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Dark money

It’s a small step, if it’s allowed to be taken, but the bill to require donor disclosure on so-called “dark money” is a step in the right direction.

BagOfMoney

Senate Bill 346 takes direct aim at the cloak of anonymity that currently shields so-called “dark money” groups – those tax-exempt organizations whose donors drop big bucks to influence elections and ballot measures but have not been required to reveal who is behind the spending.

Under the proposal, non-profits set up under section 501(c)4 of the federal tax code would be required to publicly disclose contributors who pony up more than $1,000 to any “dark money” group that spends $25,000 or more on politicking. Labor unions are exempt.

SB 346 by Sen. Kel Seliger, R-Amarillo, passed on a 99-46 vote.

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A Perry spokeswoman said Monday that the governor will review the final bill if it hits his desk. However, the House lawmaker shepherding the proposal through the lower chamber speculated Monday that its fate could be all but sealed once it leaves the House.

“They’re staying real quiet on it,” Rep. Charlie Geren, R-Fort Worth, said after Monday’s vote. “But they’ll veto it.”

The issue has been a political lightning rod since the U.S. Supreme Court’s 2010 ruling in Citizens United v the Federal Election Commission. That decision paved a path for outside groups like super PACs and 501(c)4s to raise and spend unlimited sums from corporations, labor groups and deep pocketed individual donors.

And while both 501(c)4s and super PACs can accept unlimited sums of cash, only super PACs are required to identify donors.

As a result, super PACs tend to set up sister outfits in the form of a 501(c)4s to funnel money anonymously to candidates or to fund attack ads. That’s how they got the ominous title “dark money” groups.

According to Texas Redistricting, the vote in favor on second reading was actually 95-50, but that’s a nitpick. The bill has now been approved on third reading by a 95-52 margin, and since it was not amended – which is what the real fight in the House was about – it’s on it’s way to Rick Perry. It’s amazing this bill got to a vote at all considering what it went through on the way to the House. The Trib touches on that.

The bill, which would affect major political givers on both sides of the aisle, originally passed the Senate 23-6; a day later, led by state Sen. Dan Patrick, R-Houston, senators voted 21-10 to reverse themselves, some saying they hadn’t understood what the bill required. Seliger said at the time that his colleagues had faced heavy lobbying by major political donors to change their votes.

The Senate’s effort was too late; the measure was already in the custody of the House. State Rep. Charlie Geren, R-Fort Worth, the bill’s House sponsor, has been shepherding the measure through the lower chamber, working to get it passed without amendments so it doesn’t have to return to the Senate.

“Certain groups keep scorecards and continuously bombard the internet. All that’s fine, it’s what this process is about,” Geren said. “The problem occurs when these groups wade deep into the political process … and use a loophole that keeps their donors secret.”

See here and here for more on the history of SB346. Among the fascinating things about this is the fact that it’s happening against the backdrop of the revelation that the IRS targeted some conservative 501(c)(4) groups for investigation. While the national media is saying that no progressive groups were similarly targeted, there is reporting from 2012 that indicates otherwise, and the IRS did the same thing to liberal groups when George Bush was President. It would be nice if Congress tightened the language governing who does and doesn’t qualify for 501(c)4 status so that the decision isn’t simply left up to IRS agents to determine, but we all know how this will play out.

Be all that as it may, you may wonder why legislative Republicans are taking this action. Simply put, they have more to fear from 501(c)(4) groups than Democrats do in this state, with the likes of Empower Texas and other slash-and-burn groups spending copious amounts of money in Republican primaries. Geren in particular has survived numerous such challenges, as has Speaker Straus at this point. The peril will even out as Democrats gain more footing, but as Democrats have more ideological reasons to support legislation like this, there was enough of a coalition to get it passed. I’ll be shocked if Rick Perry doesn’t veto it, as Geren and Seliger expect he will, but at least they made the statement. The Observer and the TSTA have more.

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2 Comments

  1. Bill Shirley says:

    It’s not clear to me how the state enforces disclosure of a federally defined group. Can they not organize in another state and spend money here?

  2. Noel Freeman says:

    SB 346 has to the potential to very negatively affect small, localized non-profits. The thresholds on this bill are unreasonably low, particularly considering the IRS 990 filing requirement doesn’t even kick in until a (c)4 hits $50,000 in gross revenue. That is also not to mention the fact that 990 filings are subject to public inspection. The 990 requires organizations to disclose all political activity, paid employees, directors, program costs, sources of revenue, etc.

    I would venture to say that most small non-profits that are in the $25,000 to $50,000 revenue range do not use elaborate accounting for each of their program costs and so they are dealing with money being fungible and would essentially be forced to disclose any large contributions if they engage in any level of political activity. They are typically all-volunteer organizations. Ask anyone who has ever been the treasurer of an organization that files with the TEC what they think about that process. It is an incredible amount of work for a volunteer to have to take on, especially for such small dollars.

    This becomes problematic for some organizations like the GLBT Political Caucus where some donors give to our (c)4 instead of our political action committee because it is still legal to fire people in Texas for being gay. Those donors still want to support equality and public education but not candidates because outing themselves could have a very damaging effect on their lives. Our lifetime membership is at the reporting threshold, and this bill could have the effect of limiting membership and reducing revenue for small organizations that do good work on both sides of the political aisle that are not engaging in the activities this bill is aimed at. This is a major reason the Caucus opposed SB 346.

    This bill unfairly holds small organizations responsible for the actions of organizations that are raising and spending hundreds of thousand or millions of dollars. As I spoke to staffers in the offices of the Houston House delegation, it was clear they never anticipated the unintended negative consequences of this bill on small, localized organizations. At the very least, the reporting threshold should be consistent with federal filing thresholds.

    It’s hard to believe we may actually agree with Governor Perry on something, and we hope he vetoes it. We simply cannot support the bill in its current form.

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