Dec 01 2013

Disclosure of major donors to 501(c)(4) groups should be required


Reform Party of California Commentary

After careful consideration of the arguments, pro and con, it is clear that requiring public disclosure of donor names to nonprofit 501(c)(4) political advocacy groups will have beneficial effects on political speech and the public interest. The benefits significantly outweigh adverse effects, real and imagined. The RPCA stands firmly in favor of as much transparency in politics as is reasonably possible. Disclosure of all major contributors to 501(c)(4) advocacy groups should therefore be required by law. Those contributors would be defined as one who donate more than some threshold amount per year or election cycle, say $2,000 to $3,000. The Reform Party of California (RPCA) acknowledges the reality that such a requirement cannot pass congress as it is currently constituted.

Given the situation, the RPCA supports expansion of state laws that would require donor disclosure to the extent it is compatible with federal laws, including laws that govern 504(c)(4) social welfare organizations. In addition, the RPCA advocates a change in IRS rules to (i) disallow politically-focused 504(c)(4) groups from shuffling money among themselves to avoid tax consequences (a practice that is now legal) and (ii) elimination of all tax-favored status (nonprofit or tax-exempt) for any group or donor that is engaged in partisan political advocacy and demands anonymity. The price for anonymity should at the very least be loss of tax favored status. Given America’s multi-trillion dollar debt, tax payers should not be required to subsidize partisans arguing for their personal ideological or economic interests. If nothing else, that is an unaffordable luxury because status quo two-party politics has a track record of more failure than success.

The key argument favoring anonymity is that forcing public disclosure of anonymous donors infringes their constitutional free speech right. That argument frames the issue as exposing donors to harassment or worse and in turn that inhibits their right to free speech. The argument carries some persuasive weight. However, because opposing legal responses to such donors is also legally protected free speech and that permits informed dialog and debate. To the extent there is illegal harassment of or harm to donors or their property, that is not a sufficient excuse for anonymity. That is a matter for law enforcement.

In essence, donors who demand anonymity demand that their voices to be heard as loud and often as possible while minimizing (i) money that can purchase free speech espousing opposing points of view and (ii) political and economic repercussions from individuals and entities with opposing points of view. For the most part, the repercussion that large donors wants to avoid is economic, not free-speech based. Specifically, many wealthy individual donors and legal entities do not want the public to know what 501(c)(4) groups, candidates, policies and laws they support or oppose. That knowledge can damage their political goals and/or their business or economic interests. Even if one sets aside the question of motive and assumes the only reason that anonymity supporters has is strictly grounded in any limit on free political speech, the strength of arguments for anonymity is still significantly weaker than arguments for disclosure.

A detailed basis in fact and logic for those opinions is provided at the essay that accompanies this commentary: http://reformpartyca.org/social-welfare-organizations-donor-disclosure-improves-political-speech/.