Find out what 501(c)(4) social welfare groups really are here.
When people talk about “dark money” in politics, they’re usually referring to 501(c)(4) social welfare groups. What are they and what makes them “dark”? 501(c)(4)s are nonprofit organizations that operate to promote the “social welfare,” or as the IRS describes it, an organization that exists “primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements).” So what exactly does this have to do with politics and political giving?
Social welfare groups are permitted to participate in politics, as long as political activity is not their primarily activity. These groups are also allowed to engage in lobbying activities and get involved in political campaigns (such as to advocate for or against a candidate) if that work constitutes less than 50% of what the organization does. How is that measured? There is no specific law or regulation outlining how to determine that politics is not an organization’s primary purpose. As a result, these groups generally try to keep expenditures that go towards political purposes at some percentage well below 50% – generally in the range of 30-40% at the most.
Why exactly do they have to avoid being viewed as an overtly political organization? 501(c)(4) are tax-exempt and crossing the line from social welfare group to political organization would interfere with their tax status.
So what exactly about these groups gives them the reputation for being secretive? Since 501(c)(4)s are not expressly political, they are not required to disclose their donors and they are overseen by the IRS instead of the FEC. However, since they can spend significant dollars on politics, it means that donors can contribute unlimited funding while remaining anonymous. This has the effect of allowing political money to be spent without the same type of transparency that would be required of an overtly political organization such as a campaign committee or super PAC.
This practice is counter to the principles of transparency that have been the focus of campaign finance laws for almost 50 years. These include regulations such as the “Stand by your Ad” provision that requires candidates to say something along the lines of, “I’m candidate x and I approve this message” so that voters know who is responsible for the content they see. It includes disclosure messaging on almost all content paid for with official campaign funds. And it includes allowing donors to give candidates thousands of dollars (up to the legal limit) as long as their name and some other identifying information is provided to the FEC and then made public. The objective of these and other campaign regulations is to give the voting public more information about who is promoting what message and financially supporting which candidates. By allowing 501(c)(4)s to engage in political activity without requiring the same type of disclosure as overtly political organizations, these social welfare groups are able to skirt the spirit of campaign finance laws while still acting well within legal parameters, as are donors that wish to support candidates without publicly disclosing their contributions.
Legislators and citizens alike have recognized the corrupting influence of money in politics, which is why campaign finance laws have been passed throughout the years with bipartisan support. But 501(c)(4) social welfare groups are able to bypass many of these regulations if they carry out their political activities in tandem with non-political activities. This has led many to decry these organizations and call for an end to dark money.