‘Dark money’ rule faces legal challenges
Nonprofits fight regulation, status similar to PACs
AUSTIN — Texas’ controversial “dark money” regulation, intended to bring some anonymous political spending out of the shadows, is facing renewed pressure from politically active nonprofits ahead of the 2016 election cycle.
Two groups are waging separate lawsuits against the Texas Ethics Commission to strike down the rule in an attempt to allow all 501(c)(4) nonprofits to continue keeping their donors secret during the upcoming state primaries in March and beyond.
Meanwhile, the commission, aware that a federal judge will have the final word, has been working to amend the rule by tweaking what some of its members have described as “potential weaknesses” that could be exposed in court.
Different purposes
The state’s top campaign finance regulator has even acknowledged he’s not sure the rule will withstand scrutiny of a federal judge.
At issue: When and how the state can determine that a 501(c)(4) nonprofit should be regulated like a political action committee, which is required to disclose its sources of money.
These type of nonprofits are allowed to spend money in an election independent of candidates and do not have to reveal who is funding the efforts.
The commission last year passed a rule that would trigger PAC status and disclosure requirements for a politically active nonprofit if more than 25 percent of their total contributions or expenditures in a calendar year are used for electioneering.
The groups suing have said that Texas is trying to label them as PACs when their main purpose is not to support or oppose candidates. They’ve argued in court documents that the rule could impose a “chill” on their future election activity.
Both lawsuits were filed more than a year ago, but there’s been little action in either case.
That changed earlier this month when a lawyer for a small politically active nonprofit called Lake Travis Citizens Council asked a federal judge in Austin to immediately block the dark money regulation, contending it “infringes the free speech and associational rights of individuals and organizations.”
Increasing urgency
A lawyer for the other nonprofit suing the commission said his group is trying to work in good faith with regulators. But he warned that if regulators are unwilling to make certain changes, they’ll also ask a judge in coming months to toss the rule.
“Right now we’re very early in the election season, but the urgency is increasing as time passes. That’s true for a large number of groups,” said Andrew Grossman, a lawyer for the Texas Home School Coalition Association, which filed the lawsuit. “There will be an injunction if the commission continues to follow the current approach, and the law will be blocked.”
The commission’s regulation, and the subsequent legal challenges, highlight just how the issue of politically active C4 organizations and their anonymous donors has been thrust to the forefront of campaign finance reform efforts in Texas.
A sweeping ethics reform bill broke down in the final days of the Legislature earlier this year after the House and Senate failed to agree on the issue.