How The IRS Could Make It Easier To Track Dark Money, Right Now

While much of the attention currently focused on the Internal Revenue Service (IRS) surrounds the agency’s acknowledgement that non-profit groups using tea party keywords were targeted for extra scrutiny in 2012, technologist cum data liberator Carl Malamud is campaigning to convince the IRS to make it easier to track money and influence in non-profits.

Fresh off of a victory liberating the District of Columbia Code, Malamud’s Public.Resource.Org is on to a new transparency fight: Getting the IRS to release public financial records about non-profits in a useful format. In a memo last month, the organization noted that despite having Form 990 financial information about many non-profits in a machine-readable digital format, the IRS will only release the data in PDF form:

As you know, Public.Resource.Org has expended considerable effort to try to make the Form 990, the Public Reports of Nonprofit Corporations, more broadly available on the Internet. We’ve posted 6,821,105 PDF files, including all publicly released documents from 2002 to the present. Although all large nonprofits are required to e-file their returns, and many smaller nonprofits elect to do so, the IRS has not released the machine-processable e-file information, and has chosen instead to image the data onto forms and release the information as bitmap images, equivalent to a scan of a paper document.

If the documents were released in a machine-processable format, it would be much easier to analyze and see larger patterns across the non-profit sector. This could be particularly useful in understanding how dark money is being channeled through 501(c)(4) “social welfare group” non-profits engaged in political advocacy who aren’t required to disclose their donors, but are required to file a Form 990 with basic financial information.

Dark money exploded following the 2010 Citizens United v. FEC ruling that allowed outside groups to make unlimited political expenditures. While 501(c)(4) groups are allowed to engage in some political activity and still maintain tax-exempt status, electioneering is not supposed to be their primary activity. However, dark money groups combined to spend $416 million on the 2012 election — 37 percent of all money spent by independent, non-party outside groups.

The White House announced an executive order aimed at making “open and machine readable” the default for newly created government data last week. However, as Malamud noted in a statement to ThinkProgress, that order will not by itself resolve the IRS situation:

The new executive order on “Making Open and Machine Readable the Default for Government Information” is a good first step. But, it is important that we remember that we need to do more than set out principles for new government databases and web sites, we need to fix the ones we already have on-line. Some of our existing databases, such as the federal procurement database or the IRS form 990s, are in bad shape and are crucial economic engines, affecting not only the operation of government, but large sectors of the economy that depend on this information to operate efficiently and transparently.

If we’re serious about creating jobs and making our economy grow, government data is important part of making that happen. When the US Patent Office, for example, started to release machine-redable data for US Patents, that information became immediately more useful. Likewise, when the SEC started releasing information on public corporations in their EDGAR database, our markets became more transparent and more accessible.

Note: ThinkProgress is a project of the Center for American Progress Action Fund (CAPAF), which has been recognized by the IRS as a 501(c)(4) organization. CAPAF does not endorse candidates, nor does it fund “independent expenditures” or any other kind of candidate-related advertising.