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A Road Map Around Disclosure?

By CREW Staff

Reports of shadowy groups springing up to influence the midterm elections without revealing their donors are sparking calls for stronger disclosure laws, an idea that CREW supports. We also think existing disclosure requirements need to be enforced, because even groups already required to reveal information about their contributors don't always do it.

Take the group New Leadership in Colorado. It is organized as a 527 group, which means it can raise and spend money on political activity and is required to disclose its donors. It then quickly spent more than $120,000 on ads opposing incumbent Sen. Michael Bennet (D-CO) in the Democratic primary without publicly saying much about why. The group ran radio ads accusing Sen. Bennet of voting against a Social Security cost-of-living increase, charges the Bennet campaign forcibly pushed back against, according to this story in The Colorado Statesman.

Sen. Bennet ultimately defeated former state house speaker Andrew Romanoff and won the Democratic nomination. After the primary, New Leadership in Colorado shut down its web site and disappeared.

Earlier this month, the group, which is headed by a former Colorado AFL-CIO official, did file required disclosure paperwork with the Internal Revenue Service. It disclosed some contributions, including $30,000 from the UFCW International Union Active Ballot Club, a union PAC.

New Leadership in Colorado clearly isn't the first 527 group to violate disclosure requirements. In fact, the IRS's instructions for filling out the form include explicit guidance for groups that choose not to provide all the required information.

If the IRS decides to enforce the law, the group will owe a 35 percent penalty on the money, or more than $44,000. But it's not clear whether New Leadership in Colorado will ever have to pay.

A February 2010 report by the Treasury Inspector General for Tax Administration found that 26 percent of the disclosure forms for 527 groups reviewed for the report had incomplete or missing information, and the IRS was not following up. The report found that "political organizations are intentionally withholding required information regarding their contributions and expenditures," and estimated that the IRS could have assessed $3.4 million in penalties in just one year for incomplete disclosures with more robust enforcement.

Instead, the IRS has outrageously been providing political organizations a road map of the route around disclosure laws. CREW thinks the groups trying to influence the election without disclosing required information to the public should at least have to pay their penalty bills. Let's hope the IRS thinks so, too.