WASHINGTON – Rep. Michelle Lujan Grisham’s first official piece of legislation takes aim at “social welfare” groups that enjoy a federal tax-exempt status while engaging in what she and others see as political activity.
Lujan Grisham, a Democrat representing New Mexico’s 1st Congressional District, said her bill, dubbed the 501(c)(4) Reform Act of 2013, would help eliminate “dark money” in politics and boost transparency in the U.S. campaign finance system.
Specifically, the legislation would force tax-exempt 501(c)(4) organizations to follow the same restrictions on campaign activity that currently govern charities. The groups would be compelled to set up separate political action committees and disclose those PAC donors in accordance with federal campaign finance law.
“I think if you engage in political work, you should make it as transparent as possible,” Lujan Grisham told me Wednesday. “The intent is not to prevent any private expenditure for a political purpose but to restore and return (the intent of) 501(c)(4)s, who don’t have to disclose donors and can spend half of the funds they raise for something other than their intended purpose.”
Groups with 501(c)(4) tax status – including one run by Karl Rove, a former adviser to President George W. Bush, and another run by Jim Messina, President Barack Obama’s former campaign manager – have steadily gained prominence since the 2010 Citizens United Supreme Court ruling, which allowed corporations and unions to spend directly on elections. Before Citizens United, such groups were prohibited from donating to a 501(c)(4) unless the social welfare nonprofits disclosed their donations to the Federal Election Commission. Citizens United paved the way for a 501(c)(4) to take as much union and corporation cash as they want without disclosing the donors.
Now, 501(c)(4) organizations are sprouting like weeds. The heavy influx of 501(c)(4) applications after Citizens United is what led to recent allegations that the IRS was unfairly targeting conservative groups, such as the Albuquerque Tea Party, in their close scrutiny of such groups’ applications.
Lujan Grisham contends her bill would also help streamline the application process for 501(c)(4) status both for applicants and IRS workers.
While both liberal and conservative groups are taking advantage of the Citizens United court ruling, the nonpartisan Center for Responsive Politics found that conservative nonprofits spent more than $263 million during the 2012 campaign, while their liberal, or progressive, counterparts spent close to $35 million.
Tax-exempt “social welfare organizations” span both ends of the political spectrum in New Mexico. One of the groups that popped up this year is New Mexico Prosperity, run by a former director of the New Mexico Democratic Legislative Campaign Committee. Another is GOAL Advocacy, which is headed by a former staffer to Republican U.S. Rep. Steve Pearce of Hobbs.
Lujan Grisham, a member of the House Oversight and Government Affairs Committee, said her bill would not discriminate and would force both sides to play by new disclosure rules if they engage in political activity.
The legislation faces tough sledding in the Republican-controlled House, but the congresswoman said she is hopeful she can get a hearing for the bill because the committee’s ranking Democrat, Rep. Elijah Cummings, D-Md., is a co-sponsor.
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