Treasury Department Opens Massive Loophole That Makes It Easier To Launder Foreign Money Into Our Elections

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Treasury Department Just Opened Massive Loophole that Will Make it Easier for Russia and other Foreign Interests to Launder Unlimited, Undisclosed Illegal Contributions into Federal Elections

Statement of Democracy 21 President Fred Wertheimer

Yesterday, the Treasury Department opened a massive loophole that will, as a practical matter, allow Russia, Russian oligarchs and other foreign interests to launder unlimited amounts of undisclosed, illegal contributions into federal elections.

This decision is an unmitigated disaster for our political system and will make it easier for Russia and Russian agents, for example, to get away with spending huge amounts of illegal, undisclosed money through 501(c)(4) advocacy groups to manipulate our elections.

Furthermore, Treasury has opened this massive loophole for foreign money at a time when the Mueller investigation has just publicly documented in meticulous detail the role that Russia played in manipulating the 2016 presidential election. Director of National Intelligence Dan Coats has said the Russian efforts to interfere in our elections are ongoing. We should be strengthening our protections against these efforts, not weakening them.

According to a Reuters report, the Treasury Department said “it will no longer require certain tax-exempt organizations including politically active nonprofit groups, such as the National Rifle Association and Planned Parenthood, to identify their financial donors to U.S. tax authorities.”

Under current law, any foreign government, company or individual can give unlimited amounts to these 501(c)(4) advocacy groups. The advocacy groups, however, cannot spend any money they receive from foreign nationals to influence federal elections. They must use non-foreign money to pay for election activities

Until yesterday, these advocacy groups had to disclose to the IRS, but not to the public, their donors of $5,000 or more. Thus, the IRS had the information necessary to make sure that if an advocacy group was receiving money from a foreign source, that money was not spent to influence federal elections.

But now, thanks to this irresponsible move by the Treasury Department, nonprofit advocacy groups no longer have to report their donors to the IRS. As a result, there is no way to determine if a 501(c)(4) advocacy group that is spending money to influence federal elections is taking that money from Russia, from Russian agents, from China or from any other foreign interest.

Demonstrating that he had no idea of the damage he was doing, Treasury Secretary Steven Mnuchin said yesterday, “the IRS simply does not need tax returns with donor names and addresses to do its job in this area.”

But the stark reality is that by eliminating donor disclosure to the IRS, Secretary Mnuchin and the Treasury Department just eliminated any practical way for the government to protect against non-profit advocacy groups being used by foreign governments, foreign companies and foreign individuals to launder tens of millions of dollars in illegal, undisclosed foreign money into our elections.

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Released: July 17, 2018