What Citizens United (et al) Wrought: The Shadow Money Explosion


This visualization was produced by Newsweek & The Daily Beast in partnership with the Center for Responsive Politics to illustrate the influx of money into the 2012 campaign. A related piece, on how the explosion in outside spending creates windfalls for political consultants, can be read here.
The graphs below show spending by 501(c) organizations on political ads through Sept. 13 in the current campaign cycle as well as the previous half-dozen cycles. At a glance, they show how starkly election-related spending has changed in recent years.


The first two graphs illustrate the dramatic growth and fade of “electioneering communications” — ads that don’t explicitly ask viewers to vote for or against a candidate and are run within 30 days of a primary election or nominating convention or 60 days of a general election. The McCain-Feingold campaign finance law (formally the Bipartisan Campaign Reform Act), passed in 2002, put such spending off limits for most corporations, including unions, trade groups and other nonprofits.

But spending on those types of ads spiked after the Supreme Court’s 2007 decision in a case known as Wisconsin Right to Life changed that part of the law. In the 2008 elections that followed, 501(c) organizations laid out more than $76 million for such ads. Much of that money was poured in very late in the cycle: The graph shows that by September 13 of that year, 501(c) organizations had only spent $28 million on these ads, less than half of the final total.  

In the current cycle, electioneering communications are down significantly from their apex in 2008, to about $5.4 million. That’s mainly due to two court decisions: First, the Supreme Court’s 2010 Citizens United v. FEC ruling allows 501(c) organizations like unions, social welfare groups and trade associations to engage directly in express advocacy — the sort of ads that explicitly urge viewers to vote one way or another, which the law refers to as “independent expenditures.” 

Much of the attention in the post-Citizens United era has been concentrated on the so-called “super PACs” that can raise and spend unlimited funds to influence elections. There has been less media focus on the changing spending habits of politically active nonprofit organizations, which — unlike super PACs — do not have to disclose their donors.  

OpenSecrets Blog has been exploring some of the implications of this new system in its Shadow Money Trail series.  
The second court decision, in Van Hollen v. FEC earlier this year, requires nonprofits that make electioneering communications to disclose donors of $1,000 or more. In response to that decision from the U.S. District Court, many groups that otherwise might have made electioneering communications chose to make independent expenditures instead. A notable example: the U.S. Chamber of Commerce. Before this year, the Chamber had never made an independent expenditure, despite spending tens of millions on ads in 2010. After Van Hollen, the organization’s president, Thomas Donohue, said the Chamber would “have a vigorous, unchanged election program.”  Since then, the Chamber has made only independent expenditures, totaling nearly $8 million. (Note: Today, the U.S. Court of Appeals overturned the lower court’s decision in the Van Hollen case; the implication for spending on electioneering communications for the rest of this cycle is uncertain).
The third graph shows the trend resulting from the court decisions: Express advocacy by 501(c) organizations has skyrocketed since 2010. Measured at the same point in each cycle, spending on express advocacy by 501(c) organizations increased from only $44,000 in 2006 to $3.3 million in 2008. In 2010, after Citizens United, it jumped to $21.7 million, before tripling again in the current cycle to a whopping total of $67.4 million as of September 13, 2012.  
Why is this important?  
As we noted, tax-exempt organizations are not required to disclose the donors that make their political spending possible. The only exceptions to this rule are 501(c)(5) labor unions, which receive small dues from tens of thousands of members and are required to provide detailed financial information to the Department of Labor annually. Still, that disclosure usually comes after voters have gone to the polls.  
So the increase in 501(c) spending correlates with the increase in undisclosed spending. Much of the money currently being spent on election ads comes from sources unknown to the voters, and the percentage of completely secret funds being used for political purposes is increasing. Spending by unions — which is far more transparent than spending by social welfare and trade associations — has fallen from $17 million at this point in 2008 to just under $4 million at the same time in 2012. Meanwhile, the comparable tally for election-related spending by shadowy 501(c)(4) and 501(c)(6) organizations has more than doubled, to just under $72 million.  
This is driving one of the most striking realities of the current election cycle: Spending on political ads by groups that don’t disclose, or only partially disclose, their donors — including many 501(c) organizations, as well as some super PACs — has increased from $32 million in the 2008 election, as of Sept. 13, to more than $135 million at the same point in the current election.

This story is part of an OpenSecrets.org series about the funding behind politically active tax-exempt organizations that don’t disclose their donors. You can read the other stories in The Shadow Money Trail series here.

Feel free to distribute or cite this material, but please credit the Center for Responsive Politics.
For permission to reprint for commercial uses, such as textbooks, contact the Center: [email protected]
Read more OpenSecrets News & Analysis: 501(c) groups · Campaign finance · Outside Money · Super PACs

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About The Author

Robert Maguire

Robert joined the Center in August 2011 as the outside spending and PACs researcher. In 2012, he started CRP's Politically Active Nonprofits project, which tracks the financial networks of "dark money" groups, mainly 501(c)(4) and 501(c)(6) organizations. In 2014, he won, with colleague Viveca Novak, the Society of Professional Journalists' Sigma Delta Chi Award for Public Service in Online Journalism for a series of stories published on OpenSecrets Blog. Robert has a masters in U.S. foreign policy from American University. Before coming to Washington, D.C., he lived, studied and worked for several years in France and Taiwan, traveling extensively in Europe and Asia. He is originally from Charleston, SC.