Schneiderman adops new disclosure requirements for nonprofits that engage in electioneering

June 5, 2013 NY State Attorney General's Office
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As part of a groundbreaking effort to bring transparency to the political process and protect donors to nonprofits, Attorney General Eric T. Schneiderman on Wednesday announced that he has adopted new regulations that will require nonprofit groups, including 501(c)(4) “social welfare” organizations, to make more robust disclosures of their political campaign activities.  

Nonprofits that are registered with the state will now be required to report the percentage of their expenditures that go to federal, state and local electioneering. Groups that spend at least $10,000 to influence state and local elections in New York will be required to file itemized schedules of expenses and contributions. Those disclosures will be available to the public on the Attorney General’s NY Open Government website.

 “There is only one reason to funnel political spending through a 501(c)(4), and that is to hide who has bankrolled the effort. By shining a light on this dark corner of our political system, New York will serve as a model for other states, and for the federal government, in protecting the integrity of nonprofits and our democracy,” Attorney General Schneiderman said.

Since the U.S. Supreme Court’s 2010 Citizens United decision, 501(c)(4) organizations, which are exempt from federal and state taxes because they purportedly engage in the “promotion of social welfare,” have become vehicles for political activity, including funding sham “issue ads” that attack candidates for public office, according to Schneiderman. In the last two election cycles, 501(c)(4)s and other nonprofits that do not publicly disclose sources of funds reported spending over half a billion dollars on political intervention.

As the state law enforcement official with primary responsibility for overseeing nonprofit organizations, Schneiderman is empowered by New York law to determine the form and manner in which organizations make required annual financial reports to his office, and to enact rules and regulations to administer the financial reporting system.

Since the Watergate era, intervention in political campaigns has been largely confined to political action committees (PACs). PACs are governed by state and federal election laws that require them to disclose expense and contributor information to election authorities and the public. But since the Supreme Court’s decision in Citizens United v. FEC, there has been a well-documented proliferation of secretive nonprofit groups engaging in electioneering activities with minimal disclosure to regulators and the public.

Good government advocates have coined the term “dark money” to describe anonymous election spending through 501(c)(4)s. Advocates of government transparency decry dark money because it allows deep-pocketed interests to spend millions of dollars supporting or opposing candidates — often even more than the candidates themselves spend — without disclosing their identities.

Throughout 2013, the Attorney General’s Office has held an open process to allow the public to comment on the regulations.  After submitting the proposed regulations to the Department of State in December, members of the public provided written comments on the regulations to the Attorney General’s office over the course of three months.

 “As secret money has overwhelmed our elections, federal regulators have failed in their most basic task,” said Michael Waldman, president of the Brennan Center for Justice at NYU School of Law. “Attorney General Schneiderman has shown decisive leadership to bring political spending out of the dark. His disclosure rule provides a national model. He is doing his part. Other officials in Albany must do theirs. That starts with swift enactment of comprehensive campaign finance reform.”

Susan Lerner, executive director of Common Cause New York, said: “The scourge of ‘dark money’ in our politics must be stopped.  Donors and the public have a right to know who is funding nonprofits that intervene in our elections.  I commend Attorney General Schneiderman for his innovative efforts to promote transparency and encourage other policymakers to do the same.”

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