Crack Down on Dark Money Act

I 116TH CONGRESS 2D SESSION H. R. 7525 To amend the Internal Revenue Code of 1986 to prohibit 501(c)(4) entities from using more than 10 percent of total expenditures on certain political expenditures, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 9, 2020 Mr. GOLDEN introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to prohibit 501(c)(4) entities from using more than 10 percent of total expenditures on certain political expenditures, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Crack Down on Dark 4 Money Act’’. 5 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 7525 IH SEC. 2. LIMITATION ON COVERED POLITICAL EXPENDI- 1 TURES BY SOCIAL WELFARE ORGANIZA- 2 TIONS. 3 (a) IN GENERAL.—Section 501(c)(4) of the Internal 4 Revenue Code of 1986 is amended by adding at the end 5 the following: 6 ‘‘(C)(i) Subparagraph (A) shall not apply 7 to an entity for a taxable year if more than 10 8 percent of the total expenditures for the taxable 9 year are covered political expenditures. 10 ‘‘(ii) For purposes of this subparagraph, 11 the term ‘covered political expenditures’ means 12 direct or indirect expenditures for an exempt 13 function described in section 527(e)(2). 14 ‘‘(iii) The Secretary shall prescribe such 15 regulations as may be necessary or appropriate 16 to prevent the avoidance of clause (i), including 17 regulations relating to a direct or indirect 18 transfer of all or part of the assets of an entity 19 to an entity controlled (directly or indirectly) by 20 the same person or persons who control the 21 transferor entity.’’. 22 (b) EXPANSION OF POLITICAL ORGANIZATION DEFI- 23 NITION.—Section 527(e)(1) of such Code is amended by 24 striking ‘‘organized and operated primarily for the pur- 25 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 7525 IH pose of’’ and inserting ‘‘, unless such organization is not 1 established under this section,’’. 2 (c) POLITICAL INTERVENTION ADDED TO EXEMPT 3 FUNCTION DEFINITION.—Section 527(e) of such Code is 4 amended— 5 (1) in paragraph (2)— 6 (A) by striking ‘‘includes the making of ex- 7 penditures relating to an office described in the 8 preceding sentence which, if incurred by the in- 9 dividual, would be allowable as a deduction 10 under section 162(a).’’ and inserting ‘‘in- 11 cludes— 12 ‘‘(A) the making of expenditures relating 13 to an office described in the preceding sentence 14 which, if incurred by the individual, would be 15 allowable as a deduction under section 162(a), 16 and 17 ‘‘(B) political intervention.’’, and 18 (B) by adding at the end the following new 19 paragraph: 20 ‘‘(6) POLITICAL INTERVENTION.—The term 21 ‘political intervention’ has the meaning given to such 22 term by section 4956.’’. 23 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 7525 IH (d) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to contributions made in taxable 2 years beginning after December 31, 2020. 3 SEC. 3. POLITICAL INTERVENTION. 4 (a) DISCLOSURE REQUIREMENT.—Section 5 6104(d)(3) of the Internal Revenue Code of 1986 is 6 amended by adding at the end the following new subpara- 7 graph: 8 ‘‘(C) CERTAIN 501(C)(4) ORGANIZATIONS 9 MUST DISCLOSE CERTAIN DONORS.—In the case 10 of an organization described in section 11 501(c)(4) that spends funds on political inter- 12 vention (as defined in section 4956), such orga- 13 nization shall be required to disclose the name 14 and address of any contributor donating $5,000 15 or more to such organization, and such infor- 16 mation shall be made open to public inspection 17 in the manner described in subsection 18 (a)(1)(A).’’. 19 (b) POLITICAL INTERVENTION DEFINED.—Sub- 20 chapter C of chapter 42 of subtitle D of the Internal Rev- 21 enue Code of 1986 is amended by adding at the end the 22 following new section: 23 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 7525 IH ‘‘SEC. 4956. POLITICAL INTERVENTION. 1 ‘‘(a) POLITICAL INTERVENTION DEFINED.—For pur- 2 poses of this section, the term ‘political intervention’ 3 means (except as provided in subsection (b)), with respect 4 to activities conducted by an organization in relation to 5 Federal, State, local, and foreign election campaigns of 6 candidates for public office— 7 ‘‘(1) express advocation— 8 ‘‘(A) for the election, defeat, nomination, 9 or recall of a political candidate, 10 ‘‘(B) for the election or defeat of can- 11 didates affiliated with a specific political party, 12 ‘‘(C) that voters select candidates for sup- 13 port or opposition based on one or more criteria 14 that clearly distinguish certain candidates from 15 other candidates, or 16 ‘‘(D) the making of contributions to a can- 17 didate’s campaign, a political party, or (unless 18 the contribution is restricted so that it must not 19 be used to support political intervention) any 20 other political organization within the meaning 21 of section 527(e)(1), 22 ‘‘(2) communication to any part of the elec- 23 torate, other than an express advocacy communica- 24 tion within the meaning of clause (i), if the commu- 25 nication— 26 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 7525 IH ‘‘(A) refers to a political candidate, and 1 ‘‘(B) reflects a view on such candidate, and 2 ‘‘(3) political use of resources. 3 ‘‘(b) EXCEPTIONS.—A communication described in 4 subsection (a) shall not constitute political intervention 5 if— 6 ‘‘(1) it does not consist of paid mass media ad- 7 vertising, and 8 ‘‘(2) it falls under one of the following excep- 9 tions: 10 ‘‘(A) COMMUNICATIONS TO INFLUENCE 11 OFFICIAL ACTION.—Commentary on a public of- 12 ficial that has a direct, limited, and reasonable 13 relationship to specific actions the official may 14 yet perform within his or her current term of 15 office without mention of any election or voting 16 in an election, or of the official’s candidacy or 17 opponent. 18 ‘‘(B) VOTER EDUCATION.—Voter education 19 activities or the dissemination of materials that 20 compare two or more candidates for an office, 21 including materials disclosing the views of the 22 organization on political issues, if the commu- 23 nication consists solely of content in which the 24 time, text, or space is offered in equal shares to 25 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 7525 IH each of the participating candidates, and the or- 1 ganization’s share of content is no greater than 2 the share available to any of the participating 3 candidates. The opportunity to participate, in- 4 cluding a full description of the opportunity and 5 of the organization’s share of the content, if 6 any, must be given to all candidates meeting an 7 objective threshold of viability for nomination or 8 election to the office at least 72 hours in ad- 9 vance of the final preparation of the commu- 10 nication. 11 ‘‘(C) SELF-DEFENSE COMMUNICATIONS.— 12 A response by the organization to a public or 13 publicly-reported statement by a candidate or 14 candidates that either (i) attacks the organiza- 15 tion itself, or (ii) comments upon a specific pub- 16 lic policy position that the organization has 17 taken publicly in furtherance of its exempt pur- 18 pose within the prior year, or (iii) results in 19 press inquiries to the organization that were 20 not solicited subsequent to the candidate’s 21 statement by the organization. The response by 22 the organization must be educational, limited 23 topically to addressing the candidate’s state- 24 ment, and as to (i) or (ii), disseminated in a 25 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 7525 IH manner commensurate in medium and scale, 1 and proximate in time, to the publicity of the 2 candidate’s statement, and as to (iii), limited to 3 dissemination to the requesting press organiza- 4 tion. 5 ‘‘(D) PERSONAL, ORAL REMARKS AT OFFI- 6 CIAL MEETINGS.—Oral remarks made by any- 7 one other than a candidate who is present in 8 person at an official meeting of an organization 9 held in a single room or location, so long as— 10 ‘‘(i) no announcement of the meeting 11 refers to any candidate, party, election, or 12 voting, and 13 ‘‘(ii) a disclaimer is made to those in 14 attendance, stating that remarks are the 15 speaker’s personal opinion and are not 16 made on behalf of the organization. 17 This exception covers only oral remarks made 18 by and to persons in attendance, and not any 19 other form of communication or redistribution 20 of those remarks, whether written, electronic, 21 recorded, broadcast, or otherwise transmitted. 22 ‘‘(c) DEFINITIONS.—For purposes of this section— 23 ‘‘(1) CANDIDATE.—The term ‘candidate’ means 24 a person who offers himself or herself for election to 25 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 7525 IH public office or whose election the person conducting 1 the activity or making the expenditure in question 2 expressly proposes, supports, or opposes. 3 ‘‘(2) ELECTION.—The term ‘election’ means a 4 process culminating in a vote by the public to deter- 5 mine whether a candidate will serve in a public of- 6 fice, including primary, general, special, and runoff 7 elections, nominations by caucus, convention, or 8 other means, and recall and confirmation votes. 9 ‘‘(3) PAID MASS MEDIA ADVERTISING.— 10 ‘‘(A) IN GENERAL.—The term ‘paid mass 11 media advertising’ means communication to the 12 general public placed for a fee on one of the fol- 13 lowing media operated by another person: a 14 broadcast, cable, or satellite facility, newspaper, 15 magazine, outdoor advertising facility, mass 16 mailing service, telephone bank, or another per- 17 son’s website or internet communications serv- 18 ice. 19 ‘‘(B) MASS MAILING.—The term ‘mass 20 mailing’ means— 21 ‘‘(i) a mailing by United States mail 22 or facsimile, 23 ‘‘(ii) of more than 500 pieces of mail 24 matter of an identical or substantially 25 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 7525 IH similar nature within any 30-day period, 1 and 2 ‘‘(iii) that is not voter education mate- 3 rials. 4 ‘‘(4) POLITICAL USE OF RESOURCES.—The 5 term ‘political use of resources’— 6 ‘‘(A) means— 7 ‘‘(i) the provision any of an organiza- 8 tion’s resources, tangible or intangible, in- 9 cluding monetary or in-kind, goods, serv- 10 ices, or facilities, by gift, loan, sale, rental, 11 or any other method of transfer to another 12 person or entity, if— 13 ‘‘(I) the transferee uses such re- 14 sources to support or oppose any can- 15 didate’s election to public office, 16 ‘‘(II) such use is reasonably fore- 17 seeable, and 18 ‘‘(III) if the transferor has not 19 taken reasonable steps to prevent such 20 use, 21 ‘‘(ii) any other transfer that is a re- 22 portable contribution related to one or 23 more candidates for elective public office, 24 to a political party, or (unless the transfer 25 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 7525 IH is restricted so that it must not be used to 1 support political intervention) to any other 2 political organization within the meaning 3 of section 527(e)(1), and 4 ‘‘(iii) any other use of an organiza- 5 tion’s resources in support of or opposition 6 to a candidate, if not specifically allowed 7 under a Revenue Ruling or other Federal 8 tax authority, and 9 ‘‘(B) does not include a transfer that is— 10 ‘‘(i) made in a transaction in which 11 the fair market value of goods or services 12 provided by the organization does not ex- 13 ceed the value of the consideration received 14 in exchange, 15 ‘‘(ii) similar to other transactions con- 16 ducted by the organization, and 17 ‘‘(iii) without preference for or against 18 any candidate. 19 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 20 such regulations and other guidance as may be appro- 21 priate or necessary to carry out the purposes of this sec- 22 tion.’’. 23 (c) CONFORMING AMENDMENTS.— 24 VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 7525 IH (1) The heading for subchapter C of chapter 42 1 of such Code is amended by adding at the end the 2 following: ‘‘; Political Intervention’’. 3 (2) The table of sections for such subchapter C 4 is amended by adding at the end the following: 5 ‘‘Sec. 4956. Political intervention.’’. (3) The item in the table of subchapters of such 6 chapter 42 relating to subchapter C is amended to 7 read as follows: 8 ‘‘SUBCHAPTER C. POLITICAL EXPENDITURES OF SECTION 501(c)(3) ORGANIZATIONS; POLITICAL INTERVENTION.’’. (d) EFFECTIVE DATE.—The amendments made by 9 this section shall apply to contributions made in taxable 10 years beginning after December 31, 2020. 11 Æ VerDate Sep 11 2014 19:01 Jul 28, 2020 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6301 E:\BILLS\H7525.IH H7525 pamtmann on DSKBC07HB2PROD with BILLS