Groups that have been classified as social welfare organizations by the federal government are being used to wage political wars at the ballot box in Colorado.
At least two initiative campaigns in Colorado are filling their war chests by collecting contributions from nonprofit organizations that are not required to reveal their financial supporters, state campaign finance records show.
Two campaigns — one supporting an affirmative action ban and another seeking to regulate the way labor unions organize in Colorado — have accepted more than three-quarters of a million dollars from 501(c)4 nonprofit organizations, groups that can contribute an unlimited amount of resources into lobbying and campaign activities under federal law without disclosing their sources.
Campaign records obtained from the secretary of state’s office show that proponents of a ballot measure to bar affirmative action programs have collected $305,000 since September from the American Civil Rights Coalition, a 501(c)4 based in Sacramento, Calif. The nonprofit, established by anti-affirmative action crusader Ward Connerly, is not legally required to reveal individuals or businesses who are supporting the 501(c)4, making it impossible to determine exactly who is bankrolling the initiative in Colorado.
Another campaign, which supports a "right-to-work" ballot question that would make it illegal for labor unions to negotiate agreements to collect dues or agency fees from non-member employees who receive union-negotiated benefits in the workplace, has accepted more than $488,000 from two 501(c)4 groups, according to state campaign finance records. The records reveal no definitive information about who funded petition drives to put the issue on the ballot.
"It’s an enormous problem," says Sheila Krumholz, executive director with the Center for Responsive Politics, a national watchdog group that tracks money in politics. "It’s the last great refuge for donors who want to give unlimited contributions and maintain their anonymity while doing so. The presumption is that these organizations are doing primarily social welfare work, working in the public interest, but in fact many times there have been indications that 501(c)4s are in fact actively electioneering."
During the 2006 election season in Colorado, federal tax-exempt 527 groups, also registered with the IRS, made headlines for their predominant spending on negative attack ads against various candidates and causes. The fact that 527s are only required to report donor information to the IRS on a quarterly basis, at the earliest, persuaded state legislators to pass a law in 2007 that requires more frequent financial disclosures for 527 groups operating in Colorado.
Because of the stricter requirements governing 527s in the state, Krumholz says 501(c)4s may be viewed as an easier option to bypass campaign finance disclosure.
"501(c)4s have long been in the mix but have increasingly become an attractive option for funders who want to play politics with their money but don’t want to be in the limelight," says Krumholz, who notes that 501(c)4s have been in the federal tax code for decades. "They can spend millions of dollars that may not be known until after the election – if then, if at all."
The active role of 501(c)4s in Colorado has already sparked criticisms about transparency from one group.
Protect Colorado’s Future, a coalition of labor unions and advocacy groups that are opposing the "right-to-work" initiative, submitted an open letter to proponents of the ballot question on Tuesday asking them to officially disclose donors behind 501(c)4s that have supported the measure.
While Jonathan Coors, a descendant of the Coors brewing family and government relations director at materials manufacturing business CoorsTek, has stated that he gave $200,000 through a 501(c)4 group to the effort, opponents of "right-to-work" want to know who contributed the remaining $288,000 of 501(c)4 money to the campaign.
"Voters expect more transparency from those who run these organizations, and certainly from corporate executives who stick their hands in political campaigns," said Jess Knox, executive director of Protect Colorado’s Future, who claimed that his organization was planning to file a complaint with the secretary of state’s office over the issue.
Kelley Harp, a spokesman for A Better Colorado, the committee that is supporting "right-to-work," did not respond to a request for comment.
Records detailing the total number of 501(c)4s registered in Colorado this year were not available.