The idea seemed simple: Create a nonprofit, collect cash and send more than $200,000 for TV ads promoting an education overhaul by schools chief Tom Luna.
The advantage for camera-shy donors was anonymity because a 501(c)4 nonprofit such as Education Voters of Idaho can shield backers’ names from public scrutiny, say its leaders, who include lobbyist Phil Reberger, a former chief of staff for Gov. Dirk Kempthorne, and Debbie Field, campaign manager for Gov. Butch Otter.
The strategy backfired when a judge sided with Secretary of State Ben Ysursa and ordered the nonprofit to reveal the names of the donors. Field, who late Tuesday filed paperwork listing her as EVI chairman, said the group will disclose its contributors and expenditures by Wednesday’s 3 p.m. deadline, backtracking on an earlier pledge to appeal.
The issue of how campaign disclosure laws apply to nonprofit groups isn’t confined to the Gem State. While ruling in the Education Voters of Idaho case, 4th District Judge Michael Wetherell cited several precedents, including a 2010 decision by the 9th U.S. Circuit Court of Appeals forcing an anti-abortion group in Washington state to disclose donors, despite free-speech claims under federal law similar to those of the Idaho group.
Disclosure disputes are on the national radar, too, with the Internal Revenue Service scrutinizing 53-year-old rules governing nonprofit “social welfare organizations” that have increasingly entered the political fray.
“We will consider proposed changes in this area,” Lois Lerner, director of IRS Exempt Organizations, wrote in July.
Fred Wertheimer of Democracy 21, a campaign finance openness advocate, wants the IRS to clamp down on what he calls the “dark money” sloshing around campaigns.
Among the nonprofits in his crosshairs is Crossroads GPS, run by former George W. Bush staffer Karl Rove. Since 2010, Crossroads GPS has reported to the IRS that it has collected millions of dollars in donations, but it has not had to disclose donors’ identities.
“There is a real problem here, in general terms, with the way 501(c)4s are being used to mask donors who are engaged in political activities,” Wertheimer said from his Washington, D.C., office.
Crossroads GPS contends that Wertheimer is singling out its activities while ignoring groups with liberal political leanings that operate the same way. Crossroads spokesman Jonathan Collegio also downplayed the significance of the IRS scrutiny.
“I think a lot of people are reading much more into her words than she actually meant,” Collegio said of Lerner. “There are a lot of groups that operate this way.”
In Idaho, the scrutiny involved an issue, not a candidate. Luna’s 2011 education changes limit union bargaining power, enact merit pay, require students to take online classes to graduate and provide laptops for educators and high schoolers. Voters will weigh in on Tuesday.
Education Voters of Idaho was launched on Aug. 16 — 40 days before giving $200,350 to a political action committee for commercials touting the Students Come First laws.
Reberger and Field were enlisted as board members. Field is Idaho’s former drug czar, and Reberger is a regular political player. They provided the group’s directors, John Foster and Kate Haas — two former aides to Democratic U.S. Rep. Walt Minnick — with additional credibility to appeal to deep-pocketed donors.
Their attorney, Christ Troupis, argued that the group has a far broader mission of promoting education reform beyond just this November’s ballot measures. IRS rules for nonprofits entitle it to First Amendment protections and discretion for its donors, he said.
In court Monday, Troupis told the judge that Ysursa’s disclosure demand sets a dangerous, free speech-chilling precedent.
Ysursa insisted that Education Voters of Idaho is simply a shell to hide campaign spending.
Nothing about its nonprofit status, he argued, relieves it of reporting obligations under the state’s voter-approved Sunshine Act campaign disclosure law, which came about in the post-Watergate 1970s.
In ordering disclosure, the judge drew on the U.S. Supreme Court’s 2010 “Citizens United” ruling, writing that although justices rejected some campaign spending limits, they didn’t hold disclosure requirements unconstitutional.
“Idaho adopted the Sunshine Act,” Wetherell said in court. “... And that law says: We want to know where the money is coming from.”
It’s unclear just how the order declaring Education Voters of Idaho a political committee will affect its tax-exempt nonprofit status. The IRS says the activities of 501(c)4 groups must be primarily educational.
Karen Connelly, an IRS spokeswoman in Denver, said the agency doesn’t comment on specific cases.
Since the secrecy issue emerged Oct. 9, scrutiny of the Students Come First laws has grown even more intense — not necessarily over the merits of the reforms, but rather on why donors often prefer the shadows.
Ken Burgess, a lobbyist running a separate pro-reform group, Yes for Education, has disclosed that organization’s backers. He worries about all of the negative attention so close to Election Day.
“I am concerned that this whole issue has been a distraction,” he said.