Now that federal 501(c)4 nonprofit organizations have already given more than three-quarters of a million dollars in anonymous contributions to bankroll two initiative campaigns in Colorado, one state legislator who led the charge for a stricter campaign-finance law in 2007 predicts that nonprofits will play a significant role in this year’s election season.
Aurora Democratic Rep. Morgan Carroll, a lawmaker who sponsored a law in 2007 that now requires federal tax-exempt 527 groups doing business in Colorado to disclose their donors to the secretary of state’s office, anticipates more political involvement on the state level from 501(c)4s — federal nonprofit organizations classified as "social welfare" entities by the Internal Revenue Service that have recently been used to contribute large sums of money to campaigns without disclosing funders.
"They probably would have played some role anyway, but I think we’re going to see a lot more central role for these folks now," says Carroll about the 501(c)4s. "Unfortunately sometimes law and legislation really lag behind. We [are dealing with] motivated people with a lot of money trying to influence the system. They’re looking for loopholes. It’s really difficult to keep up with them."
At least three 501(c)4s in Colorado have given approximately $793,000 since September to pay for petition circulators to collect signatures for an anti-affirmative action measure and another “right-to-work” initiative that seeks to restrict the way unions organize in the state. Both are now on the 2008 ballot.
"If we’re already at three quarters of a million this early in the cycle I think we’re going to see some real money there," Carroll says, noting that the nature of such nonprofit groups makes it difficult to single out which organizations have only been created with the intention of shielding donors from disclosure.
She said that "527s are by definition doing political advocacy. The complicated thing about 501(c)4s is that they’re mixed. You got the problem with sort of an end around disclosures for campaign finance, which of course I have a problem with, and on the other hand, you have nonprofits that aren’t really primarily political and may have a more legitimate interest in donor privacy."
Although 501(c)4 have existed in the tax code for decades, the new law concerning 527 groups in Colorado may provide more incentive for campaign funders to skirt disclosing finances through nonprofits, although a few campaigns have already used such organizations in state politics.
An issue committee called the Colorado Club for Growth — the local affiliate of the National Club for Growth, an anti-tax organization — created its own nonprofit that spent more than $2.1 million on a campaign against referendums C and D, two budget proposals on the state ballot in 2005.
In 2006, supporters of a state amendment to legalize up to an ounce of marijuana for adults also took money from a nonprofit to fund their campaign, citing fears that donors may face possible repercussions if outed for supporting such a cause.
Clarification: Last paragraph modified to emphasize that legalization supporters used money from a nonprofit and did not create it for the explicit purpose of funding the marijuana initiative.