Tax experts say it’s possible that businesses are using an aggressive interpretation of the law to wring a tax advantage out of their donations to these groups.

It’s almost impossible to know whether it’s happening, partly because the groups2014 also known by their IRS designation as 501(c)(4)s aren’t required to disclose their donors. (That’s why the contributions have been dubbed “dark money.”)

This state of affairs is not entirely new; social welfare groups have long been involved in politics. In 2000, for example, the NAACP National Voter Fund, which is a social welfare group, ran hard-hitting ads just days before the election criticizing George Bush for his opposition to hate-crimes legislation. What’s new is the scale of involvement of such groups in elections, which has expanded dramatically in the wake of Citizens United and is part of the increasing flood of money in elections.

The most prominent of a new crop of the groups is the Karl Rove-affiliated Crossroads GPS 2013 which raised $43 million in the 2010 midterm elections and is expected to become an even bigger force this year after pledging to raise and spend $300 million with its sister super PAC, American Crossroads. Democrats are also expanding their use of the groups, led by pro-Obama Priorities USA, which raised $2 million last year.

Precisely because they offer anonymity, such groups may be attractive vehicles for companies that want to spend money electing a favored candidate or pushing an issue. In 2010, Target generated a national backlash after giving $100,000 to a Minnesota group that ran ads supporting a candidate who opposed gay marriage. Liberal activists seized on the donation after it was revealed in state filings. If Target 2013 or any other public or private corporation 2013 gave to Crossroads GPS or Priorities USA, the public would never know.

Companies may also be deducting from their taxes the undisclosed donations they give to these groups.

“There has always been this suspicion, but I can’t prove it,” says Frances Hill, a tax law professor at University of Miami who first floated the concept in a brief mention in the New York Times earlier this month. “It could be put into the advertising budgets, which for many companies are very large dollar amounts.”

This is where the aggressive interpretation of the tax code would come into play.

Corporations are allowed wide latitude in deducting business expenses from their taxes 2013 everything from workers’ salaries to marketing expenses of all kinds. But one thing they’re explicitly barred from deducting is political expenditures.

As the law puts it, companies are not allowed to deduct money spent on “intervention in any political campaign” or “any attempt to influence the general public, or segments thereof, with respect to elections, legislative matters, or referendums.”

But tax experts say a company could argue that money given to “social welfare” groups isn’t political spending at all and that the donations are instead “ordinary and necessary” business expenses.

The company might argue, for example, that ads run by a social welfare group would favorably influence opinion on a public policy issue that affects the company’s business. Thus, say, an oil company would claim a business expense deduction on a donation to a social welfare group that was running ads criticizing President Obama’s policies on domestic drilling.

The company would also have to argue the money isn’t being used by the groups on political expenditures. So it comes down to where the IRS draws the line on what is a political expenditure, and whether ads run by such groups as Crossroads GPS or Priorities USA would cross the line.

Determining what is and is not a political expenditure is a matter of intense dispute. The IRS has historically looked at various factors in assessing nonprofit spending 2013 things like whether an ad mentions a candidate for public office or whether it’s aired close to an election. But wiggle room remains.

“It’s a smell test,” says Lloyd Hitoshi Mayer, a Notre Dame professor who specializes in election and tax law. Donor corporations’ lawyers “could take the position that unless an ad is express advocacy, it’s not across the line for tax purposes.” Under this argument, an ad praising Obama’s stance on foreign policy wouldn’t be classified as political unless it explicitly told viewers to “vote for Obama.”

The social welfare groups themselves also have an interest in classifying their work as issue-based or educational since they risk losing their tax status if their primary purpose is political campaign activity. Campaign finance reformers have been pressing the IRS to crack down on the new social welfare groups that, they argue, are abusing their tax status.

“The organizations themselves may be arguing that their expenditures are not political, they are issue advocacy. If you accept that characterization, you would get a deduction,” says Marcus Owens, a partner at Caplin & Drysdale and former director of the IRS’ Exempt Organizations Division.

Crossroads GPS and Priorities USA did not respond to requests for comment about what proportion of their work they classify as political. The proportion matters because if corporations are in fact deducting donations as business expenses, they cannot deduct the part of the donation that was used for political purposes.

So where does all this leave us? If a company gave $1 million to Crossroads GPS or Priorities USA and claimed the donation was a business expense, that would be $1 million of the company’s revenue not subject to taxes. If the company was paying a 30 percent tax rate, that would mean savings of $300,000.

But this is entirely hypothetical because we can’t be sure whether this tax strategy is occurring. First, the social welfare groups don’t reveal their donors. So we don’t know which companies to ask about the deduction issue. Second, if companies are taking the deduction, it would be detailed in tax returns to the IRS that are confidential.

Now the parties have exchanged positions.

The groups in question are nonprofits known as 501(c)(4)s, after the section of the tax code that describes them.

The best-known of the newer c4′s are the Karl Rove-affiliated Crossroads GPS, which last year raised a $33 million war chest to support Republicans, and the Obama-affiliated Priorities USA, which is expected to play a similar role for the president. Like super PACs, c4′s can accept unlimited donations. But Super PACs have to reveal their donors; c4′s do not.

The 501(c)(4) category is not new. Many older interest groups (including some that engage in little or no political activity) are organized as social welfare groups, from the Sierra Club to the National Rifle Association. But the Supreme Court’s 2010 decision in the Citizens United case — a case filed by a c4 — eliminated restrictions on campaign activity by these social welfare groups and other types of corporations, taking their political spending to another level.

The legislative battle over donor disclosure in the summer of 2000 shows how history often repeats itself when it comes to campaign finance regulation and how the partisan divide was not always what it is today.

Social welfare groups came under scrutiny in 2000 when Congress, led by Sen. John McCain, R.-Ariz., sought to close a loophole involving 527s, other groups that were running campaign ads without revealing their donors. A pro-Bush 527 called Republicans for Clean Air had hammered McCain with $2.5 million in negative ads during the GOP presidential primary, which the senator ultimately lost.

In June 2000, a McCain-sponsored amendment passed the Senate that required 527s to disclose their donors. Then some House Republicans proposed extending the disclosure requirements to apply to 501 (c)(4), (5), and (6) organizations — social welfare groups, unions, and business trade associations, respectively.

“We need disclosure by section 527 organizations, but when 501(c) groups intervene in the political process, they should disclose what they are doing and who is paying for it as well,” said House Ways and Means Oversight Subcommittee Chairman Amo Houghton, a New York Republican who helped draft a bill to expand disclosure.

Houghton’s bill would have required 501(c )(4) (5) and (6) organizations that spent more than $10,000 per cycle on political ads and other election activity to reveal donors who gave more than $1,000. The proposal met stiff opposition from the nonprofit community, which argued it would have a chilling effect on donations.

But Republicans on the Ways and Means committee –- as well as McCain — supported the measure.

Democrats on the committee opposed it. Some argued that expanding disclosure requirements was a “poison pill” designed to make the legislation unpalatable and to prevent any reform from passing. Others said the bill imposed “overly broad and uncertain disclosure requirements” on social welfare groups. A top aide to House Minority Leader Richard Gephardt, D-Mo., told the newspaper Roll Call that the Houghton bill “goes too far.”

Ultimately, the Republican leadership in the House concluded that it did not have the votes to force disclosure for 501 groups. The House approved the narrower bill that had passed the Senate and President Clinton signed it into law in July 2000, closing the 527 loophole.

But lawmakers recognized even then that big donors seeking ways to influence campaigns anonymously could turn from 527s to social welfare groups.

“[Q]uite honestly, I believe these groups are perfectly capable of hiring good tax lawyers and going out and finding another way of getting around this if you aim it at specific tax sections,” said Rep. Mike Castle, R-Del., at a June 2000 news conference, explaining why he supported disclosure requirements for social welfare groups.

Castle left politics in 2011 after losing a GOP Senate primary to Tea Party favorite Christine O’Donnell. Now a partner at law firm DLA Piper, he said this election cycle has vindicated his concerns about anonymous money being routed through social welfare groups.

“You’ve got these groups that can essentially contribute huge sums of money, first of all without limitation and secondly without disclosure,” Castle said. “I think it’s just a terrible injustice to a fair election system.”

It’s worth remembering here that Nevada is considered a swing state and Romney could benefit from what Ed Kilgore calls a Mormon “frontlash” in a general election contest against Barack Obama. In the primary, Kilgore points out, Mormons “will also matter on February 28 in Arizona (6% LDS), and in later caucuses in Idaho (27% LDS) and Wyoming (11% LDS), right down to heavily-Mormon Utah, which ends the whole nominating process on June 26.”

To learn more about Mormon voting patterns, I spoke with Quin Monson, a professor of political science at Brigham Young University.

The polls out of Nevada are saying Romney will win 86 percent of Mormon caucus-goers. Does that high number surprise you? 

Well, based on 2008 results both in Utah and Nevada, that doesn’t surprise me. It was similar — about 9 out of 10 Mormons in Utah supported Romney. And that was about the same number in the entrance polls in 2008 in Nevada.

What do you think the dynamic is here — is this a solidarity vote?

There are a lot of things going on. One, Mormons are overwhelmingly Republican. A recent Pew survey shows that and there’s other data that I have that show the same thing. So it’s a choice among Mormon Republicans of which candidate to go for, and I think there is a sense of solidarity with Romney. It’s not unlike Catholics and John F. Kennedy in 1960. In that context, Catholics felt like they were a bit of a beleaguered minority, sort of beginning to be better accepted in American society but still viewed with some suspicion. And they saw Kennedy in part as representing their group and representing it well. I think Mormons see Romney in the same light. Even some people in the church that don’t necessarily agree with him — either because they’re more conservative or more liberal than Romney — appreciate that he’s kind of taking one on the chin for his religion at some points. It seems to get linked to him in so many ways that even Mormon Democrats will speak in favorable terms of him and have admiration for the fact that he’s had to put up with so much.

In terms of party identification among Mormons, why is it so overwhelmingly Republican?

The first thing to say is that it wasn’t always that way. When you go back in time, you don’t have a lot of national data but you have data from Utah, which is a reasonable measure. Utah was even more heavily Mormon the further back in time you go. Utah voted for Lyndon Johnson and had a Democratic governor and state Legislature in the ’70s. So it wasn’t that long ago that it was a fairly balanced place politically. Go back even further and it was heavily Democratic. At the time of statehood in 1896, the Republican Party was the anti-Mormon party.

So what happened?

Well, I think the New Deal brought some conservatives over to the Republican side. What really happened mostly was the 1960s happened. And Roe v. Wade happened. There was a shift in American culture, and then the national parties shifted. The parties were divided internally on social issues in the ’50s and ’60s. I don’t think civil rights was as big a deal for Mormons as other issues, abortion and gay marriage in particular. The parties into the ’70s took more clear and opposing positions on social issues, and Republicans ended up taking positions that side more consistently with the church. I don’t think the church changed. The parties changed, and that left more Mormons feeling at home with the Republican Party.

Everyone is expecting the presidential election this year to be primarily about the economy. Are Mormons somehow naturally in sync with the GOP on economic issues?  

I do think there’s a natural affinity. There’s a lot of emphasis among Mormons on self-reliance, and that plays right into how some people would view American exceptionalism or perhaps rugged individualism. There is a communitarian element to Mormon theology, but I don’t know that that has been emphasized in modern times. Early on, when Mormons had problems with their neighbors in places like Missouri and Illinois it was in part because their sense of communitarianism conflicted with the surround community. And then later in Utah, there were some experiments in communitarian living. But the faith is much more focused now on self-reliance; there is an emphasis on helping your neighbor, but mostly  in the context of your Mormon congregation. But that emphasis doesn’t include government most of the time; government is left out of the rhetoric. What’s in the rhetoric is that individuals should become self-reliant, should get an education, should provide for their families, and so on.

Turnout among Mormons is also expected to be high in Nevada and elsewhere. Is this because of the Romney candidacy?

There is a consistent historical pattern in Mormons being slightly higher in political participation and slightly more civically engaged in measures of community service and other things. Some of that is because there is a lot asked of Mormons within their own congregation. On the other side of the coin, Utah political participation has  declined — turnout is very poor. That’s a function of the fact that there is not a lot of political competition in Utah; there’s a sense that things are over before they even happen. Utah used to be at or near the top in political participation 20 years ago, and now we’re at or near the bottom.

There is a clear encouragement from the church — official statements read over the pulpit — about two things. One is political neutrality in partisan elections: Members are always reminded not to use church facilities or lists and so on. And then, two, that members should be involved and vote. Those statements are typically read a couple weeks prior to a major election. In the Romney case, and in a place like Nevada where you have a sizable Mormon population, even though there is no official action by the church, there is a strong social network that could lead to Mormons being mobilized by each other.

Obviously we see Romney will get lots of support from the Mormon community. But on the other side of it, is there any way to quantify how much anti-Mormon sentiment might hurt him?  

I’ve done some work with some colleagues on this to attempt to measure the affect of framing Romney as a Mormon. And it does have a clearly negative effect. What we’ve done is create little vignettes in national surveys in which we write biographical statements about Romney and add different pieces of information in. Sociologists talk about a social contact hypothesis, where contacts with a group you’re unfamiliar with helps you to become less fearful and more understanding, and to like them more. That would lead you to believe that if people know a Mormon, they might be resistant to a negative message about Romney being a Mormon.

What we find is that people who know a Mormon really well — a family member or close friend — clearly resist any kind of negative information about Romney and his religion. Because they know otherwise. People that don’t know a Mormon at all are strongly affected by that information, but you can also counter it with positive information and they’ll take that into account. What’s really interesting is that people who know a Mormon in passing — maybe a guy at the office — react strongly to the negative information and you can’t counterbalance it with positive information. We think that has something to do with the fact that Mormons are, in fact, a little different. And if you know one in passing you know enough to know that that person is a little different, but you don’t know enough to know that, although they’re different they’re probably just fine.

I’m asking you to speculate, but do you think in a general election context Romney would be helped or hurt by being Mormon?

If Mormons made up 25 percent of the population, I’d say it would really help him. But Mormons are at best 2 percent of the population. I think on balance it’s probably not going to be helpful. The reason I think he has a chance is that it’s not going to be the focus of the conversation for most of the time. I think that’s why Romney doesn’t bring it up and when it is brought up he quickly tries to move on to something else. If it becomes central to his campaign for some reason, I think it will be to his detriment. I would look for an attempt by — not directly from the Obama campaign — but from surrogates or others, to raise questions about Romney’s Mormonism. If it continues to be a kind of sideshow and the main issue is the economy, then I don’t think his Mormonism does a lot of damage.

We recognize the limited nature of the sales, and we acknowledge that the Bahraini government has taken some positive steps with respect to human rights in recent months. However, it has not done enough to justify the sale of any military items or services to Bahrain. Moreover, if the Administration wishes to reward the Bahraini government for any progress, there are other methods that do not involve strengthening the Bahraini military or security forces.

Tragically, even a brief survey of reports from reliable sources makes clear that the Bahraini government continues to perpetrate significant human rights violations.

The letter then enumerates some of those reported violations, things like the killing of at least 10 people in the past few months, the prosecution of doctors who treated protesters, and the barring of international human rights observers from entering the country.

It’s not clear Congress can actually do anything to stop the arms sale at this point, so the letter mostly serves to draw public attention to the issue. I’ve asked the State Department for comment and will update if I hear back.

Here’s the full letter:

2012Feb2 Final Bahrain Letter