Monday, July 9, 2012

Businesses Using Nonprofits To Hide Political Donations

When the United States Supreme Court ruled in the landmark Citizens United case two years ago, it opened the door for an influx of corporate money into elections. Most thought this would manifest itself in the form of so-called super PACs (Political Action Committees). 

While this has happened in some instances, a report in The New York Times indicates that many corporations are funneling their political donations through nonprofits so they are not subject to normal disclosure requirements. This allows businesses to push for a political agenda without being held accountable for it.

In its review of corporate governance reports, tax returns of nonprofits, and regulatory filings, The New York Times uncovered many previously undisclosed donations to political nonprofits from corporations. For example, health insurance giant Aetna donated over $3 million last year to the American Action Network (AAN), a Republican-leaning organization that has spent millions of dollars attacking President Barack Obama's health care law. This donation comes despite Aetna's president publicly backing the legislation.

Most of corporations' donations went to organizations like AAN, which fall under Section 501(c)(4) of the tax code as "social welfare" organizations. Since they are not technically political organizations, they don't have to disclose their donors to the Federal Election Committee (FEC), which makes them attractive to businesses. As scrutinized as super PAC spending is, they were outspent by 501(c)(4)s in the 2010 midterm elections.

The Internal Revenue Service (IRS) has already revoked the tax-exempt status of one political nonprofit this year, leading to speculation as to whether the agency will act on some of the bigger groups such as AAN or the Democratic-leaning Priorities USA. Until such action is taken, however, it appears corporations will continue to use nonprofits to shield their donations.

You can read the full story in The New York Times.

No comments: