The Center for Public Integrity

Disclosure documents from the Internal Revenue Service reveal that political non-profit organizations have amended filings to include previously unreported contributions and expenditures—some in excess of $1 million—yet have faced little, if any, sanction.

IRS records reviewed by the Center for Public Integrity contain three dozen examples in which the difference between the original and amended reports was at least $100,000, including nine where the total gap was $1 million or more. Some of those amendments covered 2002 activity but were not filed until earlier this year, a time lag of more than 15 months. Other committees filed reports on paper when IRS rules required them to submit electronic forms. Yet the forms contain few references to any fines or penalties paid, and none by committees with the largest amounts of late or previously undisclosed activity.

In contrast, some committees that have failed to file reports, whether due to oversight or ignorance of the law, have paid tax penalties, records and interviews show. Critics of the IRS said the agency's enforcement effort was ineffective and uncertain.

Although the tax agency has a formula for calculating fines for non-disclosure, there are few details on the enforcement process or even whether committees are disciplined for making incomplete reports or missing filing deadlines.

Late or incomplete filings of contributions or expenditures trigger a penalty "calculated by multiplying the amount of contributions and expenditures that are not disclosed by the highest corporate tax rate, currently 35 percent," according to a 2003 IRS document. The same applies to non-filers.

"It's just another instance of the IRS exempt organizations division failing to do its job," said Frances R. Hill, a tax expert who teaches at the University of Miami School of Law and studies political non-profits.

America Coming Together, a political non-profit group opposing the re-election of President Bush, spent more than $1.1 million and deployed at least 700 people in Ohio in the six months ending in April, heavily focusing its early efforts on that battleground state, according to a Center for Public Integrity analysis of federal records.

Bush himself made his 18th trip as president to Ohio in mid-June, just days after Massachusetts Sen. John Kerry, his likely Democratic opponent in November, visited the state. But the candidates are just a part of the political activity in Ohio, which has seen get-out-the-vote operations for months.

Groups like ACT, known as 527 organizations after the section of the tax code that governs political committees, have raised nearly $184 million since the end of 2002 to use for get-out-the-vote operations, political advertising and contributions to state and local candidates. Many of the largest such committees oppose Bush's re-election, although conservatives have a handful of 527 organizations, too.

Perhaps the best-known of the 527s focused on the ground game, ACT has raised more than $19 million during 2003 and 2004, the third-largest amount of any 527 organization (the largest, the Joint Victory Campaign 2004, splits its money between ACT and the Media Fund, a related committee).

ACT has paid out $778,829 in salaries in Ohio, accounting for about seven of every ten dollars it spent in the state. Although a majority of the nearly $10 million spent so far by ACT came in the Washington, D.C., area, it has spent more on salaries in Ohio than on any other state in the nation. Excluding the capital area, Missouri, Pennsylvania and Florida have the next largest contingent of paid ACT employees, according to Federal Election Commission records.

Driven by a surge in giving by wealthy individuals, political non-profits raised more than $59 million during the first three months of this year, with much of that money going to groups dedicated to defeating President George W. Bush in November, an analysis by the Center for Public Integrity shows.

Three individuals—film producer Stephen L. Bing, financier George Soros and insurance executive Peter B. Lewis—gave $11 million during January, February and March to several "527 organizations," so-called because of the section of the Internal Revenue Code under which they're organized. Five other individuals, all supporters of liberal causes, contributed at least $1 million each during the same period, according to the Center's analysis of reports filed with the Internal Revenue Service.

The $11 million from Bing, Lewis and Soros during the first quarter boosted their combined total to 527 committees to $26 million since disclosure began in late 2000. Most of that money has come in the past 18 months. Bing's $5.1 million in contributions this year boosted his 527 contributions since 2000 to $9.8 million, second among individuals only to actress Jane Fonda, who gave more than $13 million—mostly in support of abortion rights—during 2000 and 2002.

Party Lines is the product of on-going work obtaining and analyzing the money raised and spent by state Democratic and Republican political party and caucus committees. The Center for Public Integrity maintains a database of party and caucus contributions and expenditures from all 50 states.

The database includes contribution and expenditure data reported to state and federal agencies by political party and caucus committees in all 50 states. During the 2004 election cycle the Center tracked 232 committees, compiling more than 400,000 contribution records totaling more than $735 million and nearly 420,000 expenditure records covering $755 million. For the 2001-2002 election cycle, the Center kept tabs on 229 state party and caucus committees; a data set housing more than 356,000 contribution records totaling nearly $823 million and nearly 422,000 expenditure records covering $790 million.

State and federal accounts

The data for this report comes from state and federal sources: State party and caucus committees file periodic reports with state regulators, and all 100 major party committees also maintain federal accounts that are reported to the Federal Election Commission. Federal accounts are used to pay for expenses that benefit at least one federal candidate. Contributions to federal accounts are subject to federal election limits.

The Center's database includes both types of filings and researchers ensured that the two sets of data did not repeat each other. In several states, state party filings included some or all of the information contained in a party committee's federal account as well. In those cases, the Center dealt with duplicative entries by removing identical records from the state filings. In this manner, the database reflects the contents of state and federal accounts.

Seven of every 10 dollars that state party and caucus committees received from the national parties during the 2001-2002 election cycle came in the form of "soft money" now banned under federal campaign finance law.

The six national party committees—the Democratic National Committee, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the Republican National Committee, the National Republican Senatorial Committee and the National Republican Congressional Committee—sent more than $300 million to state party and caucus committees in the most recent two-year election period, according to federal records.

Most of that money—$217 million—was soft money, the unlimited donations to national party committees that often found their way into the states to pay for advertising and other political expenses. Under the Bipartisan Campaign Reform Act of 2002, national parties can no longer raise or spend soft money.

The $217 million dwarfed the $86 million in "hard money" sent to the states to be spent directly on federal elections.

While it was still legal, soft money flooded several key states in the 2001-2002 election cycle: Minnesota party committees received $18.2 million in national party soft money, while committees in Florida got $16.4 million and those in Missouri took in $14.2 million. Soft money also played an influential role in smaller states that hosted prominent races in 2002, including New Hampshire and South Dakota. Soft money transfers accounted for 60 percent of the total money raised for campaigns in the two states, where key U.S. Senate races attracted millions of dollars.

National party transfers often helped pay for television and radio ads, a crucial aspect of political campaigns. Due to federal rules on allocating a mixture of hard and soft money, state parties have been able to use more soft money to purchase advertising time than national parties.

State parties raised nearly $823 million in the 2001-2002 election cycle, bolstered by millions from labor unions, corporations, wealthy individuals and the national parties, according to a new study by the Center for Public Integrity. About 53 percent of the total went to Democrats and 47 percent went to Republicans.

The parties also reported spending more than $790 million during the same time period.

While Democrats out-raised the GOP at the state level, it was no contest at the national level, where Republicans were about even with Democrats in now-banned "soft money" contributions, but held a tremendous 2-1 advantage in hard money contributions.

The Center collected disclosure records from 229 state party and caucus committees over the past year, making it possible to calculate the combined total of state and national party contributions in an election cycle—more than $1.6 billion, a staggering amount, especially given that 2002 was an off-year, non-presidential election.

Federal law regulates the source and amount of contributions that the national parties—the Democratic National Committee, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, the Republican National Committee, the National Republican Senatorial Committee and the National Republican Congressional Committee—can receive. Such regulated money is known as federal or "hard" money. In the 2001-2002 election cycle, national parties could also receive unlimited donations, called "soft money," but the 2002 passage of the Bipartisan Campaign Reform Act ended that practice.

Of the $790 million spent by state political party and caucus committees during the 2001-2002 cycle, almost half went to a collection of strategists, pollsters and mailing houses that specialize in swaying voters.

Just 51 consulting firms accounted for about $346 million in spending, paced by Greer Margolis Mitchell Burns, a Democratic firm, and GOP consultant National Media Inc. Both worked on major races in key battleground areas in the mid-term elections. GMMB received $45.6 million and National Media got $41.6 million for their efforts.

Those totals include money that the consultants then use to buy air time from television broadcasters, cable outlets and radio stations. How much was impossible to determine—consulting firms are not obligated to disclose how they spend the money they get from political parties—and therefore how much the firms actually earned was also unclear.

It comes as little surprise that state parties rely so heavily on outside consultants, since few, if any, party operations are sophisticated enough or have the financial resources to support their own in-house media producers and mail houses. In addition, parties sometimes hire consultants with direct experience, including former executive directors and chairmen.

"As elections have become more sophisticated, you've seen the influence drop down from the federal to the state level," said Candice Nelson, director of the Campaign Management Institute at American University. The result, she said, is that consultants "are pretty much an entrenched part of the landscape of how elections are run in this country."

In the 2002 election cycle, 16 leadership committees—essentially political action committees run by elected politicians—in five states raised and spent more than $17 million.

State legislative leaders—senate and house majority and minority leaders, senate presidents and house speakers—are in high-profile positions and use these types of committees for several purposes, including helping candidates within their parties in key races throughout the state.

As part of the Party Lines study of state political parties, the Center for Public Integrity examined the role of leadership committees in a handful of states: Florida, New Jersey, Illinois, Virginia and New York. To help identify leadership committees in these states, the Center contacted legislative leaders, state money-in-politics research organizations and political journalists. To compile the financial data, the Center used the online disclosure databases provided by state campaign finance regulatory agencies.

Because contribution limits and disclosure rules vary greatly from state to state, it is difficult to track money raised and spent by committees connected to legislative leaders. In many cases, it's hard even to determine which lawmakers operate such committees. Often, leadership PACs have generic or ambiguous names shielding them from affiliated lawmakers, such as "Committee for a Responsible Government" or "New Majority Project."

In Florida, legislators have formed leadership committees and have used a loophole in state law to solicit contributions of up to $50,000 from corporations and lobbyists without having to reveal contributor identities on campaign finance disclosure filings. In New Jersey, on the other hand, leadership committees are defined by statute and connected to the same positions in each party, independent of the lawmaker who holds the office.

1867: Naval Appropriations Bill 

The first federal attempt to regulate campaign finance. Prohibited officers and employees of the government from soliciting money from naval yard workers.

1883: Civil Service Reform Act 
Extended the above rule to all federal civil service workers. Previously, government workers were expected to make campaign contributions in order to keep their jobs.

1905: Teddy Roosevelt's Message to Congress 
President Theodore Roosevelt proposed that "(a)ll contributions by corporations to any political committee or for any political purpose should be forbidden by law." The proposal, however, included no restrictions on campaign contributions from the people who owned and ran corporations. Roosevelt also called for public financing of federal candidates via their political parties.

1907: Tillman Act 
Prohibited corporations and nationally chartered (interstate) banks from making direct financial contributions to federal candidates. However, weak enforcement mechanisms made the Act unenforceable.

1910: Federal Corrupt Practices Act 
Established disclosure requirements for U.S. House candidates. Legislation in 1911 extended requirements to cover U.S. Senate candidates and established expenditure limits for House and Senate campaigns. Lacking mechanisms for verification and enforcement, these measures proved meaningless.

1925: Federal Corrupt Practices Act (Revised) 
Codified and revised previous campaign reform legislation regarding expenditure limits and disclosure. Served as basic federal campaign finance law until 1971. However, with power of enforcement vested in Congress, the Act was routinely ignored.