Dems to Treasury Chief Yellen: The Time to Crack Down on Dark Money is Now

WASHINGTON — Dark money, that torrent of anonymous cash unleashed by groups with mind-numbingly generic names such as Americans for Prosperity or Patriot Majority, is an ugly fixture of American politics, a weapon used to win elections, confirm (or defeat) judges, and pass (or defeat) legislation. Once dominated by ultra-wealthy conservatives like the Koch brothers, the dark-money racket is now embraced by Democrats and Republicans, liberals and conservatives alike. President Joe Biden benefitted from an estimated $145 million in untraceable cash spent to help elect him in 2020, a sum more than ten times greater than the amount of dark money spent to reelect Donald Trump.

Now, two of dark-money biggest foes, Senators Sheldon Whitehouse (D-R.I.) and Elizabeth Warren (D-Mass.), want newly confirmed Treasury Secretary Janet Yellen to take on the issue of what they call “the corrosive effect of dark money on American elections.”

In a letter first obtained by Rolling Stone, Whitehouse and Warren wrote to Yellen urging her to reverse a years-long trend of pathetic oversight of thinly veiled political groups that use their tax-exempt status to shield the donors from the public. That oversight work falls to the IRS, which is part of the Department of the Treasury and which has seen its budget dramatically slashed in recent years by Congress. At the same time, dark money spending has surged, from roughly $5 million in 2006 to more than $300 million in the 2012 election cycle and nearly $128 million in the 2020 election, according to OpenSecrets.org.

As Whitehouse and Warren write, this surge of anonymous money can be traced in part to the Supreme Court’s 2010 Citizens United decision and several follow-up decisions, which together triggered a seismic shift in the U.S. political landscape. Citizens United and its progeny allowed corporations, labor unions, and the ultra-wealthy to write unlimited checks to supposedly independent big-money bazookas called Super PACs to spend in elections. The decision also fueled, in parallel, an arms race among anonymous groups trying to influence elections and policy fights that were funded by people or corporations (a distinction that didn’t much matter to the Supreme Court’s conservative justices) that didn’t want their spending publicly revealed. As Whitehouse and Warren put in their letter, “Our most powerful political forces now hide from open debate and public accountability by virtue of having interposed a one-way mirror between themselves and the public sphere.”

The job of reining in these dark-money groups fell to the IRS. But the agency never rose to the challenge. Republican members of Congress and their lawyers accused the IRS of unfairly singling out conservative non-profits for scrutiny — remember Lois Lerner? — and used that faux-scandal as an excuse to slash the agency’s funding and hand-cuff its employees tasked with monitoring dark-money nonprofits of all political persuasions. According to a ProPublica investigation cited by Whitehouse and Warren, the IRS “failed to strip any non-profit of its tax-exempt status, despite receiving thousands of complaints of abuse from watchdog groups and concerned taxpayers.” And to no one’s surprise, the Trump administration took steps to make it even harder for the IRS to ascertain the identities of the people and companies bankrolling the armada of nonprofits now spending anonymous cash.

Marcus Owens, a lawyer at Loeb and Loeb who previously ran the IRS division that oversees non-profit groups, says the tax agency has effectively been dismantled. In the 2019 fiscal year, he notes, the agency reported it audited just 1,335 tax-exempt groups out of a universe more than 2 million such groups. Without a better-funded and more aggressive IRS, Owens adds, it signals to dark-money groups that they can flout the tax laws without fear of repercussions. “You couldn’t dream up a better way to launder money,” he says.

As mentioned, Biden is no stranger to this game. The 2012 Obama-Biden ticket benefitted from a modest amount of dark-money spending, but that was paltry compared to the estimated $145 million in untraceable cash spent to help elect Biden president in 2020. Senators Whitehouse and Warren argue that President Biden and Treasury Secretary Yellen have the chance to begin rolling back the tide of shadowy money flooding American politics and policy.

The first step, they say, is ensuring the Treasury Department cooperates fully with the Justice Department’s investigation into the January 6th violent insurrection at the U.S. Capitol, including by assessing whether any groups that helped plan the rally that ultimately led to the mob attack should keep their tax-exempt status. The senators urge Yellen, the IRS, and Treasury to vigorously contest a forthcoming Supreme Court case, Americans for Prosperity v. Becerra, that would hinder state and federal regulators’ ability to confidentially obtain the identities of nonprofit donors and so ensure that those groups comply with the law.

And more importantly, Whitehouse and Warren ask Yellen to actually enforce the laws already on the books to prevent political operatives and press-shy donors from abusing the tax code by playing in elections while dodging any real form of transparency. This isn’t just a matter of who wins and loses election, either — even the mere threat of getting $10 million of secretly funded attack ads dumped on your head, the senators write, can cow politicians into submission or convince them to take a certain position on a key policy debate. “Anonymous money bears particularly on Congress’s inability to tackle the climate crisis,” they write. “Perhaps no industry has more utilized dark money than the fossil fuel industry, which unleashed.”

Whitehouse and Warren insist that their goal isn’t to curb First Amendment-protected speech. What they want, they say, is to drag all that shadowy spending into the sunlight, citing Supreme Court justices as diverse as Louis Brandeis (“Sunlight is the best disinfectant”) and Antonin Scalia (“[r]equiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed”) to make their point.

“Disclosure,” they write, “is what permits citizens to do the work of citizenship in a republic, knowing the identity of political actors contesting for power.”

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