Top Democrats urge Yellen to crack down on dark money groups

Top Democrats in the Senate are urging Treasury Secretary Janet Yellen to crack down on dark money spending in political campaigns.

Sens. Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.) wrote a letter to Yellen on Wednesday arguing that it’s time for Treasury and the IRS to regulate and enforce laws around the explosion of campaign spending by nonprofit organizations formed as 501(c)(4) groups, which do not have to publicly disclose where their contributions came from.

“The IRS’s regulation and enforcement related to 501(c)(4) organizations has been woefully inadequate in the post-Citizens United era,” Warren and Whitehouse wrote. “We urge you to undertake a careful review of what the IRS has done, reform its approach, and rein in abuse by ‘dark money’ organizations.”

“Our most powerful political forces now hide from open debate and public accountability by virtue of having interposed a one-way mirror between themselves and the public sphere,” the letter continues. “The result has been widely described as a ‘tsunami of slime.’ ”

There has been an explosion of political spending by dark money groups since the Supreme Court’s 2010 Citizen’s United decision.

The 501(c)(4) groups are not supposed to engage predominantly in political activities or spend directly on political campaigns, but there are scores of loopholes for the groups to exploit and the IRS has largely not intervened.

It used to be that Republican and conservative groups dominated the dark money landscape.

However, in 2020, President Biden’s campaign was the beneficiary of $145 million in dark money donations, according to a Bloomberg analysis, compared to only $28.4 million for former President Trump. Biden’s total surpassed the previous record of $113 million set by the GOP’s 2012 nominee, now-Sen. Mitt Romney (R-Utah).

Warren and Whitehouse are asking Yellen to address the explosion of spending first by working with the Justice Department to investigate whether dark money groups helped organize the Jan. 6 siege on the Capitol.

They’re asking Treasury to back California Attorney General Xavier Becerra (D) in a case that is expected to go to the Supreme Court, in which a group backed by billionaire conservative philanthropist Charles Koch is challenging a regulation in California that requires nonprofits to report donor information to the state.

And they’re calling on Yellen to enforce existing regulations under the 501(c)(4) code that they say have been flaunted by nonprofit groups in the decade since Citizens United.

“As members of the Senate both before and after Citizens United, we can personally attest to the corrosive influence of dark money,” the senators wrote. “We hope that under your leadership, Treasury will reexamine how it regulates dark money groups and restore transparency to our political landscape.”