Dark money advocacy groups are required to disclose little about their donors, but two left-wing organizations fighting President Donald Trump's cabinet nominations are using a tax law loophole to make their finances even more opaque.
Allied Progress claimed credit on Wednesday for Andy Puzder's withdrawal as Trump's nominee for labor secretary. It has also battled Trump nominees to lead the Department of Commerce and the Treasury.
The group's "Trump Transparency Project" is "dedicated to holding President-elect Donald Trump’s transition and eventual administration accountable for its economic appointments and policies that betray hardworking Americans," its website says.
Allied Progress's advocacy arm ran television ads explicitly opposing Puzder and Steve Mnuchin, who was confirmed last week to lead Treasury. It also released opposition research dossiers, organized Senate letter-writing campaigns, and launched websites to house its grassroots lobbying efforts.
OpposePuzder.org, the micro-site targeting the former Labor nominee, now redirects to a page opposing his replacement, former U.S. Attorney Alexander Acosta.
The resources that Allied Progress and its advocacy arm are devoting to their anti-Trump efforts, as well as the sources of that money, are virtually unknowable due to the groups' arrangements with two left-wing organizations that effectively hide their finances from public view.
Allied Progress is not technically a standalone organization. It is organized under the auspices of the New Venture Fund, a left-wing "fiscal sponsor" that handles legal compliance and logistics for Allied Progress and more than 100 other groups organized as tax-exempt 501(c)(3) charities.
Allied Progress Action, the advocacy arm that has been running television ads opposing Trump nominees, is part of a similar organization, the Sixteen Thirty Fund, that houses 501(c)(4) "social welfare" advocacy groups.
Neither Allied Progress nor its Action arm are required to disclose their donors. Mike Czin, an Allied Progress spokesman with the public relations firm SKDKnickerbocker, would not say who its financial supporters are.
While that is fairly standard for a political advocacy group, Allied Progress' relationships with its fiscal sponsors provide an additional layer of opacity to its finances.
Generally donors to nonprofit groups can be ascertained from financial filings by the groups that donate to them. Charitable foundations and labor unions, for instance, are required to disclose grants and contributions to groups such as Allied Progress.
However, because the group is not a stand-alone organization but a "project of the New Venture Fund," as its website notes, its donors can simply list the fiscal sponsor—NVF or Sixteen Thirty, as the case may be—rather than Allied Progress itself on their respective disclosures.
The arrangement makes it difficult to trace the donors financing Allied Progress' anti-Trump advocacy.
Labor union disclosures show that unions donated $860,000 to the Sixteen Thirty Fund and about $134,000 to the New Venture Fund in 2015 and 2016. The unions were not required to (and did not) disclose which groups they were funding through donations to their fiscal sponsors.
The financial ambiguity that such arrangements create has recently drawn scrutiny for the ways in which it can mask the identities of donors to nonprofits involved in political or policy advocacy.
"The growth of anonymous giving is a big problem during a moment when philanthropy has become more politicized," according to David Callahan, the founder and editor of online journal Inside Philanthropy.
"Intermediaries stand at the center of a new ‘shadow giving system' that has made a full end-run around yesterday’s philanthropic reporting requirements," Callahan wrote in a column last week.
The intermediary system can also help groups circumvent restrictions on the funds that nonprofits can spend on grassroots advocacy and lobbying activities, both of which are subject to strict thresholds under federal law.
Under a fiscal sponsorship agreement, it is the sponsor, not the specific groups that it houses, that is subject to those limitations. So an NVF-backed group, for instance, could theoretically devote all of its resources to lobbying, far exceeding federal limits on stand-alone 501(c)(3) groups, as long as other NVF-backed groups that conduct little or no such activity sufficiently offset that spending.
It is not clear what portion of Allied Progress' time and resources go towards grassroots advocacy, in part because it is not required to independently file financial reports with the IRS that would detail that spending.
Czin would only say that the group "follows all relevant IRS guidelines that govern 501(c)(3) activity."
He declined to provide details on the breakdown of the group's activities, only noting that ads explicitly calling on senators to oppose Trump nominees were conducted by the group's 501(c)(4) "Action" arm.
Neither NVF nor Sixteen Thirty responded to requests for comment on their relationships with Allied Progress.
Both groups are projects of Arabella Advisors, a private company that helps wealthy individuals and institutional funders manage large charitable giving portfolios. The two groups reported paying Arabella about $13.4 million for management consulting services in 2015, the latest year for which their annual tax filings are publicly available.
According to Callahan, the rise of "middlemen" such as NVF and Sixteen Thirty has steered large sums to groups that serve as financial pass-throughs, rather than actual sources of charitable giving.
"Middlemen are grabbing an ever-bigger slice of the wealth that is set aside for charity," he wrote. Members of this "vast new industry of philanthropic consultants … look nothing like the beneficiaries of charitable giving that we normally think of."
Published under: Trump Administration