REFUSAL OF CORPORATE PAC MONEY AND THE POTENTIALLY DEVASTATING IMPACT ON CORPORATE TRANSPARENCY

By: Abigail Gampher

In January of 2020, presidential candidates collectively raised approximately $397,364,054.[1]  With the largest primary pool in approximately forty years, Democratic candidates seeking to distance themselves from corruption initially rejected campaign contributions from corporate political action committees (“PACs”).[2]  Despite these initial pledges, many candidates ultimately accepted millions worth of explicit PAC contributions.[3] 

However, the general rejection of corporate PAC contributions fails to achieve candidacy transparency because campaign funding alternatives are often subject to diminished disclosure requirements.[4]  Senator Bernie Sanders’s presidential campaign openly rejects funds from super PACs based on his platform of maintaining a close relationship with working families and distancing himself from wealthy donors.[5]  Instead, Sanders employed a variety of methods to fund his presidential campaign including, but not limited to, relying on small donors, transferring funds from prior campaigns with less strict contribution requirements, and receiving assistance from Our Revolution, a political nonprofit organization.[6] 

Our Revolution’s political nonprofit status mandates that the organization promote a social welfare purpose.[7]  According to Sanders, Our Revolution’s social welfare purpose is to  “recruit, train, and fund progressive candidates’ campaigns.”[8]  Regardless of whether that campaign intervention was allegedly within the social welfare purpose, Our Revolution’s primary function may not be campaign intervention and(or) direct or indirect support for a particular candidate for public office.[9]  Alternatively, Our Revolution may engage in lobbying that advances the organization’s social welfare purpose because lobbying does not directly interfere with the electoral process.[10]

In 2018, Our Revolution received $2.7 million, more than $500,000 of which came from fifteen donors.[11]  Our Revolution disclosed donor identities, but not the campaign contribution quantities linked to those names.[12]  Subsequently, Our Revolution used those funds to create expenditures for ad creation, advocate for Sanders’s election, and solicit contributions to support Sanders.[13]

In response to Our Revolution’s diminished disclosure requirements, Common Cause filed suit on January 22, 2020, under the Federal Electoral Campaign Act (“FECA”), claiming that Our Revolution violated its reporting requirements because Sanders “directly or indirectly” established the organization.[14]  Sanders’s presidential campaign maintains several substantial links to Our Revolution including, but not limited to, the following:  (1) Sanders founded and began fundraising for Our Revolution in 2016; (2) Sanders’s campaign manager initially led the organization; and (3) Sanders maintains close professional and personal relationships with the Board of Directors.[15]  

First, Our Revolution was not required to report donor information to the Internal Revenue Service (“IRS”) based upon a recent IRS ruling.[16] Since 2015 the IRS has received thousands of complaints alleging 501(c)(4) organizations exceeded the 50% campaign intervention threshold, but the IRS has not revoked a single organization’s 501(c)(4) status on this basis .[17]  Maintenance of Our Revolution’s 501(c)(4) status would merely require that the organization engage in 51% advancement of its social welfare purpose and not exceed 49% campaign intervention.[18]  Pursuant to precedent, the IRS would likely review Our Revolution’s campaign intervention on behalf of Sanders under a totality of the circumstances standard.[19]  However, the IRS would likely direct specific attention to Our Revolution’s:  (1) methodology for carrying out the social welfare purpose; (2) utilized resources; and (3) purpose-specific fiscal transfers.[20]  Thus, without Common Cause showing that Our Revolution engaged in primarily campaign intervention or that the IRS compelled disclosure of donor identities, it is unlikely that Our Revolution violated its reporting requirements under tax law.[21]

Second, Our Revolution must disclose donor information to the FEC, but only if Our Revolution uses the donation to fund independent expenditures.[22] However, according to FEC regulations Our Revolution must only disclose the donor identities if those donations meet both of the following: (1) exceed $200 in a calendar year; and (2) the donor gave the contribution to fund a specific independent expenditure.[23] Ultimately, without an FEC quorum or enforcement actions, the FEC may not have the opportunity to correct Common Cause’s analysis of Our Revolution’s reporting requirements under federal elections laws.[24]


[1] Sean McMinn & Alyson Hurt, Tracking the Money Race Behind the Presidential Campaign, NPR (Mar. 2, 2020), https://www.npr.org/2019/04/16/711812314/tracking-the-money-race-behind-the-presidential-campaign.

[2] See id.; Shane Goldmacher, 2020 Democrats Face a Vexing Issue: Big Money from the Rich, N.Y. Times (Dec. 11, 2018), https://www.nytimes.com/2018/12/11/us/politics/democrats-2020-super-pac.html; see also Maggie Sevens, 2020 Dems Have a Money Problem, Politico (Mar. 13, 2019), https://www.politico.com/story/2019/03/13/democrat-candidates-super-pacs-1218782.

[3] See, e.g., Sarah Almunkhtar et al., 2020 Democrats Went on a Spending Spree in the Final Months of 2019, N.Y. Times (Feb. 1, 2020), https://www.nytimes.com/interactive/2020/02/01/us/elections/democratic-q4-fundraising.html; Tobias Hoonhout, Warren Reverses Pledge to Refuse PAC Money, Implies She’s Been Held to Sexist Double Standard, Nat. Rev. (Feb. 20, 2020), https://www.nationalreview.com/news/warren-reverses-pledge-to-refuse-pac-money-implies-shes-been-held-to-sexist-double-standard/ (stating that Elizabeth Warren argued that she only accepted PAC contributions after her fellow candidates either accepted PAC contributions or were millionaires).

[4] Elaine Godfrey, Why So Many Democratic Candidates Are Dissing Corporate PACS, Atlantic (Aug. 23, 2018), https://www.theatlantic.com/politics/archive/2018/08/why-so-many-democratic-candidates-are-ditching-corporate-pacs/568267/ (explaining that candidate rejection of PAC donations does not indicate the candidate also rejects corporate resources).

[5] Brian Slodysko, Shadow Group Provides Sanders Super PAC Support He Scorns, AP News (Jan. 7, 2020), https://apnews.com/345bbd1af529cfb1e41305fa3ab1e604.

[6] Salvador Rizzo, Are Warren and Sanders 100% “grassroots-funded”?, Wash. Post (Sept. 20, 2019), https://www.washingtonpost.com/politics/2019/09/30/are-sanders-warren-grassroots-funded/; Sean Sullivan & Michelle Ye Hee Lee, Sanders, a Critic of Secrete Money in Politics, Declines to Call on a Group Supporting Him to Disclose its Donors, Wash. Post. (Jan. 21, 2020), www.washingtonpost..com/politics/sanders-a-critic-of-secret-money-in-politics-declines-to-call-on-a-group-supporting-him-to-disclose-its-donors/2020/01/20/e58f813e-27f8-11ea-ad73-2fd294520e97_story; see Hoonhout, supra note 3.

[7] 26 U.S.C. § 501(c)(4) (2019).

[8] Nicole Gaudiano, Bernie Sanders Will Launch Organizations to Spread Progressive Message, USA Today (July 15, 2016), https://www.usatoday.com/story/news/politics/elections/2016/07/15/bernie-sanders-progressive-message/87073052/.

[9] IRS, Social Welfare Organizations, https://www.irs.gov/charities-non-profits/other-non-profits/social-welfare-organizations (last visited Mar. 8, 2020).

[10] Rev. Rul. 71-530, 1971-2 C.B. 237.

[11] Gaudiano, supra note 8 (explaining that two of the undisclosed donors contributed six-figure contributions).

[12] Complaint at 4-7, Common Cause v. Our Revolution (2020), https://www.commoncause.org/wp-content/uploads/2020/01/Our-Revolution-FEC-Complaint_FINAL1.22.20.pdf.

[13] Sean Sullivan & Michelle Ye Hee Lee, supra note 6; see Hoonhout, supra note 3.

[14] See id.; Citizens for Responsibility and Ethics in Washington v. FEC, 316 F.Supp.3d 349, 390 (D.D.C. 2018); see also Max Greenwood, Watchdog Group Accuses Sander-Aligned Group of Campaign Finance Violations, Hill (Jan. 22, 2020), https://thehill.com/homenews/campaign/479421-watchdog-group-accuses-sanders-aligned-group-of-campaign-finance-violations; Brian Slodysko, Watchdog Group Claims Pro-Sanders Nonprofit Violated Campaign Finance Law, PBS (Jan. 22, 2020), https://www.pbs.org/newshour/politics/watchdog-group-claims-pro-sanders-nonprofit-violated-campaign-finance-law.

[15] Complaint at 4-7, Common Cause v. Our Revolution (2020), https://www.commoncause.org/wp-content/uploads/2020/01/Our-Revolution-FEC-Complaint_FINAL1.22.20.pdf.

[16] Rev. Proc. 2018-38, 2018-31 I.R.B. 280 (stating that the 501(c)(4) organization must keep donor information, but need not disclose that information to the IRS unless compelled to do so).

[17] Maya Miller, How the IRS Gave Up Fighting Political Dark Money Groups, ProPublica (Apr. 18, 2019), https://www.propublica.org/article/irs-political-dark-money-groups-501c4-tax-regulation.

[18] Erika L. Lunder & L. Paige Whitaker, Cong. Research Serv., R40183, 501(c)(4)s and Campaign Activity: Analysis Under Tax and Campaign Finance Laws 4 (2013).

[19] Priv. Ltr. Rul. 201224034, 2012 PLR LEXIS 291.

[20] See, e.g., Christian Echoes Nat’l Ministry, Inc. v. United States, 470 F.2d 849, 855-56 (10th Cir. 1972).

[21] Compare Sean McMinn & Alyson Hurt, supra note 1, with Erika L. Lunder & L. Paige Whitaker, supra note 16.

[22] Citizens for Responsibility and Ethics in Washington v. FEC, 316 F.Supp.3d 349, 390 (D.D.C. 2018

[23] Id.; C.f. Sheela Nimishalavi & Steve Dub, Liberating the 501c4 from the “Dark Money” Trap, NonProfit Quarterly (Aug. 8, 2017), https://nonprofitquarterly.org/501c4-dark-money-trap/.

[23] Miller, supra note 17.

[24] FEC, FEC Remains Open for Business, Despite Lack of Quorum (Sept. 11, 2019), https://www.fec.gov/updates/fec-remains-open-business-despite-lack-quorum/; Brian Naylor, As FEC Nears Shutdown, Priorities Such as Stopping Election Interference on Hold, NPR (Aug. 30, 2019), https://www.npr.org/2019/08/30/755523088/as-fec-nears-shutdown-priorities-such-as-stopping-election-interference-on-hold.

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