Super PACs and the Nonprofits That Fund Them

Illustration by Newsweek

Hidden Hands

Super PACs are the perceived demons of the 2012 campaign, with the law allowing them to raise and spend unlimited amounts of dough. But a shadowy sideshow that’s gone largely unnoticed is the set of nonprofits affiliated with them, which often provide money to the cash cows—and they don’t have to publicly disclose their donors (as super PACs must). “The undisclosed money is far more troubling for the system,” says campaign finance lawyer Kenneth Gross. FreedomWorks for America is a case in point. The group, which has attacked GOP pols it finds insufficiently conservative, is located three blocks north of the Capitol. At the same address, sharing the same suite and even some staff, is the headquarters of the similarly named FreedomWorks Inc., a nonprofit (or 501[c][4] group). In 2011 the super PAC received almost half of its $2.7 million from the nonprofit, a legal transfer that skirts disclosure requirements. Whose cash is it? We aren’t allowed to know. Matt Kibbe, who oversees the activities of both groups, tells Newsweek that “to adhere to what the law stipulates” there is a “firewall” between the two. But even by the loose standards of money in politics these days, the arrangement seems rather cozy.

Other groups are doing it, too. President Obama’s super PAC, Priorities USA Action, has received $215,234 from its sister non-profit, Priorities USA. Karl Rove’s American Crossroads super PAC and its nonprofit sibling, Crossroads GPS, are also expected to be big ad buyers in the general election. Is it all too cozy? Last month, the Internal Revenue Service launched an investigation into the election advocacy of (c)(4) groups that, as nonpolitical entities, enjoy a comfortable tax status.

With Rachael Marcus of the Center for Public Integrity.

Now It Pays to Be Dirty

obama-nb10side President Obama speaking in Mt. Holly, North Carolina on March 7, 2011. John W. Adkisson / Getty Images

Why did President Obama change his mind and embrace super PACs, which he often accused of corrupting politics? He claims the reason is simple math. Obama hopes to raise around $750 million for his reelection campaign. But Mitt Romney, with the help of his Restore Our Future super PAC, could far surpass that number. The group, which can’t legally coordinate with Romney but can act on his behalf, has so far collected seven individual donations of $1 million each-an amount 32 times what the law allows someone to give a party organization, and 400 times the legal limit to give a candidate. Republicans accuse Obama of hypocrisy. Obama campaign manager Jim Messina counters that without their own super PAC, “we concede this election to a small group of powerful people.”

The Biggest Guns

Restore Our Future, the pro-Romney super PAC, has raised and spent by far the largest amount of money this election cycle, but Karl Rove’s American Crossroads is flush, too-and will have cash to burn this fall.

super-pac-nb10graphic Illustration by Newsweek

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