Shedding Light on Dark Money:  How 501c Nonprofits are Exploited to Hide Political Donors

The American Democracy Minute Radio Report & Podcast for March 24, 2023

Illustration by American Democracy Minute

Today’s Links

Articles & Resources:

Open Secrets – Dark Money Basics
Brennan Center for Justice – Dark Money in the 2020 Election
Issue One – What is Dark Money?
Issue One – Dark Money & Super PACs
Internal Revenue Service – Can a tax-exempt organization endorse candidates for public office?
Internal Revenue Service – A History of the Tax-Exempt Sector: An SOI Perspective
Citizens for Responsibility & Ethics in Washington (CREW) – The IRS is not enforcing the law on political nonprofit disclosure violations 

Groups Taking Action 

End Citizens United, Common Cause, Issue One, Public Citizen, Free Speech for People, People for the American Way

Today’s Script:  (Variations occur with audio due to editing for time)

You’re listening to the American Democracy Minute, keeping YOUR government by and for the people.

We’re starting a series explaining Dark Money, starting with “charitable” & “social welfare” 501c3 groups.  Most of these groups do great work and don’t engage in sketchy political activity.  But the tax code has been exploited by Conservative and Liberal political operatives to keep YOU from seeing who is influencing elections.  

Section 501c of the Internal Revenue Code defines these groups.  It includes 501c(3) religious, charitable, scientific or educational groups, which can’t take positions on candidates.  But while politics can’t be the “PRIMARY activity” for 501c(4) “social welfare” groups, the rules allow up to 49.9% to be political.   That also applies to 501c(5) trade unions, and 501c(6) trade associations.  None of these groups are federally required to disclose who contributes to them, and worse, the IRS has virtually stopped enforcing the rules, so abuse goes largely unchecked.  

In particular, the 501c4s have been exploited to take in and spend huge donations from anonymous politically-motivated donors, often used on negative television ads.  Technically, 501c4 groups CAN back candidates, but lately, more of their Dark Money has been funneled to Political Action Committees and SuperPACs, which only have to disclose a name like“Americans for Sweetness & Light” and keep YOU in the dark.

Next time, we’ll talk about using Limited Liability and shell corporations for hiding Dark Money donors.   We have detailed explainers and resources at AmericanDemocracyMinute.org.  I’m Brian Beihl.


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