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How Citizens United Unleashed Campaign Spending in Federal Elections by Tax-Exempt Organizations

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The Supreme Court decision in Citizens United v. Federal Election Commission has changed the landscape of American politics.

The decision has brought enormous amounts of unlimited contributions and secret money back into our elections, the kind of political money that has resulted in corruption and scandals in the past and is bound to do so again in the future.

There are two types of entities injecting hundreds of millions of dollars in unlimited contributions into our federal elections as the result of the Citizens United decision: Super PACs and groups claiming tax-exempt status as 501(c) organizations.

The Citizens United decision is directly responsible for the rise of the Super PACs that are flooding our elections with expenditures financed by huge contributions from the super rich, corporations, labor unions, and other entities.

The Citizens United decision is also directly responsible for the unlimited, secret contributions being injected into federal elections by 501(c) groups, including (c)(4) "social welfare" groups, and (c)(6) business associations, like the Chamber of Commerce.

These groups are not required by tax law to publicly disclose their donors and could end up spending as much or more than the Super PACs in the 2012 presidential and congressional elections.

Contributions to 501(c) groups can come from corporations, labor unions, individuals and other entities. They also can come from foreign entities. Absent effective disclosure requirements, it is exceedingly difficult to know if foreign money is being illegally used by these groups to pay for expenditures to influence federal elections.

The reason for the rise of campaign expenditures in federal elections by 501(c)(4) and (c)(6) groups is simple: most of these groups are corporations and prior to Citizens United they were prohibited by the corporate spending ban from making such expenditures.

Following the Citizens United decision, 501(c)(4) and (c)(6) groups spent more than $135 million in unlimited, secret contributions in the 2010 congressional elections. This amount is expected to dramatically grow in the 2012 presidential and congressional races.

Without the Citizens United decision, there would be no campaign expenditures in federal elections by incorporated 501(c) groups, and no secret contributions being spent by these groups in the elections.

Furthermore, similar to candidate-specific Super PACs, a number of 501(c) groups appear to be ignoring the laws.

Presidential candidate-specific Super PACs appear to be routinely violating the law prohibiting them from coordinating their expenditures with the candidates they are supporting.

A number of political organizations appear to be improperly claiming tax-exempt status as 501(c)(4) "social welfare" organizations to keep secret the donors financing their campaign expenditures.

Democracy 21, joined by the Campaign Legal Center, have filed complaints against several 501(c)(4) groups at the IRS challenging the eligibility of these groups to receive tax-exempt status and thereby to keep their donors secret. We also have petitioned for an IRS rulemaking challenging as contrary to law the IRS regulations that define when a group is eligible for tax-exempt status.

While the Citizens United decision is directly responsible for 501(c)(4) and (c)(6) groups pouring unlimited, secret contributions into federal elections, the dysfunctional Federal Election Commission has made its own inimitable contribution to this result.

Current law requires any entity that makes independent expenditures and electioneering communications to disclose its expenditures and the donors funding these expenditures. FEC regulations, however, have gutted the donor disclosure provisions and left citizens with no information regarding who is financing these efforts to influence their votes.

Representative Chris Van Hollen, represented by the Democracy 21 legal team, has challenged as contrary to law the FEC contribution disclosure regulations. The case has been briefed and is awaiting a decision by a federal district court Judge in Washington, D.C.

Representative Van Hollen also has introduced the DISCLOSE 2012 Act, which would close existing disclosure loopholes.

The Act would provide for timely disclosure of campaign-related spending in federal elections by outside groups and would ensure that significant donors, and the amounts they give to the groups making such expenditures are made public. The legislation covers all entities making these expenditures, including 501(c) groups.

The bottom line is this: the Citizens United decision (with an assist from the FEC) is directly responsible for 501(c) organizations spending hundreds of millions of dollars in unlimited, secret contributions in federal elections.