In the IRS We Trust

Restore Our Future, a so-called super PAC formed to support the presidential bid of Mitt Romney, recently reported receiving a one million dollar contribution from a company, which has caused a stir. It’s not the size of the contribution that caught everyone’s attention since super PACs can legally accept unlimited contributions even from corporate contributors as a result 2010 court decisions. Rather, campaign finance reformers are crying foul based on the lack of disclosure of exactly who was behind the contribution. They’re just crying to the wrong agency.

W Spann, LLC, the company that made the contribution, was formed in Delaware in March and then dissolved in July. A Boston lawyer specializing in wealth management handled the paperwork, but otherwise the person(s) responsible for the company — and the resulting contribution — is entirely unknown. A consensus has emerged that W Spann probably violated the law because making the contribution caused it to become a political committee, and W Spann failed to register with or report to the FEC. Even opponents of campaign finance laws agree that this is the case. In response, reformers have called on the FEC to investigate.

But the FEC will do nothing. There are a number of reasons for this, perhaps principally among them the fact that the FEC has been largely unable to act in its current configuration of commissioners. Even if the FEC were to act, however, it’s not clear that the consensus presents a sound legal argument. A political committee is defined as a group of people who make contributions together; a single person cannot constitute a political committee. If W Spann was established by a single person, therefore, the complaint will fail. And there are additional complications of line-drawing (should any company that makes a contribution be forced to register? if the company made charitable contributions in addition to its political contributions?) that the Republican commissioners will almost certainly balk at, making any action even more unlikely.

The complaint overlooks the real issue in this case: disclosure, not whether the company is a political committee. And there is a better way to force W Spann to disclose who was behind this major contribution. All organizations or companies whose primary purpose is to make political contributions are required to report those contributions and the original source of the funds to the IRS. Everyone has to register with the IRS, and line drawing is the essence of the IRS’s day-to-day operations, so they are much more likley to exercise jursdiction over W Spann than is the FEC.

If it is the case that the primary purpose of this shell corporation was to make this contribution, regarless of how many people were behind it, then W Spann broke the law by not reporting the source of the contribution to the IRS. Setting a precedent by forcing the disclosure of anonymous donors to the IRS rather than the FEC (which has demonstrated itself to be a poor watchdog) would be just as effective a means of getting large donors to think twice before laundering their millions through shell companies. Unfortunately, instead we’re likely to end up with nothing from the FEC.