Shadow Money Magic: Five Easy Steps That Let You Play Big in Politics, Hide Your Donors and Game the IRS

by - April 16, 2013

"Step 1: Create a 501(c)(4) tax-exempt group, and spend away
The first and most critical step, for those who want to be politically active while keeping their donors out of the public eye, is to form a group under the 501(c)(4) provisions of the Internal Revenue Service. Why a 501(c)(4) and not a super PAC -- another type of group that's allowed to raise and spend unlimited amounts of money? Secrecy. These groups are regulated by the IRS, where confidentiality is routine, rather than the FEC, where disclosure is the rule.

The only catch? These nonprofit organizations are supposed to have "social welfare" as their primary mission. Fortunately for these groups, the definition of "primary" is a little loose. In practice, though not in regulation, it has come to mean anything over 50 percent -- so, in theory, such a group can devote up to 49.9 percent of its resources on politics."

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