the 55 men who participated in the writing of the Constitution. Yet Alito and Thomas claim clairvoyance - they know the intent of these 55 men how? Oh, yeah they are all white, all male, and all wealthy and since they also know other wealthy white men today they can deduce the minds of those men sweltering in a large room, with the windows all closed, during a hot July summer in Philidelphia; 150 years before air conditioning in most business buildings . And we're supposed to believe them. Right.
Your view from the porch of our political charade overwhelms me. Coffee..