Analysis: Personal Privacy Protection Act protects donors to charities—and to lobbying groups

The Personal Privacy Protection Act could have been limited to charities, granting greater privacy rights to people who donate to places such as the Humane Society.

But it was not.

The Act, sponsored by Sen. Paul Bailey, R-Sparta, applies to all 501(c) nonprofits. That includes those that spend money to influence politics.

Bailey said he wants to allow people to donate to charities without being “harassed” and “targeted” by other nonprofits after their information appears in public records. He said nonprofits comb through those records in search of potential donors.

“When I think about this bill, I think about colleges that are raising money for projects, or they have individuals who are wanting to make contributions to those colleges (and) remain anonymous,” Bailey said in an interview. “And some people don’t want to be targeted.”

The NRA and Planned Parenthood, and other nonprofits engaged in lobbying, would still be required to follow campaign finance law and disclose donors. But in many cases, it would be harder to follow the money—and, consequently, harder to know who your representatives are listening to—if Bailey’s bill becomes law.

In large part, that’s because political nonprofits and “dark money” groups are largely unregulated by the U.S. Internal Revenue Service, and many exploit a loophole allowing them to spend money on politics without filing disclosures.

That’s why Democrats and transparency advocates oppose the bill, framing it as the “Dark Money Protection Act.”

(As for the way the Democrats frame it, Bailey said: “Well, I categorically disagree with them.”)

So what exactly is “dark money,” and why is it a big deal?

Untraceable campaign spending

In short, dark money is campaign spending that can’t be traced all the way back to an identifiable source.

Liberal and conservative groups do it. According to the Brennan Center for Justice, over a billion dark dollars have been spent in federal elections since 2008. The very fact of its darkness means there could be hundreds of millions more in untraceable political spending, the Brennan Center estimated.

According to the Center for Responsive Politics, a pro-transparency organization which provides and analyzes campaign finance data: “Whenever money is spent in a political election with the purpose of influencing the decision of a voter and the source of the money is not disclosed, it is dark money.”

Another way campaign donors shield their identities is through limited liability companies, or LLCs.

“This lack of accountability and transparency have helped disguise the source of millions of dollars in political spending,” CRP states in an explainer. “Shell companies make major contributions to super PACs each election cycle, leaving voters in the dark while the recipient often knows the donor’s true identity.”

“Abdication of oversight”

There are lots of different types of nonprofits, which enjoy some tax exemptions in exchange for (loosely-defined) service to the public. Some are prohibited from donating to campaigns, while others are allowed to do so in exchange for greater transparency.

Dark money often comes from nonprofits that are not registered as lobbying or political organizations. Many of them use a loophole that allows campaign spending as long as that’s not the nonprofit’s primary purpose.

The names of these nonprofits show up on politicians’ and PACs’ campaign reports, but they’re not required to file their own reports and choose not to disclose where their money comes from. If the spending isn’t directly affiliated with a candidate or PAC, that spending won’t show up on any financial disclosure.

Furthermore, dark money groups have faced little scrutiny from the IRS, according to a 2019 ProPublica investigation. Congress chipped away at the agency’s budget for years, allowing an “abdication of oversight.”

“The IRS’ attempts to police this class of nonprofits have almost completely broken down,” the report states. Despite thousands of complaints since 2015, “The agency has not stripped a single organization of its tax-exempt status for breaking spending rules during that period.”

Bailey said it may be a good idea for the General Assembly to “consider” tighter regulation of dark money, but he said dark money would flow regardless.

“Let’s face it, there’s always gonna be bad actors,” Bailey said. “There’s always going to be that element out there no matter what we do.”

“Danger of breeding corruption”

The bill prohibits the state from requiring or disclosing some information, and certain state employees would face criminal penalties for leaking protected information (a previous version of the bill would have allowed anyone whose information was released by a state employee to sue them for thousands of dollars).

The bill’s House sponsor is Rep. Ryan Williams, R-Cookeville. It’s scheduled came up for a hearing in the House Government Operations Committee on Tuesday but was deferred until April 12. It passed the House Civil Justice Committee and the Senate State and Local Government Committee last week.

Sen. Jeff Yarbro, D-Nashville, said the bill poses a “danger of breeding corruption.”

He said the campaign finance system since the U.S. Supreme Court’s Citizens United decision “fuels distrust” and “contributes to people’s belief that the system is rigged against them.”

“I think citizens don’t trust the way that money runs through the system without that visibility,” he said. “(Voters) don’t have the opportunity to understand the bias of the messages they’re receiving.”

“I think if this were all about protecting charities, the bill would be focused on protecting charities,” Yarbro said. “But it’s not.”