May 25, 2011

Is This Any Way to Run a Democracy?

By crewstaff

It was hard to turn on the TV in dozens of congressional districts last fall and not see one of the American Action Network’s campaign ads.  Former Senator Norm Coleman’s group bombarded us with at least $18 million in ads supporting Republican congressional candidates last fall.  Wouldn’t it be nice to know who paid for them?

Because AAN is organized under section 501(c)(4) of the Internal Revenue Code, which allows it to keep its donors anonymous, we may never know.  A look at the group’s first tax return, however, reveals the “network” probably isn’t as big as AAN would like you to think.  Turns out, most of AAN’s start-up money was contributed by just three people.

From July 2009 to June 2010, AAN brought in $2,750,351 in total contributions, all but $351 which came from just 11 anonymous donors.  It gets better.  Roughly 82% of the donations were made up of three large gifts: two for $1 million each and one for $250,000.  That’s not exactly a groundswell from the grassroots.

AAN’s recently filed return doesn’t include most of the money the group raised and spent during the heart of the 2010 election season.  AAN almost certainly won’t file a tax return covering that period until a year from now - meaning we won’t learn more about the extent to which AAN raised funds to influence the 2010 mid-terms until right before the 2012 election.

Groups like AAN, whose main function is to run campaign ads, are proliferating thanks to the Supreme Court’s disastrous Citizens United decision even though the tax code prohibits 501(c)(4) organizations from engaging in political activity as their primary purpose.  That’s why CREW filed a complaint with the IRS against AAN.  We’ve also taken on two other 501(c)(4) groups, the American Future Fund and the Commission on Hope, Growth and Opportunity.

Unless the IRS takes firm action, more and more 501(c)(4) groups backed by anonymous donors will run negative – and often untrue – campaign ads, effectively hijacking our elections.  But IRS enforcement alone is not enough. With the 2012 election cycle kicking into gear, Congress and the administration must step in as well.

President Obama should sign the proposed executive order requiring government contractors to disclose contributions to groups engaging in political activities.  On the other end of Pennsylvania Avenue, Congress should resurrect the DISCLOSE Act, forcing groups to reveal the identities of those funding campaign ads.

AAN’s tax return shows us that a remarkably few very wealthy donors can have a disproportionate impact on America’s elections.  Is this any way to run a democracy?

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