Fact-Checking Claims About the Inexplicable Union Exemption in SB 346

Several claims made yesterday by Rep. Geren in the State Affairs committee preceding the vote on SB 346 are not accurate, and need to be corrected before the House votes on this. I’ll update this post later with citations to the video itself.

First, every news account I’ve seen of this says the bill targets 501(c)(4)s. That may be true, but it’s not limited to 501(c)(4)s. The bill applies to any group “not meeting the definition of a political committee” but that engages in $25,000 in political expenditures (unless, of course, it happens to be a union).

In explaining why labor unions are exempt, Geren said a few interesting things.

First, he claimed that unions aren’t a problem because they already disclose contributions. Not true. Unions are organized under IRS Code section 501(c)(5). They file IRS Form 990 once a year, but the list of contributors is not publicly available, even if the union engages in political ads. As this chart from the Campaign Legal Center shows, c5s (unions) are in the same disclosure category as c4s.

When asked why unions are exempt, he said “because we didn’t want them to think we’d be looking into their c5s” (I’m paraphrasing). So basically he’s fine “looking into” everybody else’s finances, but if a union engages in the same political activity, he doesn’t think it’s important to know where the money came from.

Also, if a union set up a separate account, even if it were registered as a 501(c)(4), it would still be exempt by the clear language of the bill. Section 254.281(b) reads:

This subchapter does not apply to a labor organization or any subordinate entity or associated account of a labor organization.

This directly contradicts statements at the hearing that if a union set up a 501(c)(4), it would have to disclose. It would not, because of the language above.

He also claimed that this bill only requires disclosure of contributions made with the intent of helping fund “political expenditures” under the Election Code (which would only be for election ads and not issue ads). If this were true, it would be similar to what is currently the case under federal law (at least pending a ruling in Van Hollen). But again, not true. The bill says donations (even dues payments) are disclosed if “at the time of making the payments, the members or donors have reason to know that their payments may be used to make political contributions or political expenditures or may be commingled with other funds” used for such purposes. The commingling language totally refutes the claim that only donations meant to be used for the ads are disclosed.

UPDATE: Also: contrary to statements at the hearing, unions can accept funds from nonmembers–in fact, there is a long line of Supreme Court cases hashing out how unions can use dues required from nonmembers. See, e.g., Knox v. SEIU Local 100, 132 S. Ct. 2277 (2012). It’s true that nonmembers, and even members, can dissent from the union’s use of their dues funds to the extent they go to political spending. But the fact that a dissenting union member or non-member employee can object to the union’s political spending (and get a refund of any dues payment that went for such spending) does not mean the union can’t accept funds from an outside third party who wants to help fund the union’s political advertisements or activities. And this, afterall, is the real issue. If it’s true (as Craig McDonald testified in the hearing) that political money will find its way to the loophole, the Legislature is about to create a gaping, one-sided loophole that liberals will surely exploit. Conservative groups will have to disclose their donors, but moneyed liberals will be free to fund partisan election ads through union accounts without disclosure.

Last year the Wall Street Journal ran an eye-opening piece (“Political Spending by Unions Far Exceeds Direct Donations,” July 10, 2012) (link updated to accessible article) about the millions in union political spending that has flown under the radar. This is spending from union non-PAC accounts. In other words, the exact accounts the Texas Legislature is excluding from its “disclosure” bill. And the explanation that it’s not important because we already know who the union members are (1) fails to distinguish unions from other groups that would be covered under this law (e.g., we also generally know who the members of the local chamber of commerce are); and (2) fails to account for the possibility of non-members making contributions in a deliberate attempt to skirt the disclosure rule by taking advantage of this exception.

Democrats are going to laugh all the way to the bank if this bill passes without amendment.

*This post has been updated to include the preceding two paragraphs.