Right-wing funders — and some liberals too! — are waging war to keep dark money secret

In new Supreme Court case, a right-wing nonprofit (and some unlikely allies) want to ensure dark money stays dark

By Jon Skolnik

Staff Writer

Published May 12, 2021 6:00AM (EDT)

Businessman giving bribe money to partner (Getty Images)
Businessman giving bribe money to partner (Getty Images)

More than a decade ago, the U.S. Supreme Court issued its historic ruling in Citizens United v. FEC, opening the door for corporations to spend unlimited amounts of money on political causes (although not directly to political candidates). As corrosive as that decision was to democracy, it came with a slight proviso. As Justice Anthony Kennedy wrote: while "the Government may not suppress [corporate] speech altogether," it may "regulate corporate political speech through disclaimer and disclosure requirements." Citizens United found, in other words, that corporations could spend without limit, but government had a right to force public disclosure of that spending to the public.

Since then, it's become abundantly clear that money in politics takes numerous forms, far beyond the obvious subterfuge of a corporation donating to a political action committee that then funds a political candidate. In the nonprofit world, big-money donors pump hundreds of millions into politically-motivated 501(c) organizations, which are not required to disclose their donors. Those groups then funnel this money into patently political ventures, even though they are technically forbidden from engaging in significant lobbying. That two-step process describes the phenomenon known as "dark money," which allows wealthy individuals and corporations to exert enormous influence on the political system behind a veil of anonymity. 

Last year alone, more than $1 billion in dark money was spent in the 2020 election, a record high. Contrary to some people's assumptions, "both sides" actually do it — dark money flows to and from Democrats as well as Republicans. In truth, anonymous money has been part of America's political bloodstream for decades now, but not until relatively recently has the debate around it rose to a national level. Last month, in the first major case of its kind since Citizens United, the issue of nonprofit donor disclosure returned to the highest court in the land. 

In this case, Americans for Prosperity Foundation v. Bonta (consolidated with another, functionally identical case, Thomas More Law Center v. Bonta) the Supreme Court will decide whether political nonprofits can be compelled to disclose who their largest donors are. This case in question specifically concerns donor disclosure rules in California, but its implications are unmistakably nationwide. And while the Koch-funded Americans for Prosperity and the Christian-oriented Thomas More Center are distinctly right-wing in ideological terms, they have some surprising allies before the high court.

As things work now, the IRS annually collects from every nonprofit a form called Schedule B, which lists the personal information of each nonprofit's largest donors. The stated legal purpose is to regulate or prevent various financial crimes like fraud and money laundering. California is unique in requiring nonprofits to submit their Schedule B forms to the state attorney general's office — if they want to keep on raising tax-deductible donations. 

To be clear, California collects the information, but does not release it to the public. But this seemingly innocuous bureaucratic regulation has sent shockwaves throughout the conservative nonprofit world — not to mention a number of liberal-leaning or civil-libertarian nonprofits as well, including the NAACP Legal Defense and Educational Fund, the ACLU and the Human Rights Campaign. 

Broadly speaking, the strange coalition of plaintiffs in the Americans for Prosperity argue that the state's interest in collecting Schedule B's — which, once again, would not be made publicly accessible — does not outweigh the burden that the law would impose upon them. They further argue that this burden may be acute for nonprofits that advocate for or against controversial causes, like abortion. Furthermore, the plaintiffs have argued that if their donors are unmasked — by means of a hack or leak, for instance — these donors could be at risk of severe reprisal, causing a chilling effect on future donations.

John Bursch, vice president of appellate advocacy at Alliance Defending Freedom, a conservative-libertarian group, told Salon in an interview he sees this as "a free association problem."

"Whether it's a conservative organization or a liberal or progressive organization," Bursch said, "they all recognize that publicly exposing donors to groups that engage in public advocacy risks chilling — causing people to not donate, or to donate below thresholds where they won't appear on a Schedule B."

Bursch currently represents the Thomas More Law Center, a Christian conservative legal nonprofit that briefly embraced Donald Trump's efforts to overturn the presidential election and is now battling on behalf of donor privacy. He alleges that there have been several cases when donors have felt threatened because of their connections to Americans for Prosperity Foundation or Thomas More. Court documents detail purported instances of doxing, death threats and even assassination attempts. It's worth noting that the plaintiffs also fear "economic reprisal," such as boycotts or criticism of their businesses, activities that are clearly legal and constitutionally protected expressions of free speech.

To make their case, the plaintiffs draw upon an unlikely parallel: the Supreme Court's seminal 1958 ruling in NAACP v. Alabama, where the justices found that Alabama officials could not force the NAACP to turn over its membership list due to the possibility of violent public retaliation against its members. 

At the time of that decision, Justice John Marshall Harlan wrote that the NAACP had made "an uncontroverted showing" that the "revelation of the identity of its rank-and-file members has exposed these members to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility." Alabama's effort to expose NAACP members was largely understood by racial justice advocates as a clear attempt to dismantle the civil-rights group through the use of racial terror. 

Bursch acknowledged that the historical circumstances around NAACP do not resemble those of the current case, but insisted, "To think that [Thomas More] donors might not face life or death is not really accurate."

Unsurprisingly, many critics of the corrosive force of money in politics reject any comparison between the cases. In a statement to Salon, Sen. Sheldon Whitehouse, D-R.I., drily observed "an enormous gap between the Supreme Court case cited by petitioners — a civil rights-era decision where NAACP members had reason to fear state-sanctioned bombings, assassinations and other violence — and the problem of billionaires secretly running dark-money-funded political covert ops in our country."

Daniel Weiner, deputy director of the Brennan Center's Election Reform Program, echoed that analysis in an interview with Salon: "I always pause at any contemporary actor analogizing themselves to the NAACP in the South in 1958. And that includes folks on the right and left. AFP, whether or not it is right on the merits, represents some of the most powerful interests in the country. This is not comparable to the NAACP in the South prior to the civil rights movement."

There's another important difference between the two cases: While the plaintiffs in the Americans for Prosperity case are alleging a largely hypothetical risk of reprisal, they are demanding a result that in goes further than in the NAACP decision. As Vox's Ian Millhiser explained, "the plaintiffs insist that they are entitled to facial relief — meaning that the state's disclosure rule must be tossed out for all nonprofits, regardless of whether donors to those nonprofits face harassment, or even if they want to keep their donations secret." 

Weiner said that a universal ban on mandatory donor disclosures is not warranted, arguing that the plaintiffs' case goes no further than claiming "that the law should not be applied to them. It's hard to see how all this adds up to 'the law is facially invalid,' which is a really sweeping position to take in light of a couple incidents."

Bursch responded that Americans for Prosperity "is precisely the type of case where a facial ruling would be appropriate," saying, "It's almost nonsensical to suggest that thousands of charities should have to individually sue California to keep their donor information confidential."

Even though California has no plans to release "dark money" donors' names, Bursch argues there is still likely to be a chilling effect, claiming that the state does not maintain a secure record-keeping system and leaves an "open door" for hackers. It's true that in 2012, a Schedule B for Planned Parenthood was leaked in California, potentially revealing  hundreds of donors' names and addresses. But such occurrences have been rare.

As mentioned above, nonprofit donor disclosure is a particularly hot topic when it comes to dark money, which typically moves through 501(c)(4) nonprofits, or "social welfare organizations," which collect money from anonymous donors and then spend it on campaigns or candidates on said donors' behalf.

Americans for Prosperity Foundation, however, is a (501)(c)(3), meaning that in order to preserve its tax-exempt status, it's supposed to designate its funds for "charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals," according to IRS rules. However, Americans for Prosperity, the group's sister organization, is a 501(c)(4), meaning that it can more significantly engage in political advocacy and lobbying — largely in favor of reduced taxes, deregulation and other business-friendly policies — and has done so vigorously.

Bursch claimed earnestly that dark money has "nothing" to do with the current Supreme Court case, reminding this reporter that 501(c)(3) charities like AFPF are barred by federal law "from participating in any political advocacy, which is where the dark money issue arises." Explaining the relationship between Americans for Prosperity and its affiliated foundation, he said, "My understanding is that the 501(c)(3) can't fund the 501(c)(4). So, although they share a name and perhaps some common goals, the work they engage in is completely different. You can't cross those lines." 

AFP did not respond to Salon's request to comment on its relationship with AFPF, which has been known to cross some lines. In 2010, the Democratic Congressional Campaign Committee accused AFPF of financing blatantly political commercials that criticized the Obama administration, alleging that the ads "made the Americans for Prosperity Foundation a de facto political action group in violation of the federal tax code," according to the New York Times.

Bursch said that he believed or understood that AFP and AFPF had a "different office, different directors, different employees and different purposes." In fact, a comparison of AFP and AFPF's 2018 tax filings shows that a significant number of officers, directors, trustees and key employees work at both entities, including Nancy Pfotenhauer, Mark Holden, Robert Heaton, Emily Seidel, Slade O'Brien and various others.

Supplemental information on AFPF's filings also states that "certain employees of Americans for Prosperity Foundation may perform services for Americans for Prosperity, a related organization, through a service contract between the organizations." (This relationship also goes the other way.) AFPF is additionally listed as AFP's "direct controlling entity," a designation whose legal meaning is not entirely clear but certainly suggests an intimate relationship.

Not all contributors to political nonprofits count as "dark money donors," to be sure. Some are ordinary citizens, no doubt, genuinely interested in contributing to what they believe are nonpartisan endeavors. But it's precisely the lack of donor disclosure that makes the whole process opaque.

Rep. Hank Johnson, D-Ga., a staunch critic of money in politics, affirmed the need for more effective disclosure in light of the AFP and AFPF's purposefully mysterious relationship. "Because we're dealing with dark money, we don't really know the relationship between AFPF and AFP," he said. "When a 501(c)(3) gives money to a 501(c)(4) to engage in electioneering activities, that's what dark money is all about." (Salon could not find clear evidence that money has flowed from AFPF to AFP, let alone how it might have been used.)

"The Federalist Society and the Federalist Society Foundation both share the same goals and aspirations," Johnson expressed. "People are trying to exert influence. That's the reason why they contribute to these organizations that have a political agenda."

By Jon Skolnik

Jon Skolnik is a staff writer at Salon. His work has appeared in Current Affairs, The Baffler, and The New York Daily News.

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