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Dark Money in the 2020 Election

$100 Million May Just Be the Tip of an Iceberg

November 20, 2020

The 2020 federal elec­tions included at least $100 million in the spend­ing of dark money, which hides its true funders.

As I detailed here, 2020 will even­tu­ally be in the Guin­ness World Records as the most expens­ive elec­tion ever. The previ­ous winner was Obama’s reelec­tion campaign in 2012. That race was a standout for another reason: it featured the most dark money spent in any federal elec­tion then or since. (Pro Publica has a good data visu­al­iz­a­tion of how this happened in 2012.)

Dark money becomes dark by being routed through opaque nonprofits, includ­ing 501(c)(4) social welfare organ­iz­a­tions and 501(c)(6) trade asso­ci­ations. Then the nonprofit buys polit­ical ads trash­ing or tout­ing a partic­u­lar candid­ate. The ads will only be trace­able to the last organ­iz­a­tion who spent the money, so the public can’t see who paid the front group. Since 2008, over $1 billion in dark money has been spent.

Dark money has grabbed the biggest head­lines in federal elec­tions, but the same prob­lem pops up in state elec­tions too. If you would like to learn more, there’s a great docu­ment­ary about dark money in Montana’s state elec­tions —fit­tingly called Dark Money — that explains how this prob­lem can infect state and local races as well.

In the last pres­id­en­tial elec­tion in 2016, the National Rifle Asso­ci­ation (NRA) made waves being the biggest dark money spender, spend­ing $54 million. If you’d like to learn more about that, there’s a new docu­ment­ary called Fish in Barrel by film­maker John Welling­ton Ennis that explains what the NRA was doing with that money. In 2020, the organ­iz­a­tion spent a more modest $23 million, half of which went to running ads against Joe Biden.

There was $100 million in dark money repor­ted to the Federal Elec­tion Commis­sion, which is trend­ing down­wards compared with previ­ous pres­id­en­tial elec­tion years. The bad news is that this figure likely under­re­ports the prob­lem by over 600 percent. Accord­ing to Open Secrets and the Wesleyan Media Project, dark money groups have poured more than $750 million into 2020 elec­tions through ad spend­ing and record-break­ing contri­bu­tions to polit­ical commit­tees such as super PACs. They get their figures by look­ing at ad buys during the elec­tion. This could mean that $650 million is what I call “black hole money” — money spent on polit­ics and never repor­ted in the campaign finance system.

One way the spend­ing of black hole money happens is if a group spends money on ads more than 60 days out from an elec­tion that lacks words of “express advocacy.” Accord­ing to the Wesleyan Media Project, this type of spend­ing happened a lot in 2020, to the tune of $144 million. Another black hole money pit is online ads, which largely go unre­por­ted. There were $26 million worth of polit­ical ads on Google and Face­book alone.

Demo­cratic-lean­ing dark money groups outspent their conser­vat­ive coun­ter­parts in 2020. In terms of on-the-record dark money repor­ted to the FEC, the two biggest spend­ers were the liberal group Defend­ing Demo­cracy Together ($15 million) and the National Asso­ci­ation of Realtors Super PAC ($13 million). But this spend­ing was dwarfed by more convo­luted spend­ing by the liberal Sixteen Thirty Fund, which spent $51 million, and one of its bene­fi­ciar­ies was the Lincoln Project.

Two actions from the Trump admin­is­tra­tion are likely to make dark money even darker in the coming years — provided that these actions are not undone by the incom­ing Biden admin­is­tra­tion. One is that the IRS no longer requires 501(c)(4)s and 501(c)(6)s to disclose their under­ly­ing donors.

The other is a set of rule changes by the Secur­it­ies and Exchange Commis­sion that make it harder for share­hold­ers to hold compan­ies account­able for a company’s polit­ical spend­ing. These changes imposed heightened eligib­il­ity require­ments for submit­ting a share­holder proposal, restric­ted a person to only one proposal per meet­ing, and increased the resub­mis­sions thresholds for share­holder propos­als.

The SEC replaced an easy-to-meet $2,000 threshold of stock owner­ship for propos­als with a tiered approach based on a combin­a­tion of posi­tion size up to $25,000 and hold­ing period up to three years. These new thresholds will limit entry to large investors or long-term investors.

These changes in secur­it­ies laws impact the fight over dark money because over the past decade, investors used the previ­ous share­holder rules to ask public compan­ies to stop being the sources of dark money. Many public compan­ies, at least 173, bowed to this pres­sure and became more trans­par­ent. The new SEC rules make it harder for investors — the true owners of a company — to pres­sure inside managers to be better on the dark money issue.

Actions from Senate Major­ity Leader Mitch McCon­nell have also contrib­uted to the persist­ence of dark money. He’s once again placed a rider into the budget bills that are needed to keep the govern­ment running after Decem­ber 11 that stop the SEC from making any anti-dark money rules.

Mean­while, control of the Senate is still up for grabs with two seats from Geor­gia to be decided in runoff elec­tions in Janu­ary. Those elec­tions may make these the most expens­ive Senate seats ever. One thing to keep an eye on is how much of that spend­ing is done with dark money. Accord­ing to Open Secrets, Geor­gi­a’s Senate race in 2020 had more than $3.1 million in direct dark money spend­ing repor­ted to the FEC, which was more than any other congres­sional elec­tion.

All of this points to one conclu­sion: trying to tackle the dark money prob­lem should be a prior­ity for the incom­ing Biden admin­is­tra­tion.

The views expressed are the author’s own and not neces­sar­ily those of the Bren­nan Center.