The idea seemed simple: Create a nonprofit, collect cash and send more than $200,000 for TV ads promoting an education overhaul by schools chief Tom Luna.
The advantage for camera-shy donors was anonymity because such a 501(c)4 nonprofit can shield backers’ names from public scrutiny, say the leaders of the nonprofit Education Voters of Idaho who include lobbyist Phil Reberger, a former chief of staff for Gov. Dirk Kempthorne, and Debbie Field, campaign manager for Gov. C.L. “Butch” Otter.
However, the strategy backfired when a judge sided with Secretary of State Ben Ysursa and ordered Education Voters of Idaho to reveal the names of donors. The deadline for disclosure is 3 p.m. Oct. 31, barring an appeal.
The issue of how campaign disclosure laws apply to nonprofit groups isn’t confined to Idaho.
While ruling in the case involving Education Voters of Idaho, 4th District Judge Michael Wetherell cited several precedents, including a 2010 decision by the 9th U.S. Circuit Court of Appeals forcing a Washington state, anti-abortion nonprofit group to disclose donors, despite free-speech claims similar to those of the Idaho group.
Disclosure disputes are on the national radar, too, with the Internal Revenue Service scrutinizing 53-year-old rules governing nonprofit “social welfare organizations” that are increasingly entering the political fray.
“We will consider proposed changes in this area,” Lois Lerner, director of IRS Exempt Organizations, wrote in July.
Fred Wertheimer of Democracy 21, a campaign-finance openness advocate, wants the IRS to clamp down on what he called the “dark money” sloshing around campaigns.
Among the nonprofits in his crosshairs are Crossroads GPS, run by former George W. Bush staffer Karl Rove, that’s backing GOP presidential candidate Mitt Romney. Since 2010, Crossroads GPS has reported to the IRS that it collected millions of dollars in donations without disclosing donors’ identities.
“There is a real problem here, in general terms, with the way 501(c)4s are being used to mask donors who are engaged in political activities,” Wertheimer said from his Washington, D.C., office.
Crossroads GPS contends Wertheimer is singling out its activities, while ignoring other groups with more liberal political leanings that operate the same way. Jonathan Collegio, a Crossroads spokesman in Washington, D.C., also downplayed the significance of the IRS scrutiny.
“I think a lot of people are reading much more into her words than she actually meant,” Collegio said. “There are a lot of groups that operate this way.”
In Idaho, the scrutiny involves an issue, not a candidate. Luna’s 2011 education changes limit union bargaining power and require students to take online classes to graduate. Voters weigh in Nov. 6.
Education Voters of Idaho was launched on Aug. 16, 40 days before giving $200,350 to a political action committee for commercials touting Luna’s changes.
Reberger and Field were enlisted as board members. Field is Idaho’s former drug czar, Reberger a regular political player. They provided the group’s directors, John Foster and Kate Haas — two former aides to Democratic U.S. Rep. Walt Minnick — with additional credibility to appeal to deep-pocketed donors.
Their attorney, Christ Troupis, argued the group has a far broader mission of promoting education reform beyond just this November’s ballot measures. IRS rules entitle it to First Amendment protections and discretion for its donors, he said.
In court Oct 29, Troupis told the judge that Ysursa’s disclosure demand set a dangerous, free speech-chilling precedent.
Ysursa insists Education Voters of Idaho is a shell to hide campaign spending.
Nothing about its nonprofit status, he argues, relieves it of reporting obligations under the state’s 38-year-old, voter-approved Sunshine Act campaign disclosure law.
In ordering disclosure, the judge drew on the U.S. Supreme Court’s 2010 “Citizens United” ruling, writing that while justices rejected some campaign spending limits, they didn’t hold disclosure requirements unconstitutional.
“Idaho adopted the Sunshine Act,” Wetherell said in court. “Maybe it was because a bunch of unsophisticated voters, rather than legislators, enacted that law. And that law says: We want to know where the money is coming from.”
It’s unclear just how the order declaring Education Voters of Idaho a political committee will impact its tax-exempt nonprofit status. The IRS says the activities of 501(c)4 groups must be primarily educational, not political.
Karen Connelly, an IRS spokeswoman in Denver, said the agency doesn’t comment on specific cases.
Since the secrecy issue emerged Oct. 9, scrutiny of Luna’s education overhaul has been intense not necessarily over the merits of the reforms, however, but rather on why donors prefer the shadows.
Ken Burgess, a lobbyist running a separate pro-reform group, Yes for Education, has disclosed its backers. He worries about negative attention so close to Election Day.
“I am concerned that this whole issue has been a distraction,” Burgess said.