DISCLOSE Act crucial to transparency of federal election spending

The Senate Committee on Rules and Administration today will hold a hearing on the DISCLOSE Act of 2014, a bill to improve disclosure of political spending in federal elections.  The measure, cosponsored by 50 senators, is crucial to ensuring voters know who is trying to influence their votes on Election Day — and the votes of their representatives in Congress after the election is over.

Since the Supreme Court’s 2010 Citizens United decision, outside spending in federal elections has skyrocketed.  Outside groups spent over $1 billion in the 2012 federal elections — the most ever.  Shockingly, 2014 could have a comparable figure, despite the lack of a presidential election. 

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This explosion of outside spending includes a dramatic rise in undisclosed election spending. This anonymous spending occurs in three ways, all of which the DISCLOSE Act addresses.

First, due to loopholes in federal election and tax laws, some politically active groups, primarily social welfare nonprofits, are not required to disclose their donors.  The amount spent by these groups quadrupled from 2008 to 2012 — rising from less than $70 million to over $310 million.  So far in 2014, over $35 million has been spent by nondisclosing groups, which is almost triple the amount of undisclosed spending at this time in the 2012 election cycle. 

The DISCLOSE Act would require all groups that engage in more than $10,000 in political spending, including for-profit corporations, labor unions, and social welfare nonprofits, to disclose their donors. 

Second, some spenders, like super PACs, must disclose their donors, but that disclosure is effectively meaningless because the entities disclosed are sometimes shell organizations.  For example, suppose donor A contributes to shell corporation B, which then contributes to super PAC C, which then engages in political spending.  Even though super PAC C must disclose all its donors, only shell corporation B will be listed on its reports; in this way, donor A will remain anonymous.

Under the DISCLOSE Act, if an organization transfers over $50,000 to another organization while knowing the money will be used for political spending, the donating organization must disclose its underlying donors to the recipient organization, which in turn must list those donors on its disclosure reports. 

Third, some political spending isn’t recorded at all.  If a political ad is run on television or radio, but outside the “electioneering communications window” (30 days before a primary election or 60 days before a general election) and doesn’t expressly call for the election or defeat of a candidate (by using words like “vote for Senator Smith”), no disclosure is required at all.  Consequently, not only are the organization’s underlying donors not disclosed, but the amount spent goes undisclosed as well. 

The DISCLOSE Act would expand the electioneering communications window.  For the presidential election, most television or radio ads that mention a candidate run up to 120 days before any election would have to be disclosed.  For congressional races, the same would be true for any television or radio ad that mentions a candidate on or after January 1 of an election year.  The underlying donors that paid for these advertisements would also have to be disclosed.

The Supreme Court has endorsed strong disclosure provisions similar to the DISCLOSE Act.  In the lesser-known second half of Citizens United, an 8-1 majority of the Court explained that prompt disclosure is needed “to hold corporations and elected officials accountable for their positions and supporters.”  Moreover, just last month, the Supreme Court reaffirmed the importance of disclosure in its McCutcheon decision, explaining that disclosure helps prevent “abuse of the campaign finance system.”

Though the DISCLOSE Act is the best way of addressing dark money in our elections, other solutions exist.  IRS Commissioner John Koskinen recently announced that the IRS intends to clamp down on politically active social welfare nonprofit groups.  Under the proposal, if a social welfare nonprofit spends a substantial amount on political activity, the organization would lose its special tax status and would have to disclose its donors. 

Additionally, the SEC has been asked to create a rule requiring publicly-traded companies to disclose their political spending to shareholders.  This would prevent these companies from anonymously giving to politically active business leagues, most notably the U.S. Chamber of Commerce, which are not required to disclose their donors.

Disclosure helps voters understand the messages they receive before they go to the ballot box and guard against improper relationships that might form between elected officials and their political benefactors. The DISCLOSE Act is the best way to address secret spending in our elections and Congress should enact it without delay.

Earley is counsel at the Brennan Center for Justice at NYU School of Law.