Should ‘Dark’ Money Power the Resistance to Trump?

AP Photo/Marcio Jose Sanchez

Members of the Orchard City Indivisible Group raise their hands in support of a fellow member who spoke before the city's council against the policies of President Trump in Campbell, California. 

When a pair of former Democratic Hill aides put out a Donald Trump resistance manual dubbed the Indivisible Guide in December, they deliberately set out to emulate the hyper-local tactics so successfully deployed by the Tea Party.

Not lost on the authors of the guide, which went instantly viral and garnered $1 million in contributions to fund a group dubbed the Indivisible Project, was that Tea Party organizers had run afoul of the Internal Revenue Service for allegedly diving into politics while seeking tax exemption. Pressured by Republicans following a critical inspector general report, the IRS later apologized for improperly targeting Tea Party groups, but the flap exposed the perils for nonprofits that enter the political fray.

Undaunted, the Indivisible Project sought and won IRS approval in January to organize itself as a 501(c)(4) social welfare group, and has just spun off a 501(c)(3) charitable arm dubbed the Indivisible Fund to train citizen advocates. Indivisible, which has spawned 6,000 local spinoffs, explicitly opposes Trump’s agenda, acknowledges Sarah Dohl, the group’s chief communications officer. But the group’s main focus, she says, is citizen engagement and public policy—not politics.

The Indivisible Project is one of several new anti-Trump groups powered by an influx of members and money that have opted to organize themselves as nonprofits. Our Revolution, launched by devotees of Bernie Sanders, urges members to fill local Democratic Party leadership positions and phone bank for endorsed candidates, but has also set itself up as a tax-exempt social welfare group—a move that helped prompt some early organizers to quit in protest. Their complaints centered in part on the group’s tax status, which allows it to raise unlimited donations without disclosure.

Majority Forward, a group run by Democratic operatives with close ties to former Senate Democratic Leader Harry Reid, of Nevada, recently won IRS approval as a tax-exempt social welfare group—despite having spent more than $12.5 million backing Democratic Senators up for reelection in 2016, according to the Center for Responsive Politics. The group “has had very little discernible social welfare activity,” a CRP report noted, and has close ties to an allied super PAC.

Watchdogs have faulted the IRS for failing to put the brakes on political spending by tax-exempt groups, which operate outside the disclosure rules. Technically, 501(c)(4) social welfare groups may not focus on politics as their primary purpose. But campaign-style spending by nonprofits not required to identify their donors has exploded since the Supreme Court’s 2010 Citizens United v. FEC ruling to lift limits on political spending by unions and corporations, including incorporated nonprofits.

Until recently, this has been largely a Republican game. Conservative tax-exempt groups spent 59.7 percent of the undisclosed campaign money in the 2016 election, CRP data show, compared with 38.9 percent spent by liberal groups.

But Democrats, not willing to play by different rules, are catching up, and the trend could cause headaches for progressives. Party leaders have made attacks on undisclosed “dark” money a leading talking point. If Senators up for reelection get help from progressive groups operating in secrecy, it potentially undercuts Democrats’ campaign finance message. The IRS, moreover, has issued a string of rulings recently that revoke or deny tax-exempt status to groups that the agency said strayed too far into politics, which does not qualify as a social welfare or charitable activity.

“Certainly the left has taken a page out of the right’s playbook in that regard,” says Marcus S. Owens, a partner with Loeb & Loeb who previously headed the Exempt Organizations Division at the IRS. “And the point for all the groups on both sides of the political spectrum to keep in mind is that there is a boundary. Even though the modern electoral campaign involves a variety of organizations and tactics these days, the IRS is sending signals that it will enforce a standard of behavior” consistent with past rulings.

Organizers at Indivisible are “very aware” of Tea Party groups’ past IRS run-ins, says Dohl. The issue of how to organize the group was “definitely something that we talked about,” she adds. But Indivisible and its local allies are less focused on Trump, Dohl maintains, than on their own members of Congress and on promoting or opposing specific pieces of legislation.

“I think any time you have a group like the Tea Party or like Indivisible that has set out to make a difference and make political waves, you have to understand that you are going to be under a microscope,” says Dohl. “And there is probably going to be more scrutiny of the activities that you undertake than if you were an organization that isn’t political.”

The group’s affiliates—at least two have sprung up in every congressional district—are free to organize themselves according to whatever structure they see fit, according to Dohl. One Pennsylvania group, organized by a local Indivisible member but set up as a separate organization, faces a Federal Election Commission complaint from a Hereford, Pennsylvania, resident on the grounds that it should have registered as a political group.

The complaint was shared with a local newspaper by the campaign office of House Republican Ryan Costello, of Pennsylvania, who has been dogged by constituent protests in his district. The complaint faults the group for targeting Costello and Trump without disclosing its organizers or contributors, complaining in part about the group’s name, initially the Costello Constituent Action Group. The group has since renamed itself the Concerned Constituent Action Group.

“We are not a political action group,” says Tammy Harkness, an electrical engineer who set up the organization by finding like-minded Costello constituents on Facebook. Harkness says the organization has been assured by a lawyer offering pro bono advice that it has violated no rules. “We do not collect money for electioneering,” says Harkness. “We do not electioneer. We are not advocating for any candidates or against any candidates. We are issue based.”

Social welfare groups that focus on legislative advocacy are well within what’s permitted under tax rules, says Owens. But they must keep track of how much time they spend on politics versus social welfare, he notes, to ensure that the latter remains their primary activity. The trick is that the IRS has never clearly defined how much politics is too much.

“That boundary line is somewhat ambiguous,” says Owens. “The IRS is enforcing it. It’s just that the nature [and] the amount of activity that can be undertaken and be less than primary is gray.”

This article has been updated. 

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