Political Donors Chase Funding Alternative

excerpted from “On the Money: The Koch Brothers’ Dark Money Network Keeps Growing” by Gail Ablow, Moyers and Company, January 7, 2014

Political Donors Chase Funding Alternative: Thomas Catan at The Wall Street Journal reports that the possibility of new IRS rules to limit the campaign activity of nonprofit social-welfare groups, known as 501(c)(4)s, is sending lawyers scurrying. Catan writes: “Lawyers are scouring the tax code for other financial vehicles that would allow political donors to continue to spend money on elections while remaining anonymous.” Several new strategies are emerging; one is to create taxable, for-profit businesses that will keep donors hidden. Catan quotes Robert Kellner at Covington & Burling, LLP: “It’s a trend that is accelerating, and the new proposals are going to put more steam behind the train.” Another strategy is to create trade associations, known as 501(c)(6) groups. The Koch brothers already have a trade association in place that they call Freedom Partners Chamber of Commerce. During the 2012 election it poured more than $235 million into conservative causes. Andy Kroll at Mother Jones tweets: “IMPORTANT: Political operatives could use Chamber-style trade associations or for-profit LLCs to keep donors hidden.”

[note: the WSJ article linked above is access-limited; for detailed information on the pending IRS rules on 501(c)(4) ortanizations, such as the Koch Brothers’ Americans for Prosperity, see “Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations, IRS, Nov. 26, 2013]. As that document notes, “there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare.” You can bet that the lobbyists are at work to get that proportion as low as possible.]

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