Does business group's use of "dark money" for its political action committee follow state ethics rules?

The Texas Association of Business, the state’s de facto chamber of commerce, hasn’t been reluctant to talk about its opposition to last year’s “bathroom bill” that sought to define which bathrooms transgender people could use, its criticism of state-based immigration laws or its eternal skepticism of higher taxes and expanded government regulations.

The group has not been as forthcoming about who’s funding its political action committee.

For years, the business association's political arm has received hundreds of thousands of dollars' worth of corporate “dark money” contributions — amounting to nearly half of its receipts since 2000 — from an affiliated nonprofit that doesn’t disclose its donors, a Texas Tribune investigation has found.

The nonprofit corporation, known as the Committee to Inform Voters on Issues and Candidates (CIVIC), has provided at least $822,000 in donations to the TAB Political Action Committee since 2003, according to a Tribune analysis of filings at the Texas Ethics Commission. That’s 47 percent of the $1.7 million the group has taken in since the state began making digital campaign finance records available nearly two decades ago.

The contributions from the nonprofit spiked in 2017 to a record $127,000, records show.

Elsewhere, the Tribune identified more than $100,000 in “in-kind” political donations to state candidates that were not properly disclosed. The TAB reported which vendors they paid for mailers and other services but failed to say which candidates were being supported. The association gave the Tribune a list of candidates it supported with in-kind donations — they were mostly moderate Republican House members — and said it would amend its reports in subsequent filings.

The use of dark money has exploded nationally in recent years, prompting calls in the Texas Legislature for tighter rules. But top state leaders, including Gov. Greg Abbott and Lt. Gov. Dan Patrick, have resisted calls for disclosure, and former Gov. Rick Perry famously vetoed a dark money disclosure bill in 2013.

There’s no one definition for dark money, but the Center for Public Integrity in Washington says the term is often applied to politically active nonprofits like TAB’s CIVIC because “these groups do not have to disclose the sources of their funding.”

The business association’s lawyer, Ross Fischer, says it’s not fair to call the financial support the TAB gets from its nonprofit “dark money” because that money is used to defray its PAC’s administrative costs — not to elect a certain candidate or influence the defeat or passage of a legislative measure.

“It doesn’t influence the outcome of an election,” Fischer said. The TAB also says that, as the law requires, there has been no co-mingling of the anonymous corporate dollars raised by its nonprofit and the “hard” dollar donations that are disclosed by its PAC and can clearly be spent to elect or defeat candidates.

Meanwhile, it's unclear whether TAB’s explanation of how it uses anonymously obtained money would pass muster with the Texas Ethics Commission, which is supposed to police campaign finance reports but is often hamstrung by the weak oversight powers Texas lawmakers bestowed upon the agency.

Ian Steusloff, the Texas Ethics Commission’s top lawyer, said he could not discuss the TAB’s particular situation, but generally speaking, he said any group that counts political giving as one of its principal purposes could fall under a relatively new rule requiring disclosure of certain dark money proceeds funneled through entities such as nonprofits — even if the ultimate use is deemed “administrative.”

Steusloff pointed to a 1993 agency opinion holding that “contributions to defray the administrative costs of a … [PAC] are political contributions.”

“An expenditure made to administer a political committee is a political expenditure because that furthers the political purposes of that committee,” Steusloff said. “Administrative expenses for a political committee — they are political expenditures.''

The TAB’s use of corporate money has landed the organization — which has over 4,000 members statewide and advocates for pro-business policies and candidates — in legal trouble before. The group played a central role in the years-long controversy resulting from an aggressive-but-successful effort to elect a Republican Texas House majority in 2002. TAB wound up pleading guilty to a misdemeanor violation for making an unlawful campaign expenditure related to its use of corporate money; the association paid a $10,000 fine. 

The distinction between political and nonpolitical activities may be lost on the average voter. The TAB says the anonymous nonprofit money can and increasingly will be used by the TAB and its affiliates to fund a whole array of voter communications, including legislator “scorecards” or “issue ads” on hot-button topics playing out in this year’s primary races. The “issue ad” description would cover mailers and TV spots, for example, warning voters that passage of a “bathroom bill” could inflict a terrible blow on the Texas economy.

“Just look at what we faced in this last session,” said TAB President Chris Wallace. “The bathroom bill, the 'sanctuary cities' bill, the economic development incentives, eminent domain — all of the really contentious business issues that we had to face in the last session. Our members are calling on us to become more and more active.”

Wallace said as TAB takes on an increasingly aggressive role in the 2018 elections, it is planning to reorganize the way it uses both anonymous corporate money and the more traditional donations to its political action committee. CIVIC will stop sending money to the PAC and return to its core mission of voter engagement and education as part of a newly-created nonprofit called TXBIZ Votes, and TAB will take over a more traditional role of paying the costs of administering its PAC, officials said.

One thing that won’t change is the widespread use of anonymous corporate donors because, as TAB Chief Financial Officer Melissa Collins noted: “That’s easier money to raise.”

Why?

For one thing, the money comes from a corporation and not from any individual’s pocket. Plus, assuming the contributions meet certain criteria, they can be deducted as a business expense. And to the extent they are used by a PAC for permissible administrative expenses — a long list that includes utilities, rent, office furniture, legal fees and more — the secret corporate dough frees up other dollars that can be used directly in electoral battles. The dark money makes the hard money go farther.

Perhaps more importantly, no one will hassle the corporate donors over their involvement in controversial issues like state immigration crackdowns or bathroom regulations because no one will know who they are.

"You know how contentious these issues are,” said Fischer, TAB’s lawyer. “You'd have people out there trolling these contributors for making a monetary contribution in support of CIVIC. They'd be subjected to harassment simply for giving to CIVIC to promote issue advocacy or offset administrative expenses."

But in a world where corporations and wealthy individuals secretly fund — directly or indirectly — such a large amount of political messaging during an election, there is a loser, says one transparency advocate: the voter.

“Disclosure ... is truly the only protection that voters have when it comes to weighing candidates,” said former state Ethics Commissioner Chase Untermeyer. “They may be inclined to support somebody or disinclined to support somebody based upon what contributions they accept. Or it may make no difference. But the key is that information be available to the voter.”

 The Texas Association of Business has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.