Emergency
These massive pools of untraceable cash, much of which is connected to right-wing kingmaker Leonard Leo, helped solidify the Supreme Court far-right supermajority that rescinded federal abortion protections and bankrolled the Project 2025 plan to dismantle the federal government. Dark-money groups have also been involved in recent voter suppression campaigns and blackmail efforts that forced lawmakers to enact corporate-friendly laws.
With the rise of so-called donor-advised funds — shadowy charity groups run by the nation’s top financial firms — Wall Street has been helping wealthy donors funnel cash to dark-money and extremist groups. Now, if this new lawsuit is successful, the country’s rich and powerful could have even more incentive to fund dark-money efforts, courtesy of a big tax break.
The combination of donor anonymity and new tax benefits could bring “a bigger inflow of dark money into politics,” Jones said. Years Of Pushback
This isn’t the first time churches and other groups have tried to rescind 501©(3) organizations’ apolitical status.
Introduced to the U.S. tax code in 1954, the Johnson Amendment bans all such tax-exempt groups from “directly or indirectly” engaging in political campaigns, to ostensibly shield religious organizations and other nonprofits from political influence. Churches and religious leaders have long argued that this amendment restricts their religious freedom by censoring their speech.
But amid lax Internal Revenue Service (IRS) enforcement following decades of underfunding, many religious organizations have flouted the Johnson Amendment by endorsing candidates. Additionally, in 2017, former President Donald Trump promised to “totally destroy” the Johnson Amendment at the annual National Prayer Breakfast. Later that year, he signed a rule ostensibly granting more leeway to religious groups for political speech.
Years of pushback, along with a conservative majority on the Supreme Court that has continuously favored religious freedom, has left the Johnson Amendment on shaky ground, said Jones — and the new lawsuit could deliver a deadly blow.
Similar to past arguments, the National Religious Broadcasters and other plaintiffs in the suit argue that the Johnson Amendment places churches in a “unique and discriminatory status” that silences their speech.
“Churches have no choice; they are automatically silenced vis-à-vis political candidates,” the lawsuit reads. The IRS “operates in a manner that disfavors conservative organizations and conservative, religious organizations in its enforcement of § 501©(3).”
Proponents for the Johnson Amendment, on the other hand, say the law has a fairly narrow scope. Activities including nonpartisan voter education, church-hosted voter registration drives, and sermons about social and political issues are still permitted.
“The IRS has no mechanism for prohibiting speech,” said Erin Chlopak, senior director of campaign finance at the Campaign Legal Center, a nonpartisan organization that advocates for voting rights. “[The law] is just saying that if they support political candidates, they might not be able to get that tax exemption.” Hold Them Accountable With A Donation
Give a one-time donation in any amount to fund The Lever‘s mission to hold the powerful accountable through reader-supported investigative journalism. Every cent helps. Donate Now
The National Religious Broadcasters and their fellow plaintiffs are not the only conservative 501©(3) organizations currently suing the IRS. The Buckeye Institute, a nonprofit conservative public policy think tank in Ohio, is currently in legal proceedings against the agency over the IRS’ requirement that it disclose the names and addresses of major donors.
While nonprofits are not required to reveal the identities of most donors to the public or IRS, they must disclose the names and addresses of “substantial contributors” — those who donate at least $5,000 per tax year, if that amount is more than two percent of the total contributions received by the organization that year.
“Donors have made clear that they are afraid of ‘retribution’” if their identities are disclosed to the IRS, according to the Buckeye Institute’s lawsuit.
This suit follows a 2021 Supreme Court ruling that California-based nonprofits do not have to disclose the names of their biggest donors, a victory for dark-money groups. The case was brought by Americans for Prosperity Foundation, a conservative political advocacy group tied to the right-wing, billionaire-backed Koch network.
The National Religious Broadcasters lawsuit was filed in the Eastern District Court of Texas, where the plaintiffs may find a welcoming audience. The court, which is stacked with conservative judge appointments, has come under scrutiny for being a target of judge shopping, in which attorneys file cases in courts where they expect to find a judge friendly to their cause.
The Eastern District Court falls under the jurisdiction of the federal Fifth Circuit Appeals Court, known for issuing right-wing rulings and siding with conservative interests.
If both the National Religious Broadcasters and the Buckeye Institute lawsuits are successful, Jones says, wealthy donors will be able to engage in tax-deductible, anonymous dark-money campaigning, no matter the amount. A Larger Conservative Network
While the National Religious Broadcasters’ lawsuit is ostensibly about religious freedom, the plaintiffs involved in the case have close ties to far more sprawling efforts to roll back federal protections and enact a far-right agenda.
Jerry Johnson, former president of the National Religious Broadcasters, and Michael Farris, former president of the conservative Christian legal group Alliance Defending Freedom and one of the lawyers on the lawsuit, are both contributors to The Federalist Society — a network of conservative and libertarian lawyers built by Leo as part of his efforts to reshape the country’s courts.
Alliance Defending Freedom — which has long organized “pulpit freedom” Sundays where preachers have routinely endorsed candidates — is designated as a hate group by the Southern Poverty Law Center legal advocacy organization because it has helped develop “religious liberty” legislation that denies services to LGBTQ+ people. The organization also worked alongside Leo’s Federalist Society to help overturn Roe v. Wade and restrict access to abortion medication. Leo has praised Alliance Defending Freedom as “formidable” and “a real major force in the conservative legal world.”
This February, Trump pledged to defend Christian values at the National Religious Broadcasters International Christian Media Convention in Nashville.
Leo and his fellow operatives have come to rely on 501©(4) nonprofit organizations as a primary funding mechanism. Not only do these organizations generally allow their donors to remain anonymous, but they can also help them avoid tax bills. In 2022, a wealthy conservative tycoon named Barre Seid used a 501©(4) nonprofit to quietly funnel a record-breaking $1.6 billion to Leo’s operation, avoiding hundreds of millions in state and federal taxes on his business proceeds along the way.
At the same time, the IRS and Federal Election Commission, the regulatory agency that enforces campaign finance laws, have allowed these social welfare organizations to operate with near total impunity.
“The IRS’ attempts to police this class of nonprofits have almost completely broken down,” according to an investigation by ProPublica. “Since 2015, thousands of complaints have streamed in — from citizens, public interest groups, IRS agents, government officials and more — that C4s are abusing the rules. But the agency has not stripped a single organization of its tax-exempt status for breaking spending rules during that period.”
However, if these new lawsuits are successful, dark-money groups could shift their operations to 501©(3) nonprofits. That way, wealthy donors won’t just be able to use dark-money donations to avoid tax bills on their profits — they’ll be able to write off their secret unlimited political spending for a hefty tax deduction.
The Johnson Amendment, concludes Jones, “is on its last leg.”
A new lawsuit pushed by conservative operatives with ties to Donald Trump, right-wing power broker Leonard Leo, and a hate group could make donations to dark-money groups tax deductible. Such an outcome could further incentivize the massive surge of dark money flowing into politics, where there are already no limits on how much the rich and powerful can spend to influence elections.
Currently, most dark-money donations flow through 501©(4) groups, or “social welfare” organizations, since these nonprofits are allowed to engage in political activities. While these donations are considered “dark” because their origins can remain secret, they are not tax-deductible. On the other hand, donations to charitable, religious, educational, and scientific groups that qualify as 501©(3) nonprofits are tax deductible — but these organizations are generally not allowed to dabble in politics.
But in a new lawsuit against the Internal Revenue Service, four religious groups including the National Religious Broadcasters, which represents Christian radio stations, argue that in order to express their free speech rights, 501©(3) organizations should be allowed to support political candidates. If successful, the lawsuit could be a big win for dark-money donors who want to influence elections while remaining anonymous — since they would score tax breaks on their massive election spending.
Based on U.S. tax codes, people can use donations to 501©(3) nonprofits to deduct up to 60 percent of their adjusted gross income.
“On the one hand, I don’t think it can get much worse because we have so much dark money in politics already,” said Darryll Jones, a law professor at Florida A&M University in Tallahassee who has been following this lawsuit. However, if the National Religious Broadcasters win, it may “result in a bunch of smaller and medium ‘charities’ coming into bloom precisely to get into politics… That part right there is worrisome.”
This flood of dark money in politics was ushered in by the 2010 Supreme Court Citizens United decision, which allowed corporations and outside groups to spend unlimited amounts on elections. This was part of a coordinated, 50-year effort to solidify corporate America’s control of the electoral system.
The current election cycle has seen a record-breaking amount of dark money flooding into campaign coffers.
Full story because of the annoying paywalls
Last fall, Emily Krieger, a mother in Bozeman, Montana, began to wonder about the unending fees she was paying to provide her two children lunch money at their local public school.
A cafeteria lunch at Emily Dickinson Elementary School, where Krieger’s children attend, costs $2.25, plus $1 for a carton of milk. Yet last year, the cost of loading money onto students’ meal accounts — which are managed by a website called MySchoolBucks — increased to $3.25 per transaction. The fee had grown larger than the cost of an entire meal.
“It caught my attention,” Krieger told The Lever. On the MySchoolBucks website, the $3.25 charge was called a “program fee.” But that money, Krieger learned, wasn’t going toward her children’s school.
Instead, the fees were going to one of the largest payment processing companies in the world — one that has been fighting a years-long legal battle to protect the millions it makes upcharging parents on lunch money. Now, that operation is facing new scrutiny from the courts and federal regulators.
At the same time, efforts are ramping up to provide universal free school lunches, which Minnesota adopted last year under the governorship of Democratic vice presidential candidate Tim Walz. But the school-lunch tycoons — and their powerful legal and lobbying teams — won’t be relinquishing their lunch-money millions without a fight.
MySchoolBucks, a subsidiary of financial behemoth Global Payments, is the largest of three payment processors that dominate an increasingly lucrative K-12 payments market, mediating millions of dollars in payments from students and their parents for everything from school lunches to athletic events. As the company has increasingly cornered the market, it has drawn attention from consumer-rights lawyers and federal regulators — and is now at the center of a growing battle over school-lunch junk fees.
“They’re making billions off a very large service fee,” Krieger said — on the backs of her own family and families around the country, as students head back to school. “It’s like, yikes, is this the best or only option? Is this what most schools are using?”
The company and its competitors are raking in more than $100 million a year from fees on lunch money alone, according to a July report by the Consumer Financial Protection Bureau, a federal consumer watchdog. The fees are particularly burdensome on low-income families, who often can’t afford to load a large lump sum of money onto a student’s meal account and therefore pay more frequent flat transaction fees. Regulators found that vulnerable families may pay as much as $0.60 in fees for every $1 they spend on lunch.
“They designed a system to nickel and dime hundreds of thousands of people once every other week,” said Adam Rust, the director of financial services at the consumer advocacy group Consumer Federation of America, calling the fees “a hidden cost of just living.”
Yet while MySchoolBucks has signed more and more contracts each year, making it a central growth driver for Global Payments, challenges to its business practices are brewing. A consumer fraud lawsuit, which was brought in 2019 against the company, may soon be certified as a class-action suit, which could allow attorneys to pursue settlements on behalf of many more families, according to new court records reviewed by The Lever. The CFPB’s recent report on the market, which documented the companies’ disproportionate burden on poor families, could represent a prelude to further enforcement.
Any attempts at reform, however, will come up against a company with annual revenues of more than $9 billion, and which spends hundreds of thousands of dollars a year lobbying lawmakers in Washington.
“There is every incentive in the world for [Global Payments] to throw everything they’ve got at us, as long as they possibly can, until a court makes them pay back parents,” said Janet Varnell, one of the lead attorneys on the ongoing lawsuit against MySchoolBucks, and the president of Public Justice, a pro-worker and pro-consumer legal advocacy group.
“This is the first case of its kind,” she added. “No one has successfully sued a K-12 payment processor company for this type of fraud.”
Global Payments did not return a request for comment.
Looking forward to more wasted Sundays. Obligatory: Rrrraaaaiiiiddddeeeerrrrrrsss
