Levin Floor Statement on DISCLOSE ActMonday, July 16, 2012
Mr. President, the genius of our Founding Fathers was to establish a system of government in which the governed determine who represents them. It’s easy for us, more than two centuries removed from their achievement, to lose sight of just how remarkable that achievement was. They overturned untold centuries of human history during which those with wealth and power made the decisions, and everyone else had little or no chance to influence how they were governed.
The remarkable system the Founders created has endured through war, crisis, depression and doubt. But we should not mistake that endurance for automatic permanence. Democracy requires that we maintain the vital connection between the people and their elected representatives. It must be the voters, and not the influential few, who choose our nation’s leaders. If the people begin to doubt their central role in our government, it will be corrosive to democracy.
In recent months, there has been reason for just such doubt. A Supreme Court ruling has opened our system to a flood of unlimited and secret special-interest money. Inexplicably, a one-justice majority of the Court decided in the Citizens United case that such unlimited donations "do not give rise to corruption or the appearance of corruption."
Now, many of us believed from the moment that decision was handed down that the Court’s majority was badly mistaken. But events since that day have left little doubt. We have in recent months seen the dangerous consequences of the Court’s ruling: a deluge of unregulated funds that has threatened to upend the election campaign for our nation’s highest office, a flood whose organizers vow will upend congressional campaigns across the nation this summer and fall. Through "Super PACs" and through supposedly regulated, but in fact, actually unregulated nonprofit organizations, the conduits through which this flood of secret money flows, millionaires and billionaires already have made massive donations to fund a barrage of attack ads drenching, smothering the voices of those who are to make the decisions in our democracy – the people.
According to the Center for Responsive Politics, an independent watchdog group, as of mid-July these Super PACs have raised more than $244 million to influence elections. Individuals and corporations can make unlimited donations to these Super PACs, whose donations are supposed to be disclosed. But the Court’s decision opened the door not just to individuals and corporations seeking to influence elections with unlimited contributions. This ruling, combined with the IRS’s failure to strictly enforce our laws on the operation of nonprofit groups organized as social welfare organizations under Section 501(c)(4) of the Internal Revenue Code, allows them to seek this influence with spending that is not only unlimited, but also secret, because there is no requirement that donations to those 501(c)(4) organizations be disclosed to the public. Donors can seek to influence an election with huge sums of money and can do so without even having to disclose their involvement. They do so covered by a fig leaf that the nonprofit groups to which they donate are dedicated to "social welfare," rather than partisan politics. That fiction dissolves the moment one looks at these "social welfare" attack ads that the IRS is so far blind to. According to an analysis of TV ad spending data by the Campaign Media Analysis Group, two thirds of all ad spending by outside groups so far during this election cycle has come from nonprofits subject to no federal public disclosure rules. More, much more, is on the way as Election Day approaches this fall.
The organizations now spending millions of dollars to influence elections were set up for that explicit purpose – to campaign for candidates they favor and against candidates they oppose. And yet they preserve their nonprofit status, and their secrecy, by relying on a contradictory regulation and guidance from the IRS.
Now this is how it works. In order to keep their tax-exempt status, and keep donor names and donation amounts secret, organizations are set up as "social welfare" organizations under section 501(c) of the Internal Revenue Code. For example, Section 501(c)(4), which is a very popular section of the code for these organizations to claim, requires that an organization be "operated exclusively," I repeat, "exclusively for the promotion of social welfare." Yet in the regulation implementing this statute, the IRS says, "An organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare." Under this regulation, according to the IRS, to qualify as "exclusively" dedicated to social welfare, you need only be "primarily" interested in social welfare. That doesn’t fit any reasonable definition of "exclusively" that I know of.
I have expressed my concern to the IRS about this. I pointed out to the IRS that the IRS took a stand on this issue before. In 1997, it denied nonprofit status to an organization called the National Policy Forum. The IRS position then was that "partisan political activity does not promote social welfare."
Yet the IRS determination of a group’s tax exempt status can take a year. Therefore, even if the IRS determines that these organizations are not legitimately "social welfare" organizations, it will likely be too late. The secret money will already have been donated, and spent, and the elections will be over.
The contradiction in the IRS regulation is reflected in IRS literature designed to guide the operations of nonprofits. IRS officials pointed me to information on the agency’s Internet site that states flatly, "The promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate." But in the very next sentence on that same website, the guidance says, "a social welfare organization may engage in some political activities, so long as that is not its primary activity." That contradicts the plain assertion in the previous sentence that "social welfare" advocacy does not include campaigning.
It also then leaves open the question of the definition of "primary activity."
An IRS publication on nonprofit organizations contains the same contradiction. It says: "Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. However," it goes on to say, "if you submit proof that your organization is organized exclusively to promote social welfare, it can obtain an exemption [from taxes] even if it participates legally in some political activity on behalf of or in opposition to candidates for public office." Now that makes no sense. If partisan activity does not meet the IRS definition of "promoting social welfare," how can an organization that participates in partisan activity possibly be "organized exclusively to promote social welfare?" So, rather than providing clarity, the IRS is perpetuating ambiguity. It should promptly end this ambiguity.
But Mr. President, we also have a responsibility to act. The Senate and the Congress should act to prevent these organizations from continuing to benefit from their tax-exempt status and hide their donor information. They should be required to disclose the donor and contribution information, and stop hiding behind their nonprofit status. The facade of these TV ads not being partisan politics needs to be swept away. It’s that simple.
We have seen repeatedly the corrosive effects of secret money on the political process. We need to look to history. The Watergate scandal, the single incident in modern U.S. history that most damaged public confidence in honest government, involved burglaries and dirty tricks that were paid for using secret campaign donations. Even by the weak standards of the time, much of this secret money was illegal; more than 20 corporations and organizations were fined, and some executives went to jail, because their secret payments to the Nixon campaign violated the law. Now, a donor can make such secret donations, dedicated to who-knows-what nefarious purpose, and spend unlimited amounts in secret, with what has to this point been the acquiescence of the IRS.
Post-Watergate history warns us as well. We’re all familiar with the revelations about former Senator John Edwards. His personal failings got most of the media attention, but let’s not forget the financial heart of his problem: While running for president, he sought and received secret amounts of cash from a major campaign donor in order to conceal embarrassing facts that might damage the campaign. Yet huge secret payments to campaigns at this moment in our history are rife.
We need look no further this capital city in which we work to see the dangers of secret money. Residents of Washington, D.C., have learned in recent weeks that the current mayor benefitted from what federal prosecutors have called a "shadow campaign" of huge secret donations from a major city contractor. The chief federal prosecutor has said, "the 2010 mayoral election was corrupted by a massive infusion of cash that was illegally concealed from the voters of the District." If true, these charges mean that a campaign donor with a major financial interest in city government decisions sought to influence the election of the city’s mayor using huge secret payments that concealed his involvement.
Mr. President, do any of us doubt that individuals and corporations with a vested interest in federal government outcomes are spending huge sums of money to influence those outcomes, without ever having to disclose their involvement to the public? People may go to jail for such spending in the Washington, D.C., election, and yet secret spending is common practice in campaigns for the highest offices in our country.
This is not the democracy that men and women have fought to protect throughout our history. It’s not the democracy the Founders adopted in our Constitution. As Adlai Stevenson, once put it: "Every man has a right to be heard; but no man has the right to strangle democracy with a single set of vocal chords." Yet this torrent of unregulated money threatens to strangle the voice of the people.
Mistaken though it may have been, the Supreme Court’s decision stands until it is reversed. We are committed to uphold the rule of law even when we disagree with the Supreme Court’s interpretation of the law. But we must be equally committed to the fight for a vibrant, open, representative democracy, one in which elections are determined not by the secret spending of billionaires, but by the will of the people.
The bill we seek to vote on would take an important step toward mitigating the damage of the Citizens United decision. The DISCLOSE Act of 2012 would help shine the light of day on what has been, since the Court’s ruling, an underground sewer flow of hundreds of millions of dollars. It would require nonprofits engaged in partisan political activities to disclose their major donors and their expenditures. It would not stop the flow of unlimited money, because we cannot under the Citizens United ruling, but it would at least ensure that the people know who is trying to influence elections.
The Supreme Court has consistently maintained that requiring disclosure is constitutional. Even in the Citizens United case, the Court’s majority said, "Disclosure permits citizens and shareholders to react to the speech of corporate entities in the proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages." Indeed, the majority’s reliance on disclosure is key to their argument that unlimited spending from corporations would not create corruption or its appearance. The same Supreme Court that has allowed this flood of money has said Congress can require it to be disclosed. We should do so, and so so promptly.
Mr. President, it is difficult to understand why members of the Senate could oppose these simple, straightforward disclosure requirements. It is difficult to imagine that we would be comfortable telling our constituents that we voted to uphold the veil of secrecy that now shields this flood of money from public view. And it is even more remarkable that some of us would vote, not just to maintain that secrecy, but to prevent the Senate even from debating it. The filibuster of this legislation, if successful, will signal shocking acquiescence to a system in which the wealthy, fortunate few can seek to shape the outcome of elections in secret, without the Senate even voting on whether to continue that secret system.
There are those in this body who defend the flood of secret cash in our politics. It is hard for this senator to understand how those senators explain to their constituents that they do not deserve to know who is spending millions to influence elections. But it is doubly difficult to accept the refusal of my colleagues to allow us to vote on this bill by filibustering the motion intended to let us proceed to that vote.
