Show us your money: halting the use of trade organizations as covert conduits for corporate campaign contributions

Journal of Corporation Law, The, Fall, 2007 by Shayla Kasel

The most problematic part of trade organizations participating in elections is that their contributors, actions, and spending are secretive. The structure of campaign finance, combined with the lack of IRS supervision, allows contributors to hide their influence on elections, avoid contribution limits, spend money from prohibited sources, and have greater control over the message of a campaign. (174) This covert nature of trade organizations makes it hard for voters to determine who is behind an ad, while simultaneously increasing the fundraising power of the trade organization. (175) Contributors who would not ordinarily contribute for fear of political or legislative retaliation are free to pour money into an election.

Since the IRC requires only minimal reporting, 501(c)(6) organizations are an ideal loophole for campaign funding. (176) Furthermore, the lack of disclosure requirements and lack of accountability allows them to operate without drawing attention or public scrutiny. (177) In contrast, 527s disclose their contributions, allowing the media and watchdog groups to inform the public, and enabling reformers to use the contribution and expenditure disclosures to build a compelling case for reform. (178) On the other hand, the case against trade organizations is widely unknown because of the lack of disclosure. Without any idea of who is giving to these groups, and how they are spending the money, the media and watchdog groups are unable to analyze their activities, keeping the public in the dark. (179) The only information available results from local litigation and organizations boasting of success. (180)

Furthermore, being able to hide the source of their money allows trade organizations to create exceptionally politically charged advertisements while keeping the source of those ads a secret. (181) Such committees commonly create a front name that conjures positive images or associations that may mask the groups' true agenda. For example, "Americans for Job Security" sounds like a positive, innocuous group, but the name is quite ironic--it was established as a pro-Republican, (182) pro-business organization to work against labor unions. The advertisements funded by these group are additionally effective because they intentionally mirror candidate ads in order to increase effectiveness. (183) The deceptive nature of these advertisements is harmful to voters because they cannot judge who is influencing them and to whom a candidate may be beholden once in office. (184)

WRTL's reversal of BCRA indicates that the number of issue ads of this type will likely increase because issue advertisements can now continue until and including election day. While the FEC is currently promulgating new rules and definitions of express advocacy, these rules will not expand or change the law. Since laws can only come from Congress, and Congress rarely passes campaign finance legislation, 501(c)(6)s are not likely to be seriously regulated until Congress is able to also address the issue advocacy problem and 527s.