Stopping Secret Spending

Transparency in the sources of funding our elections is central to the free functioning of our democracy. Accordingly, federal law and many states require both PACs and non-PAC organizations to file a campaign finance report if they directly pay for political advertising. However, most campaign finance laws do not require reporting by a non-PAC organization if it only serves as a conduit for donations from big donors to a different organization that ultimately uses the money for campaign ads.  

Wealthy special interests use unlimited secret money to rig the political system in their favor. We need real transparency about who is spending big money on elections to reduce the influence of wealthy special interests. We can do that by passing legislation that says if money is passed from one entity to another before it is spent, each entity handling a large sum must track these transfers and trace the amounts back to their original source. 

State Feature

In 2012, Rhode Island enacted a cutting-edge disclosure law that provides voters with information about the underlying sources of political spending in the state. Under the law, an organization that spends more than $1,000 for independent expenditures, electioneering communications, or covered transfers must disclose all its donors of $1,000 or more in an election cycle on reports filed with the Rhode Island Board of Elections. Rhode Island's reporting requirement for groups making covered transfers is an especially effective means of uncovering the true sources of funding behind political advertisements run by super PACs and obscure 501(c) entities.

Generally, the law classifies a donation or payment from one organization to another as a "covered transfer" if the transferred funds were initially earmarked or solicited for the immediate recipient or a subsequent transferee to make independent expenditures or electioneering communications. By requiring organizations that make covered transfers to file public disclosure reports, Rhode Island's law enables voters to identify the origin of money used for political expenditures even when the money was funnelled between multiple entities before being spent in state elections.

Political advertising disclaimers are the most instantaneous form of campaign finance disclosure, providing the recipients of a political ad with real time information on the face of the ad about the sources funding the ad.  Typically, political ad disclaimers must include the name of the advertisement’s sponsor. But when political ads are sponsored by obscure organizations with innocuous names (e.g., “Americans for America”), identification of the ad sponsor alone provides little value to voters trying to assess the credibility of the communication. 

A policy solution to this is simple: if an ad is run by an outside group or super PAC, it must state the top three donors who helped the sponsor pay for it on the ad.  

State Feature

In 2017, South Dakota approved a new requirement for independent expenditure political ads to include the names of the top five contributors to the advertising’s sponsors.

When Americans make donations to super PACS and other groups, they have the right to know how that money is being spent. But currently, sufficient donor notice mechanisms aren’t in place, and donations made in good faith are being funnelled through conduit groups in a manner not intended by the donor.  

We can fix this by requiring groups to immediately notify donors that their contributions may be used for independent campaign spending, and that if the donor spends significantly enough, the donor may have to create its own records of the sources of its funds. Donors must also have the option to opt out of having the donation transferred for such expenditures.