In a settlement reached last week in Nevada, a 501(c)(4) social welfare group that ran ads in that state’s 2010 gubernatorial race agreed to pay a $40,000 fine and disclose the donors that fueled its spending.

Even coming four years after the fact, the settlement should have been a victory for voters, since it could have discouraged other dark money groups from spending in state races. Yet the resulting disclosure was more evidence of how hard it is to get to the true source of contributions to politically active tax-exempt groups.

Running more than 300 times during the race at a cost of close to $200,000, the 30-second spot (featured stock footage of GOP candidate Brian Sandoval in various settings. The narrator touted Sandoval’s “conservative values,” saying he was against “job-killing tax increases” and planned to cut $500 million in state spending.

It ended with the tag “Brian Sandoval: No tax increases, no government waste. Just conservative.” It didn’t call on Nevadans to vote for Sandoval, nor did it say that he was “right for Nevada.” It didn’t even encourage people to call Sandoval and say they support the policies mentioned in the ad — a hallmark of “sham” issue ads that fly under the radar because they don’t explicitly call for voters to support or oppose a candidate.

Nevada’s then-secretary of state, Ross Miller, maintained it was a political ad — and filed a lawsuit saying that AAF should be a PAC and disclose all relevant contributions and expenditures to the public.

“This out-of-state organization is attempting to influence the outcome of a Nevada election,” said Miller, “and, at the same time, dodge state law that requires disclosure and transparency in election activity.”

OpenSecrets Blog , they often get around that rule in various ways. At the core of this battle is the fact that 501(c)(4) groups, which benefit from having tax-exempt status and can shield the names of their funders from the public, aren’t supposed to have politics as their primary purpose. However, as has described at length , they often get around that rule in various ways.

AAF also tried to argue that its political spending in Nevada was only 2.4 percent of its total spending, and thus well below the IRS’ “primary purpose” threshold. But this argument, the court said, would have “ absurd results ” when applied to well-funded groups like AAF. “Adopting such a rule,” the court explained,” would mean that AAF could have the major purpose of influencing the election or defeat of candidates generally (i.e. not only in Nevada) … and yet no state could ever constitutionally require disclosure from AAF, as long as it doesn’t spend more than 50% of its money in any one state.”

The settlement required AAF to pay a $40,000 fine and to register as a PAC and file reports disclosing its contributions and spending.

The non-disclosure disclosure

But it wasn’t the victory voters might have hoped for. For one thing, AAF didn’t have to disclose the donors of all of its $7.8 million in 2010 revenues — only those relevant to its activities in Nevada.

And then, when AAF filed its disclosure form, it contained the name of a single donor: another dark money group called the Republican Governors Public Policy Committee. So after the court rejected nearly every argument made by AAF about why it should be able to keep its contributors secret, AAF revealed just one contributor, and it was another organization that isn’t required to disclose its donors.

The RGPPC is affiliated with the Republican Governors Association — which does have to report who its donors are — but it does not derive its funds from the RGA. CRP research turned up two of the donors to the RGPPC — also nondisclosing entities. Crossroads GPS and the American Natural Gas Alliance together provided $850,000 to the group in 2010. Little is known about the other corporate or individual donors giving to RGPPC except a few, including two health care companies, whose names were accidentally disclosed in 2011 and discovered by the Center for Public Integrity.

Research by the Center for Responsive Politics has turned up one more of AAF’s 2010 funders — another 501(c)(4) called Alliance for Freedom, which provided $4 million, or more than half of AAF’s revenues that year. The Alliance for Freedom is listed at the same address in Alexandria as AAF, and the groups share two board members: Barry Bennet and Kara Ahern. And Alliance for Freedom’s gift to AAF constituted 91 percent of the donor group’s resources in 2010, the year AAF was supporting Sandoval in Nevada.

The Nevada case is a counterpoint to another recent case of dark money operating at the state level, in California. When it was found that a network of nonprofits were “ laundering ” money in a scheme to avoid disclosing funders trying to influence votes on a pair of ballot initiatives, California investigators ultimately required the groups trace the money all the way back to the original donors to get at what regulators in the state refer to as the “first bite.”

Help us keep government accountable by making a donation today.

Meanwhile, AAF’s punishment has been only a mild setback, occurring so far after the fact that Sandoval is now up for re-election: His primary is in June. The donors to the group that helped get him elected in the first place, as well as their motives, are still in the shadows.



For permission to reprint for commercial uses, such as textbooks, contact the Center: 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]





Support Accountability Journalism At OpenSecrets.org we offer in-depth, money-in-politics stories in the public interest. Whether you’re reading about 2020 presidential fundraising, conflicts of interest or “dark money” influence, we produce this content with a small, but dedicated team. Every donation we receive from users like you goes directly into promoting high-quality data analysis and investigative journalism that you can trust.Please support our work and keep this resource free. Thank you. Support OpenSecrets ➜