Under the Dome

Uncertainty opens up ‘dark money’

A controversy that flared up last week over a North Carolina nonprofit group whose TV ads were aimed at helping U.S. Sen. Thom Tillis win election last year illustrates the confusion around the current state of federal campaign finance law.

The nonprofit, Carolina Rising, qualified for tax-exempt status as a “social welfare” group, but it is allowed to engage in some political activities – so long as that is not its “primary” purpose. Under the law, that means less than half its expenditures can be on political activity.

The group spent 97 percent of its money in 2014 on the ad campaign as Tillis ran for office. But if it is seen as being about an “issue,” and not overtly in favor of or against a particular candidate, then the spending might be OK. Maybe.

What we do know is that it’s a question that is keeping campaign finance lawyers employed, and taking advantage of a lack of direction from the Federal Election Commission.

First, a look at how we arrived at this point. Michael Weisel, a Raleigh campaign finance attorney whose clients include nonprofit groups and super PACs, offered a brief overview of the legal history involved. Weisel is a Democrat who says he has clients from both parties.

▪ The Magic Words – Eight phrases signify that an ad is an express advocacy political commercial: “vote for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat” and “reject.” That’s from a 1976 U.S. Supreme Court case, known as Buckley v. Valeo.

▪ Soft money – In 2000, federal law changed to allow unlimited money to be spent on issue ads, usually negative, about specific candidates. Typically, these kinds of ads aired right before an election. The McCain-Feingold reform act of 2002 required issue ad donors be disclosed during a window of time around the election.

▪ Citizens United – In 2010, the Supreme Court declared that the restriction on independent political spending by corporations and unions was unconstitutional. That has cleared the way for so-called super PACs, political action committees that can raise and spend unlimited amounts of money from people, corporations, associations and unions independent of candidates’ own committees.

Super PACs often work in tandem with nonprofit groups, which don’t have to disclose their donors to the public, creating a nearly limitless network of “dark money.”

▪ As a result — Now the FEC says an ad is political if it mentions a candidate and airs during a certain time frame before an election. If outside that window, and the magic phrases are avoided, then it is an issue ad. The Internal Revenue Service looks beyond the ads to surrounding facts and circumstances. Ads that aren’t aired within the FEC windows can still be considered political ads by the IRS.

There is disagreement and gridlock among the six members of the FEC, who are evenly split between political parties, about all this. That has left campaigns without clear direction and opened the door to situations like Carolina Rising is now a part of.

Dallas Woodhouse, now the executive director of the N.C. GOP and formerly the head of the state’s Americans for Prosperity chapter, said he started the nonprofit group last year to promote conservative ideas about education and free markets. Soon after the November election, a Center for Public Integrity analysis determined that Carolina Rising ran nearly 4,000 ads praising Tillis.

Woodhouse said they were issue ads because they focused on education and autism, incidentally mentioning Tillis. Then, last week, the Citizens for Responsibility and Ethics in Washington and the Center for Responsive Politics publicized documents showing that Carolina Rising had spent 97 percent of its revenue – nearly $5 million – on those ads.

The group’s current IRS tax filing shows that most of that money, $4.82 million, came from a single donor – which could be one individual or an organization. Some speculated that the money came from Art Pope, the philanthropist, conservative financier and retail chain store CEO.

Pope told Dome by email on Friday that neither he nor his company gave the $4.82 million to Carolina Rising, although he didn’t say if he had contributed in any amount.

“I know some left-wing bloggers and advocacy are implying that I was the donor, and I am happy to refute their silly propaganda,” Pope said.

The fact that so much of this money is not disclosed, it’s not transparent, citizens have no understanding of the volume of outside money that is influencing voters in North Carolina.

Kay Hagan

Woodhouse maintains his group’s ads were issue ads. A videotape of him boasting of having spent $4.7 million to elect Tillis, and election-eve TV ad contracts listing the “issue” involved as “pro-Thom Tillis” and “Supporting Thom Tillis, senatorial candidate, for N.C. (R) election,” raise questions.

The election between Tillis and incumbent Sen. Kay Hagan became the most expensive race in the country last year. Hagan raised more than twice as much money as Tillis — $25 million compared with $11 million — but another $82 million poured in from outside groups opposing or supporting both candidates.

“I think you can see the huge influx of out-of-state money pouring into a state like North Carolina, and that takes away, I believe, the one-person one-vote mandate in our constitution,” Hagan told Dome on Friday. “The fact that so much of this money is not disclosed, it’s not transparent, citizens have no understanding of the volume of outside money that is influencing voters in North Carolina.”

Hagan said she thinks that individuals and corporations should be required to disclose what they spend on TV ads, whether for candidates or political issues. She was a key sponsor of last year’s unsuccessful effort in Congress to require that corporations include pictures of their top people in all such ads.

“That would give the public a much better understanding of who is funding this ad,” Hagan said.

The other side of the argument is that people have a right to free speech that includes contributing as much money as they want to get their candidate elected or to promote their cause. Pope on Friday referred Dome to his testimony before a U.S. Senate Judiciary Committee last year opposing Hagan’s disclosure bill.

Pope told the committee that campaign contributions primarily pay for door-to-door efforts, holding rallies, TV ads and mailers, and using websites.

“Spending money to communicate with the public simply does not constitute ‘buying’ an election,” Pope said.

Staff writer Craig Jarvis

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$30K for golf with Berger, Moore

‘No exclusivity,’ staffer says

The legislature’s top brass has invited campaign supporters to a golf fundraiser in Pinehurst – and the minimum contribution for two couples is set at $30,000.

“Neither of us are golfers, so consider us the entertainment,” says the invite, which bears the signatures of Senate leader Phil Berger and House Speaker Tim Moore, both Republicans.

The invite included a flier that notes “other legislative leaders” will join them.

The event, called the Majority Champions Retreat, is billed as a first-ever event and is scheduled for Nov. 5 and 6, with a reception and dinner on the first day and breakfast, golf and lunch on the second at “the home of championship golf.”

According to the flier, each minimum $30,000 contribution – from individuals or North Carolina registered political action committees – is to be divided and go to the Republican Party Senate Caucus (at least $10,000), the Republican Party House Caucus (at least $10,000), the Phil Berger Committee (up to $5,100) and Friends of Tim Moore (up to $5,100). By law, $5,100 is the maximum amount an individual can give per election.

A political staffer helping to organize the event declined to say who it had been provided to, though lobbyists were among those receiving the invite.

Ray Martin, who is the Senate’s political director, said in an email exchange that he didn’t want to “publicize our strategy” but that anyone willing to make the “required contribution” was invited.

“No exclusivity or discrimination here,” Martin wrote.

The $30,000 donation is good “for 2 couples to join us,” according to the flier and “space is extremely limited and on a first come first serve basis.”

– Benjamin Brown of The Insider and J. Andrew Curliss