Nonprofits likely under fire as Senate explores ‘dark money’

A Senate hearing on Wednesday is likely to produce fireworks as Republicans and Democrats square off over the role that foundations and nonprofits are playing in elections.

The Senate Finance subcommittee on Taxation and IRS Oversight offers no description of the hearing beyond the title “Laws and Enforcement Governing the Political Activities of Tax Exempt Entities.” Even the witnesses who will testify are uncertain of its focus. It appears likely that subcommittee chairman Sen. Sheldon Whitehouse wants to raise concerns about “dark money” flowing through 501(c)(4) nonprofits, but Republicans plan to widen the scope of the hearing to highlight what they see as illegal political activities by 501(c)(3) charities and foundations.

Contributions to 501(c)(4) social-welfare organizations, unlike 501(c)(3) charities, are not tax deductible, and as a result, those organizations are allowed to engage in a much broader range of political activities.

One of the witnesses at the hearing, Ann M. Ravel, former chairwoman of the United States Federal Election Commission who now teaches at the University of California at Berkeley’s law school, said she will discuss her concerns about the movement of money from 501(c)(4) organizations to political-action committees with little oversight or public awareness of the source of those funds.

“There is a lack of accountability that is problematic,” Ravel said.

However, witnesses who were invited to testify by committee Republicans had a much different perspective, saying it was shortsighted to focus on fundraising for political-action committees when, in their view, the real abuses are occurring at some 501(c)(3) nonprofits and foundations.

Scott Walter, president of the Capital Research Center, a conservative group that monitors...