Republican bill would shield donors to ‘dark money’ groups in Michigan

Political nonprofits in Michigan are already not required to disclose details about who gives them money. Sen. Mike Shirkey, sponsor of a bill that would add an extra layer of protection for nonprofits who choose not to disclose, said threats of donor exposure can create “a chilling effect.” (Photo by Pictures of Money, Flickr CC)

The 2018 midterm elections were the most expensive in Michigan history, with more than $291 million poured into myriad campaigns.

Less than 48 hours after polls closed on election day, a bill was introduced in the state senate that would make some of that money — the millions that came from nonprofit political advocacy groups — harder to trace. The bill, sponsored by the incoming Republican senate majority leader, would prevent public agencies in Michigan from requiring nonprofits to disclose their donors and supporters.

Nonprofits in Michigan are not currently required to publicly disclose donors. But incoming Secretary of State Jocelyn Benson has pledged to increase campaign finance transparency and the Attorney General’s office, which approves nonprofits to receive donations, will soon be led by Dana Nessel, who was backed by the End Citizens United PAC.

“I want to make sure that nonprofit organizations ‒ broadly, not just political ‒ are protected from having to disclose their donors,” said sponsor Sen. Mike Shirkey, R-Clarklake. He said donors may be discouraged from giving to nonprofits if they believe they would be identified without their permission.

Shirkey’s bill would prevent state agencies ‒ including the Secretary of State or Attorney General ‒ from learning donors’ names.

“Even the threat of it has a chilling effect,” Shirkey said of donor disclosure. “So putting it into statute will put a punctuation point on it and make it clear.”

Experts on campaign finance said the bill would make campaign finance reform, as one expert put it, “a herculean task.” Calls for Michigan to ensure more disclosure, not less, of who contributes to political candidates gained urgency after Michigan was ranked last in the nation in transparency.

“It appears to be a preemptive move to ensure that nonprofits will not have to disclose where their money is coming from for many years at minimum,” said Craig Mauger, executive director of the nonpartisan Michigan Campaign Finance Network, which tracks money in state politics.

“Because once you put this into law, the pro-transparency forces would have to control both chambers of the legislature and the governor’s branch in order to overturn this law.” (While Democrats swept the races for governor and other statewide offices earlier this month, Republicans kept control of the Michigan House and Senate.)

How nonprofits influence elections

Shirkey’s bill would protect organizations that fall under section 501(c) of the IRS tax code. There are 29 different types of nonprofits under this section, but the ones involved in political advocacy tend to be 501(c)(4)s and 501(c)(6)s — “social welfare” organizations and business advocacy organizations.

They can receive unlimited donations from individuals, corporations and unions, and while their political activity is supposed to be limited, the IRS rarely enforces those limits.

IRS oversight of these groups became even less restricted this year when the agency announced it would no longer require 501(c)(4)s and 501(c)(6)s to report large donors in annual tax returns, allowing these groups to redact donors’ names when their returns are made public.

While nonprofits don’t have to publicly disclose the sources of their funding, some voluntarily do so. States, however, have the right to demand more transparency of nonprofits.  

Political nonprofits can give to SuperPACs and participate in express advocacy without disclosing their donors, said Mauger, and they often purchase issue ads that nominally address an issue rather than a particular candidate, even as the ads generally make clear which candidate the group favors.

For example, a March ad from the 501(c)(4) Fund for Michigan’s Tomorrows urged Michigan voters to “tell your legislators to stand with (Republican candidate for governor) Bill Schuette.” On the other side of the ideological divide, a liberal 501(c)(4), the Sixteen Thirty Fund, gave more than $5 million to the ballot committee Voters Not Politicians, whose proposal to change the state’s redistricting system passed in November.

Michigan nonprofit groups also often work closely with campaigns; at times, the same consultants manage a campaign and run the political nonprofit supporting it, said Mauger. In the 2018 governor’s race alone, nonprofits spent more than $7 million, according to data tracked by Mauger’s group.  

Making Michigan ‘darker’

The senate bill preemptively protects nonprofits against any state administrative rules that would require them to disclose their donors to the public, or to public agencies.  

“We think that that’s really dangerous,” said Anna Massoglia, a researcher at the Center for Responsive Politics, a national nonpartisan group that tracks money in politics. She said preventing government agencies from tracking donations makes it difficult for them to tell whether a group is accepting money from straw donors (people who pass on someone else’s money to a candidate or cause).  

“Especially with the threat of foreign influence being such a big issue right now, it would be extremely difficult to tell whether someone was a legitimate donor in the U.S. or someone outside of the U.S,” Massoglia said.  

Advocates for government transparency say it’s important to be able to see who is funding the nonprofit groups that support candidates because it can indicate what issues or interest groups that candidate will likely support once in office.

Disclosing donors helps “identify conflicts of interest and make connections between why certain groups are supporting certain individuals,” said Mauger of the Michigan Campaign Finance Network. “If someone wants to influence a state lawmaker in Michigan right now, they can do that completely in secret by writing a large check to that lawmaker’s nonprofit organization.”

Eric Lupher, president of the nonpartisan Citizens Research Council of Michigan, said “we should have the ability to know who’s trying to get us to vote one way or another on these things… I think that’s good government.”

Massoglia said most states are actually going in the opposite direction, shining more light on campaign finance, not less. And other states’ tougher disclosure policies are being upheld by federal courts. In one case, a U.S. Appeals Court upheld the California Attorney General’s right to require nonprofits to report contributors. In another, the U.S. Supreme Court allowed a Federal Elections Commission rule to stand that requires nonprofits that do express advocacy at the federal level to disclose their funding.

Mauger said the bill may be preemptive protection against the possibility that Secretary of State-elect Benson could implement an administrative rule to require disclosure.

A Benson rep criticized Shirkey’s bill in a statement.  

"Transparency was among Jocelyn Benson's campaign priorities for good reason,” said spokeswoman Liz Boyd, citing Michigan’s last-in-the-nation transparency rating. “Unfortunately this bill goes in the wrong direction by exempting dark money contributions that (shield) independent expenditures from disclosure.”

In 2013, current Secretary of State Ruth Johnson, a Republican, proposed a rule that would require groups running issue advertisements to report campaign finance details. The Republican-led senate responded by rushing to approve a bill that ensured groups behind the ads would not have to disclose donors, which Republican Gov. Rick Snyder signed two days after Christmas.

Johnson’s spokesman Fred Woodhams said she has not yet taken a position on the current bill.

Concern for privacy and free speech

If it becomes law, the Shirkey bill would be called the “personal privacy protection act.” Shirkey said “there have been efforts made” to expose the identities of nonprofit donors.

“This is intended to put belts and suspenders on it so that it's no longer challengeable,” Shirkey said. “And of course you can't stop somebody from filing suit, even if it is against the law. But this is just primarily to put further protections in to avoid the situation” of challenges to nonprofits’ privacy.

Those who favor keeping donors’ identities private say that disclosure is a threat to individuals donors’ free speech rights and can lead to threats that can reduce donors’ willingness to give.

“In this environment, it is more important than ever for individuals to have the option to speak collectively without the fear of reprisals and threats that too frequently result from having their names, addresses, and employer information posted on the Internet as a result of compulsory donor disclosure laws,” according to a report by the Cato Institute, a D.C.-based libertarian think tank.

David Keating, president of the Institute for Free Speech, a nonprofit that favors less regulation of campaign money, said the bill is a good idea because it protects the anonymity of group members who might be politically targeted by state leaders.  

“I think this is something that protects all sorts of views no matter what perspective they might be,” Keating said. “There’s some pretty scary stuff going on around the country where officials seem to be targeting organizations they don’t like and requiring this invasion of privacy.”

He cited a lawsuit in New York in which the National Rifle Association alleged the state is targeting insurers who participate in an NRA-branded insurance program, and a Maryland case in which newspapers challenged a law that required them to publish information about political ad buyers.

Instead, Keating said, campaign finance disclosure requirements should be made legislatively with public input.

Shirkey said he is confident the bill will get the support it needs to pass in the Republican-held house and senate, and pushed back against criticism that the bill would make it harder to determine who is influencing elections.

“There's pros and cons to virtually every type of statute and law that's put in place,” Shirkey said, “and I believe the value of protecting that confidentiality is of higher value than the opposite.”

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Comments

Bones
Fri, 11/16/2018 - 8:48am

If such groups as CATO and the Institute for Free Speech are supporting it, you know it's a terrible bill meant to cement the oligarchs clutches on power. A pox on these corporate bootlickers.

Matt
Mon, 11/19/2018 - 9:28am

Yep, along with criminal justice reform, drug law reform, marriage equality along with other terrible things that Cato supports!

Bones
Tue, 11/20/2018 - 11:38am

It's good cover for an institute that knows that the economic and environmental deregulations it pushes for will hurt the vast majority of Americans

Matt
Tue, 11/20/2018 - 7:20pm

Hmmm Bones, are you exercising proposal 1's passage already? Your conspiratorial impulses are way too active. And maybe Cato support's something because they actually believe citizens have the right to use their property the way they want to as long as they're not forcing anyone against their will?

Liz Oppewal
Fri, 11/16/2018 - 8:55am

The adage - "put your money where your mouth is" comes to mind. But the proposed law seems more like a way to slip your money into someone else's pocket & being able to hide it . I think it would be good put a chill on the money flowing into politics right now. I say let's make people & corporations put their faces where their money is.

RHY48906
Fri, 11/16/2018 - 9:15am

This is a ridiculous idea. We need more transparency, not less when it comes to government and elections spending. We should count every vote and make sure every donor is named and accounted for, be it a Stryer or a DeVos, a Soros or an Adelson. If you don't want your name attached to something, then that should tell you something about what you are trying to do, or support.

zooman
Fri, 11/16/2018 - 9:31am

The idea that folks with lots of money who buy political influence through non-profits have the right to hide behind the First Amendment to do so anonymously, while those of us who are of more modest means and donate directly to campaigns do so knowing that our names will be public is ridiculous on its face. The results of this month's election make it clear that Michiganders want their legislators to focus on governing, not on catering to special interests.

Dave
Fri, 11/16/2018 - 9:31am

For a party that claims to support the constitution, this just shows why they are dying. What ever happened to a government for by and of the people? Non profits are not people, and may not even be completely supported by US citizens.

John Darling
Fri, 11/16/2018 - 9:44am

Nooooooooooooooooooop
We need sunshine laws to expose the moneyed interests. I'm all for free speech but this amounts to anonymous speech for the uber wealthy. A pox on this.

Gil White
Fri, 11/16/2018 - 10:25am

Mega donors want to hide their purchase of elections, plain & simple.

Sue Harvey
Fri, 11/16/2018 - 10:37am

That “chilling effect” doesn’t mean more covering up sir...you’re feeling the chill of disgust from citizens ..well documented by the election results. So apparent big money is buying you and Repubs to get a Lame Duck present for themselves.

Lee Griffin
Fri, 11/16/2018 - 10:47am

This bill is 180 degrees in the opposite direction our state should be going. Dark money is poisoning our political culture and underpinning irresponsible governance. We learned from the passage of Proposals 2 and 3 that engaged (and outraged?) citizens can take back their government. Let's not allow this dreadful legislation to pass!

Rick
Fri, 11/16/2018 - 11:16am

This pretty much says it all. The GOP loves dark money, zero transparency and 'bought legislation'.

Peter Eckstein
Fri, 11/16/2018 - 11:36am

This bill would prevent disclosures that would have a "chilling effect" on donors who want to contribute anonymously to political causes. I'm all for this kind of chilling effect and would like to go into the other direction from this cynical bill and go to a "deep freeze".
Now that the election is over, they roll out an anti-disclosure to be enacted in the lame duck session. We need a state constitutional amendment to end the term of the legislature on election day.

Lois
Fri, 11/16/2018 - 11:39am

No to more dark money. Yes to more transparency.

Jeff Wescott
Fri, 11/16/2018 - 12:32pm

The Cato Institute's report sounds suspiciously akin to the complaints of "johns" caught in prostitution stings. Pay for a hooker or for a politician: either way, rich white men feel they have a right to anonymity. And the fact that the NRA "alleges" that New York state authorities have targeted gun insurers is only an allegation, not proof, not fact. Bridge should know better and follow up on such allegations.

Peter
Fri, 11/16/2018 - 1:04pm

Here's a great strategy to make sure this awful bill dies: tell the Republican base that the bill will enable socialist and "new world order" groups to better hide all their Soros funding. They'll be calling Shirkey in droves to oppose the bill. :D

jane thomas
Fri, 11/16/2018 - 2:20pm

It's hard for me to understand how anyone can publicly object to transparency when it comes to money in politics. Those who do object are suggesting they are fine with secret money and power controlling political decisions.

AM
Fri, 11/16/2018 - 2:24pm

I think every legislator that supports that bill should automatically be investigated for corruption.

johnchas
Fri, 11/16/2018 - 2:43pm

Interesting how the "dark money" forces behind the Republican party in this state are afraid of having their dirty hands exposed. What are they truly afraid of? Us commoners knowing who these politicians truly serve, & its not their constituents. Anonymity and influence buying go hand in hand as any good mafia don would know. Perhaps the new governor will get to use her veto pen early.

Kevin Grand
Fri, 11/16/2018 - 6:17pm

I don't know what the republicans are so afraid of?

George Soros, Tom Steyer and Michael Bloomberg have no problem hiding their donations through various shell organizations and dummy front groups (like those who bankrolled Props 1, 2 & 3).

What?

Did you honestly believe that Prop 2 was funded solely through grassroots efforts?!?

Janet Wagner
Sat, 11/17/2018 - 12:20pm

Kevin, Voters Not Politicians was open and honest about the larger donations they received. Nothing was left "in the dark." That's the point!

Kevin Grand
Sun, 11/18/2018 - 6:15pm

Ms. Wagner, do you even know where those groups that gave to he Prop 2 campaign got THEIR money in the first place?

Those groups were not standing out in the intersection with a donation jar asking passing motorists for their spare change.

Politics is a large and complicated web of front groups created to promote specific interests without leading directly back to those pulling the strings.

john chastain
Sun, 11/18/2018 - 7:44am

Being sardonic again eh. What are republicans afraid of? Their constituents finding out where the money comes from and who’s interests they truly serve. When the Roberts court unleashed the power of corporate wealth to influence elections it was said by the conservative justice that transparency was both good and legal under the constitution. Since then the republicans have blocked every effort to enable transparency. Influence buying hidden behind anonymity is the refuge of scoundrels and charlatans. So no the funding isn’t all local, republicans made the rules we’re just playing the game the way they do. Don’t like that then support transparency and limiting wealth in politics and we’ll see a rebalancing of influence back to individual citizens.

Thomas E Graham
Mon, 11/19/2018 - 3:20pm

The Roberts Court simply made private corporation giving equal to union giving, church giving, and every other organization giving. if you want to take away the collective power of corporate shareholder giving, fine, we'll take away the collective power of collective union giving as well.

Arjay
Fri, 11/16/2018 - 6:19pm

At last, some bi-partisan legislation that should pass unanimously. This bill benefits both the Koch brothers AND George Soros. It will be great for them. For you, not so much, but hey, the politicians will all be happy.

J Hendricks
Sat, 11/17/2018 - 6:47am

Full transparency of donors? More harassment of individuals like Tucker Carlson from unhinged Democrats! Which of course is exactly what the progressives want. They love to intimidate those who don’t follow the current liberal dogma.

Rick
Sun, 11/18/2018 - 1:20pm

So you're cool with the Russians pouring millions into our country to influence our legislators? Oh, I forgot - the NRA got millions from the Russians and passed it on to GOP.

Kevin Grand
Mon, 11/19/2018 - 3:34pm

Good point on those darn Russians.

Nice to know how much Uranium One money went into Clinton & Obama's pockets.

Bones
Tue, 11/20/2018 - 11:40am

SMFH Uranium One? How many times does that shambling zombie of a non-scandal need to be debunked before you'll shut up about it?

Kevin Grand
Wed, 11/21/2018 - 6:43am

So says someone who regurgitates the Russian Collusion Delusion...

Gerry Niedermaier
Sat, 11/17/2018 - 12:30pm

Last minute do as much damage we can to the citizens and keep kissing the keisters (sp)of big business.

Hector Solon
Sun, 11/18/2018 - 11:43am

WHERE were all these concerns for privacy when Dick & Betsy DeVos Clan-funded Mackinac Center pushed for legislation PUBLISHING to the Internet ALL state worker, teacher, superintendent & school administrators' SALARIES (and healthcare plans) by name? A tool used precisely to INTIMIDATE our educators.

This isn't just taking Michigan lower that 50th in America in ethics & campaign finance transparency, it is complete hypocrisy of the 38 or so big money donors in Michigan who have used these very tactics to attack public schools and government programs.

Matt
Sun, 11/25/2018 - 7:56am

That is exactly the thing about receiving tax payer monies. The tax payers have a right to know where it goes and how it's spent. I've always noticed how the Michigan teacher lobby spins when state by state teacher pay comparisons are published. But again public employees must expect such scrutiny. If it's that distasteful you can always switch to a private school.

K Teacher
Sat, 12/01/2018 - 9:08am

Thank you Hector

Thomas E Graham
Mon, 11/19/2018 - 3:14pm

To me the bill makes sense for the vast majority of non-profit contributors. If I want to give $100 to planned parenthood or the NRA, I don't want people to know that because you never know who will show up on your doorstep and get in your face.
But if you're donating more than $10k, you name or your organization's name ought to be public knowledge because in reality, your just hiding your agenda behind someone else's name.