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Lee Fang

Lee Fang

Investigating the intersection of politics, lobbying and public policy at RepublicReport.org.

Why Is a Congressional Hearing on Natural Gas Being Organized by Former Natural Gas Lobbyists?

Natural gas pipeline

(AP Photo/Keith Srakocic)

This post was originally published at RepublicReport.org

Today, the congressional Energy and Commerce committee's  subcommittee on Energy and Power is scheduled to hold a hearing on Representative Cory Gardner’s (R-CO) bill to force the Obama administration to approve all applications for new liquefied natural gas terminals used to export natural gas. A close look at the staffers involved with this particular subcommittee reveals that several have close ties to the LNG industry.

– Energy and Power staff counsel Patrick Currier is a former lobbyist for gas and energy companies, including the Gas Processors Association, FirstEnergy Corp, and the CCS Alliance.

– Energy and Power chief counsel Tom Hassenboehler is a former lobbyist for America’s Natural Gas Alliance, one of the most vocal trade groups pushing to build more LNG export capacity.

The chair of the subcommittee, Representative Ed Whitfield (R-KY), also has a stake in this debate. The most recently available personal finance disclosures show Whitfield holds between $250,000-$500,000 in stock with ExxonMobil and holds between $250,000-$500,000 with Chevron — two companies that would gain substantially from new LNG export terminals. ExxonMobil is heavily invested in expanding into the LNG industry, and last week, posted an item on its company blog criticizing the Department of Energy for its “go-slow approach to processing [LNG terminal] applications.” Earlier this month, Chevron chairman John Watson told a crowd in Houston that there’s “no question that sufficient gas exists in the US and Canada to export globally.”

Bill Cooper, president of the Center for Liquified Natural Gas, a pro-LNG export association, said he is “happy” about the wave of political support. “We didn’t gin up the Ukrainian crisis. We didn’t gin up the idea that it ought to be connected in some way to LNG exports. But Congress did, obviously, and a lot of editorials, experts and geopolitical analysts have all jumped on that. We appreciate the attention that LNG exports are receiving, and if it does provide a catalyst to make something happen that heretofore has not, then we’re going to be very happy with that,” Cooper told NGI Daily.

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On the other side of Capitol Hill, Senator Mary Landrieu (D-LA) held her own hearing on the topic of LNG exports. “Landrieu is expected to make the case that an increase in liquified natural gas exports would create high-paying jobs and turn the US into an energy superpower,” buzzed The Hill’s Overnight Energy before the hearing.

As Republic Report has noted, pundits and politicians closely aligned with the LNG industry have used the crisis in Ukraine to demand more LNG exports, even though doing so would not hamper Russia’s dominance over the market or affect the price of gas in the region.

Read Next: Bob Dreyfuss on what's wrong with Putin's approach to relations with America.

How the Gas Lobby Is Using the Crimea Crisis to Push Bad Policy and Make More Money

Rex Tillerson

Rex Tillerson, CEO of ExxonMobil, which has ties with Russian gas giants (Photo courtesy of Michael Wuertenberg, CC 2.0)

This post was originally published at RepublicReport.org

A small group of pundits and politicians with close ties to the fossil fuel industry are using the crisis in Crimea to demand that the United States promote natural gas exports as a quick fix for the volatile situation. But such a solution, experts say, would cost billions of dollars, require years of development, and would not significantly impact the international price of gas or Russia’s role as a major supplier for the region. Rather, the move would simply increase gas prices for American consumers while enriching companies involved in the liquified natural gas (LNG) trade.

On Capitol Hill, House Energy and Commerce Committee Chairman Representative Fred Upton (R-MI) was among the first to use the crisis in Ukraine to demand that the Department of Energy speed up the approval process for new LNG terminals. “Now is the time to send the signal to our global allies that US natural gas will be an available and viable alternative to their energy needs,” said Upton in a statement. As we’ve reported, Upton’s committee is managed in part by Tom Hassenboehler, a former lobbyist who joined Upton’s staff last year after working for America’s Natural Gas Alliance, the primary trade group pushing to expand natural gas development and LNG exports.

Paul Bledsoe, in an opinion column for Reuters, wrote that the United States should expedite natural gas exports to “bolster transatlantic solidarity and help to form a united US-EU response to Russian intervention in Crimea.” He was identified in the piece as a member of the “White House Climate Change Task Force under President Clinton.” What wasn’t disclosed, however, is that Bledsoe is an official with a pro–fossil fuels think tank called the Bipartisan Policy Center, which is funded by the American Gas Association and energy companies with a financial stake in promoting the natural gas industry. (Although he’s not listed on the website, a representative with BPC told Republic Report that Bledsoe continues to work there.)

Groups created and funded by Charles Koch, chief executive of Koch Industries, have also demanded that America should respond to the crisis in Crimea with LNG exports. “A serious President would also fast-forward permits on new liquefied natural gas terminals that could ship to Europe,” claims a column posted by Americans for Prosperity, a Koch-run advocacy group. A similar argument is advanced by the Koch-founded Cato Institute.

What’s left undisclosed, however, is the huge financial stake in the debate for Koch Industries. A brochure for the company shows that Koch has deeply expanded its footprint into the natural gas market, and is now actively engaged in shipping, sourcing and marketing LNG, in addition to becoming a leader in developing financial instruments related to natural gas. “To complement existing North American activities from Houston and to optimize their global portfolio, KS&T companies are expanding a Europe-wide natural gas business from Geneva and an LNG trading business from offices in Houston and London,” reads the document. Further, Koch federal lobbying disclosures show that the firm has pushed a bill to expedite LNG exports from America to NATO countries.

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In perhaps the most ironic twist of this public debate around how to respond to Russia’s incursion into Crimea, American lobbyists with ties to Russia are calling for a solution that would not only shield Russian gas oligarchs, but enrich them. The National Association of Manufacturers has opposed tough sanctions on Russia. Instead, NAM has used the crisis in Ukraine to “urge speedier approval of liquified natural gas exports, arguing that the move would weaken Vladimir Putin’s control over Europe’s energy supply.” NAM’s chief lobbyist Jay Timmons told Politico that an LNG-export response would “send a strong signal to the Russian Federation, our NATO allies, our trading partners and the rest of the world that energy exports matter and are a critical tool of American foreign policy.”

What Timmons did not mention is that ExxonMobil is a leading member of his trade association, and that ExxonMobil has extensive ties to Russian gas giants, including partnerships to develop natural gas in the United States and around the world. (For more on the business ties, see Kert Davies and Steve Horn’s recent reporting on the Putin-sanctioned alliance between ExxonMobil and Russian state–owned oil and gas giant Rosneft.) In short, Timmons’s strong signal to Russia would help Russian gas businesses.

Read Next: How to avert another Cold War over Crimea.

Jon Kyl, Barred From Lobbying, Offers to Assist Clients with Tax Reform

Jon Kyl

Former Senator Jon Kyl speaking in Phoenix, Arizona in 2012. (Reuters/Joshua Lott)

This post was originally published at RepublicReport.org

Need help navigating the proposal federal tax system overhaul? Covington & Burling, a major law-lobbying firm in Washington, DC, sent out a client alert recently announcing that former Senator Jon Kyl (R-AZ) stands ready to assist businesses seeking the best outcome of the legislative proposal led by Representative Dave Camp (R-MI) and Senator Ron Wyden (D-OR).

If enacted, the tax overhaul expected this year will change billions of dollars in tax credits and rates.

Kyl, however, is barred from lobbying because he left the senate last year and is still within the “cooling-off period.” The Honest Leadership and Open Government Act extends the ban on former senators engaging in lobbying from one to two years, leaving Kyl off the market for lobbying until January of 2015.

But as we’ve covered, lobbying law is poorly enforced and ambiguously defined. Former staffers and lawmakers prohibited from engaging in lobby activity often flout the law by engaging in meetings with officials, often with the cover that they’re just doing so in order to collect intelligence, rather than “lobby.”

Shortly after he retired from office, Kyl joined the lobbying team of Covington & Burling, euphemistically titled the “Public Policy and Government Affairs”division. And the tax reform alert, which is embedded below, notes that Kyl is part of a team that is actively communicating with government officials on legislation now debated in Congress (emphasis added):

Covington’s Public Policy and Government Affairs and Tax practice groups—which include Senator Jon Kyl, former top Republican on the Senate’s Finance Subcommittee on Taxation; former senior Treasury officials; and Ed Yingling, former President and CEO of the American Bankers Association (ABA) — are conversant with the details. Many of our team members are in regular consultation with senior Members of Congress, Treasury and IRS officials, and staffs of the Congressional tax-writing committees and are able to explain the hundreds of pages of proposals.

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See the alert below:

Hot Topic Tax Reform

Read Next: Lee Fang on Congressional candidate David Jolly’s winning millions of dollars in contracts for his clients through connections to his old boss

The Koch Brothers Spent Twice as Much on the 2012 Election as the Top Ten Unions Combined

Koch spending

(Chart courtesy of RepublicReport.org)

This post was originally published at RepublicReport.org

The Wall Street Journal’s Kimberley Strassel either has no understanding of campaign finance, or is willfully misleading her readers. In either case, her column today about the Koch brothers’ political spending—which parrots a meme that has bounced around conservative blogs and websites like a bad chain e-mail—gets the facts about Koch spending versus union spending completely wrong.

In her column, “The Really Big Money? Not the Kochs,” Strassel cites a Center for Responsive Politics list to claim that unions “collectively spent $620,873,623 more than Koch Industries” on political races. Of course, if you actually visit this page on the CRP website, the list runs below a disclaimer noting that it does not include certain Super PAC spending or most undisclosed dark money spending, the preferred route for the Koch brothers for decades. In fact, the CRP site notes that union spending might appear inflated since unions’ traditional PAC spending is coupled with outside Super PAC spending. For the purposes of this chart, union spending is inflated compared to the giving of companies like Koch or Super PAC donors like Sheldon Adelson.

For the last election, Koch PACs spent $4.9 million in disclosed contributions (figures that appear on the chart referenced by Strassel). But they also spent over $407 million on undisclosed campaign entities, which does not show up in the CRP chart.

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Republic Report broke down the figures for the last election and found that Koch groups alone spent more than double the combined political spending (including to undisclosed group) for the top ten unions combined. The chart includes union spending on dark money Democratic groups and Koch spending on dark money groups like Americans for Prosperity.

This undisclosed campaign system is nothing new for the Koch brothers. In 1995 and 1996, Koch set up a shell company called Triad Management to spend millions in secret money to help the Republican Party. Of course, this type of spending never shows up in databases like the one cited by Strassel.

All NRLB-regulated unions, on the other hand, disclose every outside payment. Payments that cannot be found through the FEC can be found on a database maintained by the Labor Department. Individuals and corporations are under no such similar disclosure rules. The Koch money identified recently by The Washington Post, the $407 million, relates only to money filtered through foundations and nonprofits. The money Koch spends as a corporate entity, as it has in the past, may have gone unreported.

 

Read Next: Lee Fang investigates DC’s shadow lobbying complex.

David Jolly’s Clients Won Earmarks From His Old Bosses, Bill Young

David Jolly

David Jolly speaks during a candidate forum in Clearwater, Florida, February 25, 2014. (Reuters/Brian Blanco) 

This post was originally published at RepublicReport.com

David Jolly, the Republican congressional candidate vying for the special election in Florida next week, has not only made a career out of lobbying. Records reviewed by Republic Report show that Jolly’s clients won millions of dollars in taxpayer earmarks from his old boss, the late Representative C.W. “Bill” Young (R-FL), an appropriator known for his lavish use of the earmarking process.

These earmarks contrast sharply with the claims made by Jolly that he did not build his business career through political connections to his former employer.

“I did not build my practice around Mr. Young, not in any stretch,” Jolly told the Tampa Bay Times.

Two of the firms that hired Jolly as a lobbyist—BayCare Health Systems and Alakai Defense Systems—won lucrative earmarks from Young while paying Jolly to influence the committee where Young was a senior member.

In 2009, BayCare Health Systems retained Jolly and another former Young staffer named Douglas Gregory. Later that year, Young secured a $1 million earmark for BayCare Health Systems for “facilities and equipment.”

From 2008 through the beginning of 2010, Alakai Defense Systems, a sensor technology company for the military, retained Jolly as a lobbyist. Records indicate that during this period, Young awarded Alakai with over $2 million worth of earmarks.

The Honest Leadership and Open Government Act prohibits certain former staffers in Congress from lobbying their former employers for a period of time. As The New York Times recently reported, many former staffers have flouted the “cooling off period” ban by taking advantage of an array of loopholes in the law.

Jolly, who left Young’s staff to join the lobbying firm Van Scoyoc Associates in January of 2007, became a lobbyist just before the ban came into effect.

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“Yes, there are concerns raised when a former staffer appears to use his or her ties to his employer for personal gain,” says Jessica Levinson, associate professor at Loyola Law School in Los Angeles. ”The cooling off period prohibition is designed to prevent people from using their connections in government to obtain unfair or preferential treatment or access for private clients.”

“The idea,” says Levinson, is that “everyone, regardless of whether or not they are represented by former staffers or officials, should get a fair shot to persuade their officials.”

Read Next: Lee Fang writes that Obama’s newest pick for TPP trade post is a former SOPA lobbyist.

Obama Nominates SOPA Lobbyist for TPP Trade Post

Robert Holleyman

Robert Holleyman (AP Photo/Kevin Wolf)

This post was originally published at RepublicReport.org

This morning, President Obama nominated Robert Holleyman as deputy US trade representative. If confirmed by the US Senate, Holleyman will help lead the effort to pass the controversial Trans-Pacific Partnership trade deal.

Notably, Holleyman is a former lobbyist who led efforts to pass the Stop Online Piracy Act legislation, better known as SOPA, when he was leader of the Business Software Alliance. The SOPA debate (along with its sister legislation, PROTECT-IP, in the Senate) brought a spotlight on industry efforts to undermine Internet freedom through what many considered to be draconian intellectual property policy.

Critics have pointed out, the leaked TPP documents relating to TPP negotiations reveal that the United States is seeking to resurrect portions of the SOPA bill through the TPP, namely, holding Internet Service Providers liable for hosting copyright infringement and extending the copyright life of certain corporate-owned copyrights. As Susan Sell, a professor of political science at George Washington University, noted, the proposed TPP provisions suggest the deal will advance intellectual property rules that "could not [be] achieved through an open and democratic process."

During the SOPA debate, Holleyman was chief executive of the Business Software Alliance, a trade group for software companies including IBM. Holleyman commended then–Judiciary Chairman Lamar Smith for his work in sponsoring SOPA and for pushing for its passage. In 2012, as the bill worked its way through Congress, the BSA spent over $1.6 million on lobbying. After widespread outrage against the bill, which eventually failed, BSA withdrew official support and sought similar policy changes through other legislation.

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If the Senate approves Holleyman as the next deputy trade representative, he will have another opportunity to advance SOPA-style policy.

Last week, Republic Report broke several stories regarding the TPP, including bonuses paid by CitiGroup and Bank of America to officials also tapped by the administration to lead the TPP deal. We also reported on media companies and their lobbying efforts on the bill—which have been extensive, despite the lack of coverage media outlets are devoting to the issue.

Read Next: Lee Fang uncovers the shadow lobbying complex.

Chevron’s Lobbyist Now Runs the Congressional Science Committee

Chevron sign

(Photo courtesy of Charles Hathaway, CC 2.0)

This post was originally published at RepublicReport.org

For Chevron, the second-largest oil company in the country with $26.2 billion in annual profits, it helps to have friends in high places. With little fanfare, one of Chevron’s top lobbyists, Stephen Sayle, has become a senior staff member of the House Committee on Science, the standing congressional committee charged with “maintaining our scientific and technical leadership in the world.”

Throughout much of 2013, Sayle was the chief executive officer of Dow Lohnes Government Strategies, a lobbying firm retained by Chevron to influence Congress. For fees that total $320,000 a year, Sayle and his team lobbied on a range of energy-related issues, including implementation of EPA rules under the Clean Air Act, regulation of ozone standards, as well as “Congressional and agency oversight related to offshore oil, natural gas development and oil spills.”

Sayle’s ethics disclosure, obtained by Republic Report, shows that he was paid $500,000 by Chevron’s lobbying firm before taking his current gig atop the Science Committee.

In recent months, the House Science Committee has become a cudgel for the oil industry, issuing subpoenas and holding hearings to demonize efforts to improve the environment. Some of the work by the committee reflect the lobbying priorities of Chevron.

In December, the Science Committee, now chaired by Representative Lamar Smith (R-TX), held yet another hearing to try to discredit manmade global warming. In August, the committee issued the first subpoena in twenty-one years, demanding “all the raw data from a number of federally funded studies linking air pollution to disease.”

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Though Chevron has gone to great lengths to advertise a lofty environmental record, the company continues to break air pollution laws while quietly backpedalling on its prior commitments to renewable energy. A Bloomberg News investigation reported that Chevron estimated that its biofuel investments would return only 5 percent in profits, a far cry from the 15 percent to which the oil giant is accustomed, and quietly moved to shelve renewable fuel units of the company. In California, Chevron is battling the newly created cap-and-trade system for carbon pollution. And in states across the country, Chevron has lobbied and provided financial support to a range of right-wing nonprofits dedicated to repealing carbon-cutting regulations, including the low-carbon fuel standard.

Earlier this year, Dow Lohnes’ lobbying practice merged with Levick, a public affairs firm.

(HT: Sheila Kaplan)

Read Next: Lee Fang on new, under-the-table lobbying tactics

Farm Bill Cuts $8 Billion in Food Stamps, Preserves Handouts to Koch Industries

Farm Bill 2014

Senate Agriculture Committee Chairwoman Debbie Stabenow, D-MI, right, Thad Cochran, R-MS, second from right, and Senator John Hoeven, R-ND, center, just after Congress gave its final approval to the sweeping five-year farm bill, Tuesday, February 4, 2014. At left are Senator John Boozman, R-Ark., and Senator Amy Klobuchar, D-MN.  (AP Photo/J. Scott Applewhite)

After a conservative-led revolt against the Farm Bill, a five-year congressional funding program for agricultural and hunger programs, a deal will reportedly reach the president’s desk on Friday. The final iteration of the bill cuts $8 billion from food stamps, a key demand made by Americans for Prosperity, which aired advertisements and organized opposition to the initial Farm Bill because of the supposed waste of providing food assistance to needy families. Americans for Prosperity is controlled by the billionaire Koch brothers and their cohort. Koch groups claimed the Farm Bill serves “special interests and powerful corporations” over the taxpayers.

Yet, the final funding package contains a number of giveaways that benefit Koch Industries’ bottom line:

Biomass Subsidies: The Farm Bill preserves $881 million in mandatory spending for biomass energy, a program that Koch Industries’ timber subsidiary Georgia-Pacific has used to to extract government subsidies. Georgia-Pacific applied and qualified for the Biomass Crop Assistance Program for its facilities in Alabama, Mississippi, Louisiana, Georgia, Oregon and Florida. Lobbying reports from Koch Industries show that the company has pressured Congress on the Farm Bill, specifically on the BCAP program. Records also show that Koch Industries executive Deborah Baker asked Department of Agriculture officials to expand BCAP forestry eligibility.

• New Clean Water Act Exemption: The Farm Bill enacts a measure that ensures runoff of pesticides and other chemicals from forestry sites may not be regulated under the Clean Water Act as industrial pollution. The Farm Bill includes an amendment that would define the “EPA’s treatment of forestry operations as non-point sources of pollution under the Clean Water Act.” A bipartisan group of legislators sponsored the forestry amendment, which Wild Oregon warns will overturn “a recent court ruling that found that pollution originating from active logging roads be treated similarly to other industrial activities.” The group says the amendment poses “a serious risk not just to the [Nestucca River], but to countless other rivers and streams in Oregon that have been damaged by poor logging and road building practices.” Koch Industries’ Georgia-Pacific signed on with other companies in lobbying for this amendment to the Farm Bill.

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Koch Industries was also joined by other energy and timber corporations in lobbying for the expansion of biomass energy programs. Timber companies and their trade associations, particularly in the Pacific Northwest, came together to demand the Clean Water Act exemption.

Recipients of food stamps, also known as the Supplemental Nutrition Assistance Program (SNAP), had few resources to influence Congress. Although several grocery and convenient store industry groups pushed back against cuts on SNAP, defenders of food stamps were largely outgunned during the debate. Anti-poverty activists say the deep cuts in the food stamp program will amount to a $90 monthly reduction for many families.

 

Read Next: When Americans share their stories of living in poverty, who in Congress listens?

Alberta Government Quietly Funded Researchers Behind ‘Independent’ Report Boosting Keystone XL

Alberta Tar Sands

An aerial view of crude oil production in Alberta, Canada. (Flickr, Howl Arts Collective)

Before the State Department released its controversial Environmental Impact Study last week, a consulting firm called IHS CERA primed the news media by releasing its own study last year claiming that the Keystone XL wouldn’t make a substantial difference in emissions. The report was released as an “independent” study. TheNation.com filed a Freedom of Information and Protection of Privacy Act request to the Alberta government, and found that taxpayers in Canada paid IHS CERA hundreds of thousands of dollars.

The heavily redacted contract, a version of which can be found here, provides $325,000 from the government of Alberta to IHS CERA. In addition, public budget documents from Alberta reveal that taxpayers in Canada have provided IHS with more than $545,426 in payments over the last year for energy-related work.

The Alberta government has been one of the most aggressive proponents of the pipeline. Last year, Alberta retained two DC lobbying firms with strong ties to Secretary of State John Kerry, Mehlman Vogel Castagnetti and Rasky Baerlein Strategic Communications, to push for speedy approval of the Keystone XL.

Logo_IHS_CERA_190809

Echoing the State Department EIS released last week, the IHS CERA claimed that even without the Keystone XL, Canadian oil sands would be developed by other means. “Even if the Keystone XL pipeline does not move forward, we do not expect a material change to oil sands production growth,” claims the authors.

However, assessments of the market by Toronto-Dominion Bank, Royal Bank of Canada, Deloitte, Goldman Sachs and other leading financial analysts have found that the Keystone XL is critical for the development of the high-carbon oil sands market.

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Notably, even Jackie Forrest, one of the co-authors of the 2013 IHS CERA report, claimed previously that without the Keystone XL, oil sands development “could stall for lack of new demand.” Contradicting her most recent report, Forrest told the Oil & Gas Journal that, “based on our view of growth in Canadian oil sands and tight oil production, over the next five years North America will need both the Keystone XL and the Enbridge projects in order to create enough takeaway capacity to prevent bottlenecks.”

As critics have noted, the State Department’s EIS was also marred by a serious conflict of interest. The private firm tapped to conduct the study, ERM, misled the State Department by obscuring its financial ties to TransCanada, the largest beneficiary of the Keystone XL pipeline.

 

Read Next: Keystone XL and Tar Sands: Voices From the Front Lines.

IRS Dark Money Reforms Would Curb Voter Registration, Leave Lobbying Groups Untouched

The exterior of the Internal Revenue Service building. (AP Photo)

President Obama could take immediate steps to begin to clean up the dark money problem in American politics. He could, for instance, issue an executive order requiring all government contractors to disclose their contributions to 501(c) advocacy groups, a decision that would impact hundreds of major firms.

Instead, the administration’s response to the flood of dark money in recent elections is a set of new IRS regulations aimed only at addressing some activity taken by 501(c)(4) “issue advocacy” groups. The new rules restrict “participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office.” The rules also restrict C4 organizations from engaging in so-called “candidate-related” communications.

Though put forth with purportedly good intentions, this proposed rule would do little to deter powerful individuals or large companies from engaging in limitless dark money electioneering. The $400 million in undisclosed campaign money spent by the Koch network in 2012, revealed recently by Robert Maguire of the Center for Responsive Politics and Matea Gold of The Washington Post, showed that deep-pocketed donors have been quick to set up 501(c)(6) trade associations, which would not even be impacted by the rules as they stand now. Like 501(c)(4) issue advocacy organizations, 501(c)(6) trade groups may take unlimited donations and engage in unrestricted partisan or election activity. Trade groups are often formed by industry associations or coalitions of like-minded businesses. One of the largest of the new Koch groups, called Freedom Partners, is a 501(c)(6) trade association.

As a result of the Citizens United Supreme Court decision, 501(c)(6) trade associations have been front and center in coordinating corporate-funded, fully undisclosed, partisan advocacy. Organizations such as the US Chamber of Commerce and the American Petroleum Institute have taken advantage of the new election landscape to provide corporations with a veil of secrecy in influencing American elections. And the proposed regulations on 501(c)(4) organizations would do nothing to change that.

Let’s say, for the sake of argument, that a candidate who feels strongly about regulating the fossil fuel industry and addressing climate change ran for US Senate. In response, oil company X sought to prevent this candidate from being elected, but did not want the negative publicity associated with dumping millions of dollars into an election. Oil company X could simply route the money through a 501(c)(6) trade group, like the US Chamber of Commerce or the National Federation of Independent Businesses, which could then air the negative campaign advertisement independently or through another third party. The voter would have no idea where the money was coming from.

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While certain organizations have been created or expanded in the last two election cycles to exploit the current system for 501(c)(4) nonprofits, namely groups like Americans for Prosperity, Crossroads GPS and, on the Democratic side, Priorities USA, most 501(c)(4) nonprofits are community groups that have little resources and exist to promote genuine nonpartisan advocacy.

Under the administration’s new rule, the small 501(c)(4) groups would probably be hurt the most, and at least in the short term, civic engagement will take a hit. The “candidate-related” communications banned in the new rules include nonpartisan voter registration and “get-out-the-vote” drives.

To critics, the rule will reduce the role of activists (like the League of Women Voters) while allowing the wealthy to simply change tax status and continue operating in the dark. “The big players,” Alliance for Justice president Nan Aron wrote, “will hire lawyers and accountants to help them avoid the rules.” Moving to better police the activities of political nonprofits is desperately needed. But any change should aim to level the playing field and promote transparency for all.

Read Next: Lee Fang on who is leading the movement to privatize education.

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