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1 [1] (October 18, 2018)

handle is hein.crs/crsmthzzbpw0001 and id is 1 raw text is: Congressional Research Service lnforrn~ng the legislative debate since 1914 0 October 18, 2018 Donor Disclosure: 501(c) Groups and Campaign Spending Introduction Independent spending in a 2012 Senate race, which resulted in a recently decided court case, CREW v. FEC, exemplifies a long-running policy debate about which contributions to politically active tax-exempt organizations should be disclosed in campaign finance reports. Federal Election Commission (FEC) guidance, and the court ruling, are significant because they require publicly reporting the original source of some contributions that previously remained private. Whether those contributions should be included in campaign finance disclosure reports has been a major point of debate in Congress and in the policy community. After the court ruling took effect on September 18, 2018, certain groups that previously did not disclose some of their donors to the FEC now must do so. The FEC issued filing guidance on October 4, 2018, but another rulemaking is expected, which could change reporting requirements. Campaign practitioners offer differing interpretations of the new reporting requirements and suggest that additional litigation could occur. Regardless of what might unfold, or has, in the courts concerning this specific case-which is beyond the scope of this CRS product-the policy implications that CREW v. FEC highlights are relevant for congressional debate over donor disclosure in campaigns and beyond. The developments also could affect tax-exempt organizations' spending to elect or defeat candidates. Independent Spend ng in 2012 Race The disclosure and spending in question originated in the 2012 U.S. Senate race in Ohio. Affiliated with Republican super political action committee (super PAC) American Crossroads, Crossroads Grassroots Policy Strategies (Crossroads GPS) is a tax-exempt group regulated under §501(c)(4) of the Internal Revenue Code (IRC). Crossroads GPS reported making more than $6 million in independent expenditures (IEs) calling for election or defeat of candidates in the Ohio contest. It reported no donors for those IEs in its FEC reports. This and similar fundraising and spending concerns the intersection of campaign finance law and tax law. For the purposes of this discussion, CREW v. FEC addresses whether tax-exempt organizations that are only partially regulated by campaign finance law must disclose their donors in FEC reports. These developments are among the latest in a decades-long debate about which activities and entities should be regulated by campaign finance law, tax law, or both. This CRS product does not address other matters in the case, such as legal interpretation or rulemaking authority. In November 2012, Citizens for Responsibility and Ethics in Washington (CREW), which identifies itself as a watchdog group, filed a complaint with the FEC, alleging, among other things, that Crossroads GPS failed to disclose its donors as required under the Federal Election Campaign Act (FECA; 52 U.S.C. §§30101-30114) and agency regulations. In November 2015, FEC commissioners deadlocked on whether Crossroads GPS had violated commission regulations and FECA (Matter Under Review 6696). CREW then sued the commission for, among other things, allegedly failing to enforce disclosure requirements. In August 2018, Chief Judge Beryl A. Howell, of the U.S. District Court for the District of Columbia, ruled in CREW's favor. In part, the opinion invalidates an FEC regulation that permitted groups to withhold donor information from the agency in circumstances like the Crossroads GPS fundraising and spending. These developments are, therefore, relevant for other politically active tax-exempt groups that spend money to elect or defeat candidates. Disclosing Donors Under FECA and FEC regulations, donor disclosure depends on the kind of groups receiving and spending funds. Figure 1 shows the distinction between different entities regulated under campaign finance law and tax law, which is essential to understanding donor disclosure. Figure I. Campaign Finance: Intersecting Areas of Law T5AX L AWV ELECTI1ON LAW Politically Political Political active organizations committees organizations 527 #,Candidate Politco comit o5 7 arl taxpwp Source: Congressional Research Service figure. Most FECA provisions apply to political committees, which are candidate campaign committees, party committees, and PACs. Except for super PACs, political committees may not accept contributions above amounts specified in FECA. Political committees are also presumed to be primarily engaged in electing or defeating federal candidates. (Although regulated primarily by election law, political committees are regulated under IRC §527 for tax purposes. IRC §527 is unessential for this discussion.) Crossroads GPS is not a political committee. It reports to the FEC only in specific cases as explained below. Crossroads GPS is organized under §501(c)(4) of the IRC www.crs.gov 7-5700

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