Big chart explains byzantine campaign finance regulation

Long-time readers (all three of you) know that campaign finance is one of my pet issues. If we had shorter, publicly financed campaigns, a whole slew of "unsolvable" political problems would solve themselves, because then politicians would have to pay attention to us voters, not campaign contributors and lobbyists who pay for favors.

Critics who call the U.S. tax code complex should take a look below at our Byzantine campaign finance system!  

And for the record, let me say again that the IRS was correct to pay special attention to groups applying for tax-exempt status with "tea party" in their name. That's party as in political party, as in political activity.  I for one refuse to wink at their open deceit like our stupid tax laws do.

Why does the IRS regulate political groups? A look at the complex world of campaign finance

By Sunlight Foundation 

May 17, 2013

The controversy over the Internal Revenue Service's handling of applications for non-profit status from Tea Party groups has put a spotlight on a subject with which we at the Sunlight Foundation Reporting Group are all too painfully familiar: The migraine-producing complexity of the nation's campaign finance system. To shed some light on the ongoing debate, we've decided to share what we know.

As often is the case with systems worthy of Rube Goldberg, it's easier to draw than to describe.

The graphic above shows why its so hard to track campaign money: Those who raise it report to one (or more) of three federal agencies, depending on how they raise the money, how they spend the money and how much of it they spend and raise.

The starting point for understanding what different kinds of organizations that spend money on politics can and cannot do is the Internal Revenue Code, which contains several sections defining different types of tax exempt organizations and outlining what these organizations can and cannot do if they are organized under a certain section of the Internal Revenue Code. Section 527, for example, defines in some 3,500 words what a political committee is, what types of its income are exempt from tax (contributions, transfers from other 527 committees), what sort of expenditures it can make, and what its tax exempt purpose is ("influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed").

But it doesn't end there: In addition to the Internal Revenue Code's definitions, these these organizations are regulated by federal law and state laws. For example, the Internal Revenue Code does not require nonprofits organized under section 501(c)4 to disclose their donors to the public. But the Bipartisan Campaign Reform Act called for such groups to disclose their donors if they ran "issue ads" (ones that mention a candidate without saying "vote for" or "vote against him--the FEC has a fuller definition here; it's worth noting it took a 2012 court ruling to force the Federal Election Commission to apply this rule).

Further complicating the picture: Organizations under one of the categories listed above can form sub-organizations under another category. For instance, a labor union or trade association can spawn a 501(c)4, a super PAC and a traditional PAC. Many major givers operate under three or four guises, making the financial influence they exercise over elections especially difficult to track.

Understanding who reports what to whom when is complicated, but here are some general guidelines of what federal agencies are involved in overseeing these organizations, their regulatory authority and the disclosures they require:

Internal Revenue Service

• Regulates organizations for compliance with tax law.
• Requires a limited number of 527s--those that do not register with the Federal Election Commission or a state election authority--to disclose information, including initial notices (form 8871), periodic reports of their fundraising and spending (form 8872), an annual information return (form 990) and a tax return if they have taxable income of more than $100 (form 1120-POL). Groups organized under section 527 that file with the Federal Election Commission or state election boards are not required to file with the IRS, unless they have more than $100 in taxable income.
• Regulates nonprofits organized under section 501(c) of the Internal Revenue Code. These include social welfare organizations like Crossroads GPS (section c4), labor unions like the AFL-CIO (section c5) and trade associations like the U.S. Chamber of Commerce (section c6). Nonprofits file an initial application for tax exempt status (form 1024) and annual information returns (form 990). They disclose information on grants they make to other organizations, their boards of directors, salaries of their five highest paid employees and amounts paid to their five biggest outside contractors. They do not disclose information on donors.
• Nonprofits that lobby to influence legislation must disclose the amount expended on lobbying on their 990 forms.

Federal Election Commission

• Administers and enforces federal election law.
• Oversees candidate committees, political party committees, political action committees and independent expenditure-only committees--also known as super PACs. All these types of committees are organized under section 527 of the Internal Revenue Code; because they disclose information to the FEC, they do not file disclosures with the IRS.
• Requires that these political committees file periodic disclosures of their donors, expenditures, loans received and outstanding debts. Committees can choose either monthly or quarterly disclosures.
• Requires disclosures of independent expenditures--that is, spending on advertising, get-out-the-vote or other activities that aim to either elect or defeat a candidate for federal office. These expenditures must be reported within 48 hours until 20 days before an election, when they must be reported within 24 hours. Anyone making an independent expenditure must file a report: 501c organizations, 527 political committees, individuals and for-profit corporations. Both 48 and 24 hour reports require disclosure of the candidate or candidates supported or opposed, the amount spent, the payee or payees, but do not disclose donations.
• Adjusts for inflation the limits on the size of donations individuals can make to candidate, party and political action committees (but not super PACs, which can take contributions in unlimited amounts from individuals, corporations--including 501c4 nonprofits that don't disclose their donors--and labor unions).
• Investigates violations of federal election law.

U.S. Department of Labor

Requires some labor unions (those that have private sector or federal employees, including U.S. Postal Service workers) to disclose information on the amount spent on political activities, including itemized spending. Labor unions that represent state and municipal employees are not required to file annual reports with DoL.

Not on the chart, but also peripherally involved in the regulation of political funding and disclosure, through the requirements it imposes on television advertisers:

Federal Communications Commission

Requires all organizations that purchase advertising on television, radio and cable outlets to disclose to the station, in a filing available for public inspection, to disclose the name of the organization, its officers, the amount spent and other information about the ad buy. Generally, these disclosures are only available to review at the offices of the stations, though in 2012, the FCC required the four biggest broadcast outlets in the 50 largest markets to post the disclosures--known as the station's political file--online at the FCC website. Sunlight makes this records readily searchable via our Political Ad Sleuth tool.

U.S. moving to universal 'Net access too slowly

Obama's FCC is definitely taking steps in the right direction -- toward universal broadband Internet access -- but they are insufficient, especially given: 1) America's great wealth, population, and population dispersion; and 2) our ostensible competitive advantage in high-tech and knowledge-based industries.

A few far-sighted countries like Finland and Estonia, meanwhile, have enshrined the basic right to high-speed Internet access in their law and national constitution, respectively! Other EU countries seem to be headed that way, too....

You can't help but feel we are falling behind, and for no good reason.

F.C.C. Lifeline Program To Help Bridge Digital Divide, Chairman Julius Genachowski Says

By Gerry Smith

January 9, 2012 | Huffington Post

URL: http://www.huffingtonpost.com/2012/01/09/fcc-lifeline-program-digital-divide-julius-genachowski_n_1194780.html

OK Go on net neutrality

OK Go makes really cool videos. Check 'em out.

OK Go on net neutrality: A lesson from the music industry
By Damian Kulash
August 29, 2010 | New York Times

On the Internet, when I send my ones and zeros somewhere, they shouldn't have to wait in line behind the ones and zeros of wealthier people or corporations. That's the way the Net was designed, and it's central to a concept called "net neutrality," which ensures that Internet service providers can't pick favorites.

Recently, though, big telecommunications companies have argued that their investment in the Net's infrastructure should allow them more control over how it's used. The concerned nerds of the world are up in arms, and there's been a long, loud public debate, during which the Federal Communications Commission appeared to develop a plan to preserve net neutrality.

The FCC's latest action on the question came partly in response to a federal appeals court ruling in April that appeared to limit the agency's authority over Internet service providers. In May, FCC Chairman Julius Genachowski issued a plan to classify the Internet under Title II of the 1934 Communications Act. In English, that means the agency would be legally recognizing a fact so obvious that I feel silly even typing it: We use the Internet to communicate. With that radical notion established, the FCC would have jurisdiction to protect the public interest on the Net, including enforcing neutrality. Since announcing its intent, though, the FCC hasn't followed through, and the corporations involved are trying to take the reins before the public servants do.

The first volley, earlier this month, was a proposal from Google and Verizon. The part they'd like us to notice, and the part I was thrilled by, is where they say there shouldn't be paid priority for the transmission of Internet content, meaning all legal data should be treated equally. Hear, hear, Googrizon! We, the stuff-making, freedom-loving, innovation-crazed citizens of the Internet, could not agree more.

Unfortunately, a couple of parts of the proposal radically contradict the noble principle outlined above.

First, Google and Verizon would like to exempt wireless Internet, which leads one to wonder just how dumb they think we are. Everyone's heard that the future of the Web is all wireless, but in truth, the present of the Web is all wireless. We are already deep in the iPad/BlackBerry/Android era, and there's no going back. So limiting equality and fair play to wired territory would be kind of like civil rights legislation that dealt with bus seating but exempted schools, the workplace and the voting booth.

Second, the companies slipped in a doozy of an idea for what seems like a hypothetical "fast lane" apart from the "public" Internet. Big bucks could gain access to this separate, specialized service, guaranteeing faster delivery of corporate ones and zeros. Essentially they are saying: Don't worry, there would be no "paid priority," except in the instances where you could pay for priority. Words fail to convey my incredulousness.

Let me tell you why I take this so seriously, and so personally. I've spent a decade working in the music industry, a business in which the big guys block out the rest of us. Creativity and innovation take a distant back seat to money, and everyone loses, even the big guys themselves. They have insulated themselves from change for so long, they've dug their own grave.

Both as a musician and as a music fan, I've always wanted to see the best and most exciting musical ideas rise to the top. But we all know the story of the music business: Success is bought more often than earned. Smart money looks for low risks, so the safest, blandest music attracts the most investment, and only the safest, blandest music makes it to the airwaves and the shelves at Wal-Mart. Creative, innovative artists toil in obscurity, the public is fed rubbish, and, for decades, the industry contentedly made its way to the bank.

Music is subjective, of course, so you don't have to agree with my assessment of what's innovative and what's trash. But business is less so, and the past decade of the music industry is as clear an example as you can find of what happens when the depth of pockets, not the quality of ideas, is the arbiter of success. It's been like a corporate version of the Three Stooges: absurd flailing, spectacular myopia and willful ignorance of reality. Now that the big record companies have made themselves obsolete, bands such as mine can make a better living without their help than we can with it.

The lesson is that insider's clubs don't nurture the best ideas, which is the whole point of markets: Competition is supposed to keep everyone on their toes. Sure, it's a drag that the radio plays such bad music, but it won't sink our economy. Can you imagine, though, what would happen if we let the same thing happen to ideas themselves?

The Internet is the purest marketplace for ideas that the world has ever seen, and the amazing power of such a level playing field has revolutionized everything. Google knows this better than anyone. It started in a garage and became an industry leader by having great ideas, not mountains of cash. And it's wonderful: The Internet works! It rewards innovators such as Google, and it relegates protectionist, defensive, idea-squashing fogies such as record companies to the dustbin of history.

Now that the Internet has been around long enough to have developed its own giants, though, we need to make sure they don't ruin what's great about the technology that made them. We need to make sure they don't crush the idea industry the way the music giants crushed the music industry. I hope Google keeps succeeding (seriously, I'm a stockholder), but it must be because of the power of its ideas, not its power to tilt the playing field.

The Google and Verizon statement, which was roundly criticized when it was released, is unlikely to be the only proposal we'll see from the big boys. A week and a half ago, AT&T, Verizon, Microsoft, Cisco Systems and a trade group called the National Cable & Telecommunications Association met for closed-door negotiations on managing online traffic that didn't include the FCC or the public.

The good news is that the Obama administration has repeatedly promised that it supports net neutrality. Right now the FCC can lastingly protect freedom and equality on the Net. To establish that authority, the agency needs the support of three of its five commissioners. Two commissioners, Michael Copps and Mignon Clyburn, Democratic appointees, have loudly backed the effort.

What we need is for the chairman to join them and follow through on the plans he laid out months ago. Mr. Genachowski, we, the citizens of the Internet, are with you.

Damian Kulash is the singer for the band OK Go.