Spending Bill Prevents Feds From Regulating Dark Money Groups

The $1.1 trillion omnibus spending bill passed by Congress last week prevents two federal agencies from issuing rules that would make it easier to track political spending, the Sunlight Foundation and New York Times report.

A rider in the legislation inserted by House Republicans prevents the Internal Revenue Service from issuing or finalizing any rule "relating to the standard which is used to determine whether an organization is operated exclusively for the promotion of social welfare for purposes of section 501(c)(4) of the Internal Revenue Code" during fiscal year 2016. In other words, the IRS cannot adopt any regulation in the new year that would affect so-called dark money groups, which unlike political campaigns and super PACs are not required to disclose their donors and can engage in political activity as long as it is not their primary activity. A second rider prevents the Securities and Exchange Commission from issuing a proposed rule that would require publicly traded companies to disclose their political donations. According to the Center for Public Integrity, at least $173 million flowed from top U.S. corporations into dark money groups in 2014.

After the IRS apologized in 2013 for its "inappropriate" targeting of conservative groups applying for tax-exempt status, a Treasury Inspector General report recommended that the agency clarify its rules as to what constitutes political activity. While the agency appeared to be readying new draft regulations earlier this year, by July it had signaled that it would delay any action to rein in dark money groups until after the 2016 election cycle.

Democracy 21 president Fred Wertheimer told the Times that, with the inclusion of the riders in the legislation, President Obama should issue an executive order requiring companies holding federal contracts to disclose their campaign activities. While the spending bill prohibits forcing those who bid on federal contracts to disclose their contributions, it does not cover those already doing business with the government. A proposal to block such an executive order did not make it into the bill.

"There is virtually universal agreement that the current rules are confusing and unclear, and have resulted in abuses both by dark money groups and by IRS agents in the exemption approval process," Campaign Legal Center president Trevor Potter said in a statement. "Now, Congress has mandated that these same inadequate rules remain untouched for another year — the agency is not even allowed to continue working on drafting better ones."