Nonprofits likely under fire as Senate explores ‘dark money’ | USA News®

By DAN PARKS of The Chronicle of Philanthropy, Chronicle of Philanthropy

A Senate hearing on Wednesday is expected to produce fireworks as Republicans and Democrats clash over the role foundations and nonprofits play in the election.

The Senate Finance Subcommittee on IRS Taxation and Oversight offers no description of the hearing beyond the title “Laws and Enforcement Governing the Political Activities of Tax-Exempt Entities.” Even the witnesses who will testify are unsure of its purpose. It seems likely that subcommittee chair Sen. Sheldon Whitehouse would like to raise concerns about “dark money” flowing through 501(c)(4) nonprofits, but Republicans plan to expand the scope of the hearing to highlight what they consider to be illegal political activities in 501(c)(3) charities and foundations.

Contributions to 501(c)(4) welfare organizations, unlike 501(c)(3) charities, are not tax deductible and therefore these organizations are permitted to engage in a range much broader political activities.

One of the witnesses at the hearing, Ann M. Ravel, a former chairwoman of the United States Federal Election Commission who now teaches at the University of California at Berkeley Law School, said she will discuss his concerns about the movement of 501(c)(4) money from organizations to political action committees with little oversight or public awareness as to the source of those funds.

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“There is a lack of accountability which is problematic,” Ravel said.

However, witnesses who were asked to testify by committee Republicans had a very different perspective, saying it was short-sighted to focus on fundraising for political action committees when, according to them, the real abuses occur at some 501(c)(3) associations and foundations.

Scott Walter, president of the Capital Research Center, a conservative group that monitors philanthropy and political donations, said he was told there was no specific legislation related to the hearing. Walter said he intends to argue that the abuse of 501(c)(3) charities crossing the line into partisan activity is a much bigger problem than 501(c) “dark money” ( 4) on which Whitehouse intends to focus.

He highlighted Facebook co-founder Mark Zuckerberg and Priscilla Chan’s $400 million commitment during the last election cycle to promote access and voter integrity. Walter said the vast majority of those funds were spent in strongly Democratic districts, which violates the federal prohibition on spending tax-deductible charitable contributions in a manner that “intends or has the effect of to benefit a candidate or a party”.

Groups like the New Venture Fund have faced similar scrutiny from conservatives; he pursues a wide range of progressive policies in areas like climate change and gender equity, and he regularly receives large donations from people like Jeff Bezos, MacKenzie Scott, Melinda French Gates, and Mark Zuckerberg and Priscilla Chan and foundations like Ford and MacArthur.

Arabella Advisors, a for-profit advisory firm that provides advice to wealthy donors and foundations, has also drawn the ire of conservatives, who say it helps its nonprofit clients push the boundaries of acceptable activities for charitable organizations that enjoy the benefits of tax exemption. contributions.

Several states across the country have sought to ban outside groups from contributing financially to the administration of local elections.

Brad Smith, founder of the Institute for Free Speech, who will testify at the hearing at the invitation of Republicans, said he believes Democrats are exaggerating the problems with black money flowing to committees political action while ignoring the fact that many 501(c)(3) charities engage in a wide variety of activities that can influence elections or politics. For example, charities are allowed to run voter registration drives that target certain areas, do some lobbying and do advocacy work to raise the profile of certain issues they care about, said Smith.

“I’m very cynical about the audience because I view the audience as somewhat cynical,” Smith said.

Meanwhile, people on the left have taken aim at Charles Koch, a longtime supporter of conservative charities. These concerns left and right have prompted policymakers to spell out clearer rules on how charities can use their funds when it comes to election-related activities.

Another witness called to testify is Philip Hackney of the University of Pittsburgh School of Law, who questioned whether private foundations should retain their preferred tax status due to what he sees as widespread abuse of this. privilege.

Whitehouse is a leading advocate for legislation that would require organizations spending money on elections, including 501(c)(4) groups and political action committees, to disclose donors who give $10,000 or more during an election cycle. Whitehouse also expressed concerns about the use of “dark money” to groom and promote conservative candidates for federal judgeships, including the Supreme Court.

The offices of Whitehouse and Sen. John Thune of South Dakota, the lead Republican on the Senate subcommittee, did not respond to calls or emails seeking comment on the hearing.

This article was provided to The Associated Press by the Chronicle of Philanthropy. Dan Parks is editor of the Chronicle. Email: [email protected] The AP and the Chronicle are supported by the Lilly Endowment for coverage of philanthropy and nonprofits. The AP and the Chronicle are solely responsible for all content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.

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