Privacy Protection Act criticized as conduit for “dark money”

Sponsors call it a method to protect the identity of donors to nonprofits such as Habitat for Humanity. Critics say it could open the pathway for out-of-state “dark money” to flow into political campaigns.

Gaining momentum in the General Assembly, the Personal Privacy Protection Act would prohibit the release of information for all 501(c) organizations, those holding nonprofit, tax-exempt status under federal IRS code.

Sponsored by Rep. Ryan Williams, R-Cookeville, House Bill 159 passed the Civil Justice Committee Wednesday on a voice vote and moves on to the Government Operations Committee for consideration. The Senate State and Local Government Committee voted 6-2 Tuesday to send SB1608 to the Calendar Committee to be scheduled for a floor vote.

Williams told the committee Tuesday the legislation would not change disclosure requirements for political action committees. He explained, though, that as a member of the Habitat for Humanity Board, he found that private donors want their identities to remain anonymous to avoid being hounded for money.

“We’re just making sure the information stays confidential and doesn’t get released to the public,” Williams said. 

Under an amendment adopted Wednesday, the measure also would affect donations to private foundations for state universities, such as Tennessee Tech and Austin Peay, according to Williams.

The Comptroller of the Treasury would have access to the information for audits and investigations. But otherwise, it would not be available as a public record under the state’s Open Records Act, according to the legislation.

Rep. Mike Stewart, D-Nashville, raised questions Wednesday about whether the bill would allow out-of-state donors, such as a Colorado millionaire, to give money to a nonprofit political entity in Tennessee without public disclosure.

“I think you’re potentially creating a dark money situation where people from outside the state could affect our affairs,” Stewart said.

Williams responded that it wouldn’t, although he did acknowledge the measure applies to all 501c organizations. He didn’t know whether they might include political entities, even though they could include trade organizations and social welfare groups.

Sen. Paul Bailey, a Cookeville Republican sponsoring the bill’s Senate version, echoed Williams’ comments in an interview with the Tennessee Lookout. He contends donors who make large contributions don’t want their names to wind up in print to avoid being solicited by other groups “to write checks.”

“This is not about trying to protect dark money from flowing into organizations but just basically trying to give protection to those that are making donations,” Bailey said.

Sen. Sara Kyle, a Memphis Democrat, raised questions about the legislation, saying it could lead to more charity fraud in Tennessee by hurting state officials’ ability to police “illegitimate charities.”

“I also have concerns that this law could be used to further conceal the identity of special interest donors who are paying for partisan campaign activity through political nonprofits, labor organizations or chambers of commerce. Personal privacy is important, but the public wants accurate information about who is spending money to influence our elections, not less,” Kyle said in a statement.

Tennessee’s bill is similar to measures passing nationally, all linked to the American Legislative Exchange Council, a conservative group that puts together template legislation to create a national movement, according to the Campaign Legal Center, a campaign finance watchdog group.

Oklahoma’s legislature passed a measure nearly identical to Tennessee’s bill in 2020 allowing organizations with 501(c) status, including labor organizations, social groups and chambers of commerce to sidestep public disclosure of donors, even though they participate in campaign activities, according to the Campaign Legal Center. Arizona, Mississippi, Utah and West Virginia have enacted laws with similar language, and South Dakota followed this year. Iowa and Nebraska legislatures are trying to pass comparable bills.

These measures pile on top of Citizens United v. Federal Election Commission, a 2010 decision by the U.S. Supreme Court allowing corporations to make “independent expenditures” in elections, based on the premise that they hold the same status as an everyday citizen.

Austin Graham, legal counsel for Campaign Legal Center’s state and local reform program, terms it a “concerted effort” by state lawmakers to limit the ability of any state or local entity to require meaningful disclosures from those who support and fund nonprofit entities, which can be heavily involved in political campaigns.

“These kinds of laws and this sort of bill we’ve seen in Tennessee attempt to really undercut the public’s right to transparency and information about groups that are trying to get candidates elected, trying to get ballot measures passed, trying to influence legislation. It’s definitely an alarming trend,” Graham told Tennessee Lookout.

Delving into the details is crucial with this type of legislation because a 501(c) entity isn’t necessarily a church or charity but could be a trade association, labor union or social welfare group, all of which spend heavily on political advertising and engage in lobbying activities, Graham pointed out.

Prohibiting disclosure of their funding sources cuts off a “critical source” of information for the public to determine who is behind lobbying efforts, campaigns and ballot efforts, he said.

The effects are “kind of murky,” Graham said, because bill sponsors don’t seem to know how far the legislation goes. Most of the laws are fairly new, too.

For example, Graham said, if the bill becomes law in Tennessee, it is unclear whether the Registry of Election Finance will be able to investigate and compel the production of records related to political activities of a nonprofit entity to determine whether they need to register and file reports as a political campaign committee, he added. Typically, groups that raise $1,000 to donate to candidates are required to register, he said.

“At the very least, it creates this apparent conflict with the duties of campaign finance officials in Tennessee, if under existing laws, all of a sudden you have this whole new body of law saying … no public agency can require the production of personal information related to supporters of a nonprofit,” Graham said.