Contributions of anonymous cash totaling more than $2.4 million are bankrolling anti-labor and anti-affirmative action campaigns in Colorado. The money is coming from nonprofit organizations that are not required to reveal their financial donors, prompting a former House member and state Senate candidate to consider legislation that could strengthen disclosure for certain nonprofit organizations that get involved with politics.
Three state campaigns — Amendment 46, to ban affirmative-action programs; Amendment 47, to restrict the way unions organize in the state, and Amendment 49, to bar automatic union dues deductions from public employee payrolls — have each predominantly funded their coffers with the help of anonymous nonprofit contributions, records with the secretary of state’s office show.
Nonprofits are traditionally “social welfare” organizations that register with the federal Internal Revenue Service, but recently they have been used in Colorado to fund political causes, all while keeping secret the names of donors who have paid for campaign costs or for petition efforts to put a proposal on the ballot.
Morgan Carroll, an Aurora Democrat who is running against Republican Suzanne Andrews in Senate District 29, said she wants to bring further transparency to nonprofit electioneering, possibly by supporting legislation in 2009 that would require certain nonprofit groups to disclose funders or by using state audits to examine the organizations’ political activities.
Carroll sponsored a law in 2007 that now requires federal tax-exempt 527 political groups doing business in Colorado to disclose their donors to the secretary of state’s office, but Carroll claims that regulating nonprofits can be harder because of the thin line between what constitutes active politicking and promoting “social welfare.”
“Because their primary purpose is supposed to be ‘social welfare’ and there can be some overlap between that and ‘political activities,’ a clear definition would be needed if further disclosures were to be triggered at the state level,” Carroll said. “To the extent people really are electioneering and using the [nonprofit] status as a way to avoid disclosures I think we need to address that assuming we can find a clean constitutional way to do it.”
The majority of initiative campaigns this year have not funded their efforts exclusively with anonymous nonprofit funds, according to state campaign-finance records. For instance, Colorado For Equal Rights, a campaign supporting a ballot question to define a fertilized human egg as a person, has disclosed dozens of individual names. Protect Colorado’s Future, another group opposing Amendments 47 and 49, has released records showing that a large majority of the campaign’s funding comes from various labor unions.
In contrast, the Amendment 49 campaign, being supported by the Golden-based Independence Institute conservative think tank, has collected nearly 100 percent of its funding through a nonprofit organization called Colorado At Its Best, receiving more than $1.4 million dollars since February, records show.
Supporters of banning affirmative action programs in Colorado with Amendment 46 have taken more than $326,000 from the American Civil Rights Coalition since September. The coalition is based in Sacramento, Calif., and was established by anti-affirmative action crusader Ward Connerly. Cash from the nonprofit comprises 97 percent of the campaign’s funding, records show.
Such figures are not exactly a surprise to Bruce Freed, executive director of the Center for Political Accountability, a watchdog group based in Washington, D.C., that monitors government transparency matters.
Nonprofit groups are expected to be the preferred vehicle for hidden election spending in 2008, according to Freed, who notes that while nonprofits have been in the tax code for decades, they are beginning to increase their political activities on both the state and national levels.
In July, the Center for Political Accountability issued a statement (PDF) requesting that the conservative nonprofit groups Employee Freedom Action and Freedom’s Watch disclose how they are funding ads and other political actions against Democratic candidates for national office. Both groups have published spots attacking Senate candidate Mark Udall, who has also been the target of another local nonprofit organization that launched a $670,562 negative ad blitz less than two weeks ago.
“Clearly folks are accruing a great deal of money and they want to keep that source of the money secret,” Freed says.
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 like Carroll to pass the law in 2007 that requires more frequent financial disclosures for 527 groups operating in Colorado.
That crackdown was also the result of a series of investigative reports by The Colorado Independent (then known as Colorado Confidential) on campaign finance loopholes and reporting abuses by the Trailhead Group, Senate Majority Fund, Colorado Leadership Fund and Colorado Good Government Initiative.
‘The last great refuge’
Because of new 527 regulations, nonprofit groups are becoming a more attractive option for political donors who don’t want their names to see the limelight on public disclosure forms, according to Sheila Krumholz, an executive director with the Center for Responsive Politics, a nonpartisan group that tracks money in politics.
“It’s an enormous problem,” Krumholz told the Colorado Independent in June. “It’s the last great refuge for donors who want to give unlimited contributions and maintain their anonymity while doing so.”
Backers of Amendment 47, a “right-to-work” initiative 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 collected 81 percent of funding, or approximately $648,000 since December, from two nonprofits called Protect Colorado Jobs and Colorado Citizens For Change.
Jonathan Coors, government relations director at materials manufacturing business CoorsTek, has said that the company is giving money to the Amendment 47 campaign through the nonprofit Colorado Citizens For Change. But even if such an anecdotal disclosure is true, it is still unknown who contributed $288,000 through a nonprofit, Protect Colorado Jobs, to collect petition signatures for the campaign.
One of the first instances of anonymous nonprofit electioneering in the state happened in 2005 when 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 and spent $2.1 million in anonymous dollars on a campaign against referendums C and D, two budget proposals on the state ballot.