Crack Down on Dark Money Act

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. 1. Short title This Act may be cited as the Crack Down on Dark Money Act 2. Limitation on covered political expenditures by social welfare organizations (a) In general Section 501(c)(4) (C) (i) Subparagraph (A) shall not apply to an entity for a taxable year if more than 10 percent of the total expenditures for the taxable year are covered political expenditures. (ii) For purposes of this subparagraph, the term covered political expenditures (iii) The Secretary shall prescribe such regulations as may be necessary or appropriate to prevent the avoidance of clause (i), including regulations relating to a direct or indirect transfer of all or part of the assets of an entity to an entity controlled (directly or indirectly) by the same person or persons who control the transferor entity. . (b) Expansion of political organization definition Section 527(e)(1) of such Code is amended by striking organized and operated primarily for the purpose of , unless such organization is not established under this section, (c) Political intervention added to exempt function definition Section 527(e) of such Code is amended— (1) in paragraph (2)— (A) by striking includes the making of expenditures relating to an office described in the preceding sentence which, if incurred by the individual, would be allowable as a deduction under section 162(a). includes— (A) the making of expenditures relating to an office described in the preceding sentence which, if incurred by the individual, would be allowable as a deduction under section 162(a), and (B) political intervention. , and (B) by adding at the end the following new paragraph: (6) Political intervention The term political intervention . (d) Effective date The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2021. 3. Political intervention (a) Disclosure requirement Section 6104(d)(3) (C) Certain 501(c)(4) In the case of an organization described in section 501(c)(4) that spends funds on political intervention (as defined in section 4956), such organization shall be required to disclose the name and address of any contributor donating $5,000 or more to such organization, and such information shall be made open to public inspection in the manner described in subsection (a)(1)(A). . (b) Political intervention defined Subchapter C of chapter 42 of subtitle D of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: 4956. Political intervention (a) Political intervention defined For purposes of this section, the term political intervention (1) express advocation— (A) for the election, defeat, nomination, or recall of a political candidate, (B) for the election or defeat of candidates affiliated with a specific political party, (C) that voters select candidates for support or opposition based on one or more criteria that clearly distinguish certain candidates from other candidates, or (D) the making of contributions to a candidate’s campaign, a political party, or (unless the contribution is restricted so that it must not be used to support political intervention) any other political organization within the meaning of section 527(e)(1), (2) communication to any part of the electorate, other than an express advocacy communication within the meaning of clause (i), if the communication— (A) refers to a political candidate, and (B) reflects a view on such candidate, and (3) political use of resources. (b) Exceptions A communication described in subsection (a) shall not constitute political intervention if— (1) it does not consist of paid mass media advertising, and (2) it falls under one of the following exceptions: (A) Communications to influence official action Commentary on a public official that has a direct, limited, and reasonable relationship to specific actions the official may yet perform within his or her current term of office without mention of any election or voting in an election, or of the official’s candidacy or opponent. (B) Voter education Voter education activities or the dissemination of materials that compare two or more candidates for an office, including materials disclosing the views of the organization on political issues, if the communication consists solely of content in which the time, text, or space is offered in equal shares to each of the participating candidates, and the organization’s share of content is no greater than the share available to any of the participating candidates. The opportunity to participate, including a full description of the opportunity and of the organization’s share of the content, if any, must be given to all candidates meeting an objective threshold of viability for nomination or election to the office at least 72 hours in advance of the final preparation of the communication. (C) Self-defense communications A response by the organization to a public or publicly-reported statement by a candidate or candidates that either (i) attacks the organization itself, or (ii) comments upon a specific public policy position that the organization has taken publicly in furtherance of its exempt purpose within the prior year, or (iii) results in press inquiries to the organization that were not solicited subsequent to the candidate’s statement by the organization. The response by the organization must be educational, limited topically to addressing the candidate's statement, and as to (i) or (ii), disseminated in a manner commensurate in medium and scale, and proximate in time, to the publicity of the candidate's statement, and as to (iii), limited to dissemination to the requesting press organization. (D) Personal, oral remarks at official meetings Oral remarks made by anyone other than a candidate who is present in person at an official meeting of an organization held in a single room or location, so long as— (i) no announcement of the meeting refers to any candidate, party, election, or voting, and (ii) a disclaimer is made to those in attendance, stating that remarks are the speaker’s personal opinion and are not made on behalf of the organization. This exception covers only oral remarks made by and to persons in attendance, and not any other form of communication or redistribution of those remarks, whether written, electronic, recorded, broadcast, or otherwise transmitted. (c) Definitions For purposes of this section— (1) Candidate The term candidate (2) Election The term election (3) Paid mass media advertising (A) In general The term paid mass media advertising (B) Mass mailing The term mass mailing (i) a mailing by United States mail or facsimile, (ii) of more than 500 pieces of mail matter of an identical or substantially similar nature within any 30-day period, and (iii) that is not voter education materials. (4) Political use of resources The term political use of resources (A) means— (i) the provision any of an organization’s resources, tangible or intangible, including monetary or in-kind, goods, services, or facilities, by gift, loan, sale, rental, or any other method of transfer to another person or entity, if— (I) the transferee uses such resources to support or oppose any candidate’s election to public office, (II) such use is reasonably foreseeable, and (III) if the transferor has not taken reasonable steps to prevent such use, (ii) any other transfer that is a reportable contribution related to one or more candidates for elective public office, to a political party, or (unless the transfer is restricted so that it must not be used to support political intervention) to any other political organization within the meaning of section 527(e)(1), and (iii) any other use of an organization’s resources in support of or opposition to a candidate, if not specifically allowed under a Revenue Ruling or other Federal tax authority, and (B) does not include a transfer that is— (i) made in a transaction in which the fair market value of goods or services provided by the organization does not exceed the value of the consideration received in exchange, (ii) similar to other transactions conducted by the organization, and (iii) without preference for or against any candidate. (d) Regulations The Secretary shall prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section. . (c) Conforming amendments (1) The heading for subchapter C of chapter 42 of such Code is amended by adding at the end the following: ; political intervention (2) The table of sections for such subchapter C is amended by adding at the end the following: Sec. 4956. Political intervention. . (3) The item in the table of subchapters of such chapter 42 relating to subchapter C is amended to read as follows: Subchapter C. Political expenditures of section 501(c)(3) . (d) Effective date The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2021.

Summary: Crack Down on Dark Money Act This bill prohibits tax-exempt 501(c)(4) social welfare organizations from using more than 10% of their total expenditures on covered political expenditures (i.e., direct or indirect expenditures for an exempt function, including 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). The bill also requires a social welfare organization that spends funds on political intervention to publicly disclose the name and address of any contributor donating $5,000 or more to such organization. The term political intervention includes advocacy for the election, defeat, nomination or recall of a political candidate, the making of contributions to a political campaign, communications to the electorate about political candidates, and political use of resources.