July 18 — Recent headlines blaring that big corporations and individual donors have dropped out of funding this year's political conventions suggest that those providing financial support to the conventions are widely known, but that is far from true—especially this year.
No rules currently require pre-convention reporting of contributors to the convention “host committees”—historically the biggest recipients of convention-related gifts.
Support for this year's events in Cleveland and Philadelphia appears to be less transparent than ever before, as both major parties have faced fundraising difficulties they apparently would like to keep under wraps.
Recent news reports have focused on funding problems related to the Republican National Convention in Cleveland, which began July 18. For example, Bloomberg News reported last month that a growing number of prominent U.S. corporations were opting to drop or scale back their sponsorship of the convention, with the nomination of Donald Trump promising a level of controversy rarely seen before.
Meanwhile, the Democratic National Convention in Philadelphia set to begin July 25 also faces problems, especially after a report that the Internal Revenue Service has denied a tax deduction granted to donors to previous host committees and to its Republican counterpart.
According to Bloomberg News, those companies signalling that they wouldn't sponsor the Republican Convention included Wells Fargo & Co., United Parcel Service Inc., Motorola Solutions Inc., JPMorgan Chase & Co., Ford Motor Co. and Walgreens Boots Alliance Inc. All of these companies helped provide support for the 2012 Republican convention in Tampa, Fla.
Other Bloomberg News reports said big individual donors, such as David Koch of Koch Industries Inc., would not be providing the large convention contributions given in the past.
These reports have raised doubts about previous assurances from party and host committee officials, who said fundraising to support the conventions was on track to equal or surpass previous gatherings.
In April, the head of the Republican National Convention host committee, David Gilbert, said fundraising was going well, and organizers were only $10 million shy of their $64 million goal months before the convention began (See previous story, 04/13/16).
The recent news coverage about this year's convention host committee fundraising has been based solely on comments from donors and convention officials. No actual public reporting of contributors to the 2016 host committees will occur until months after the conventions are over.
This year's convention host committees will be required to file reports in late September with the Federal Election Commission listing their receipts and spending. The reports are due 60 days after the conventions conclude, according to FEC rules.
The lack of official reporting requirements before the conventions already has led to confusion over who actually is providing money to support them. Republican officials reportedly had to apologize in recent days over a last-minute fundraising appeal for $6 million made to Las Vegas Sands Corp. casino mogul Sheldon Adelson, which said several named companies had reneged on commitments to fund the Republican National Convention's Cleveland host committee.
The companies told reporters they had never committed to give to the Cleveland host committee, though they had contributed in the past to convention host committees.
Meanwhile, the Democratic National Convention is facing troubles over an Internal Revenue Service ruling that individual contributions to the Philadelphia host committee will not be tax deductible.
Such host committee contributions historically have been deductible—a rarity in the world of political contributions and a big incentive for companies and other big donors to give.
Republican officials have indicated that the IRS has approved deductibility of contributions to the Cleveland host committee. It remains unclear why the Service would treat gifts to the two major parties' host committees differently.
An IRS spokesman did not respond to a request for comment from Bloomberg BNA.
A report in the Philadelphia Inquirer, citing the head of the Philadelphia host committee, David Cohen, senior executive vice president of Comcast Corp., said the committee's charitable tax-exempt status under Section 501(c)(3) of the tax code had been denied because the IRS found its work was too political. Cohen said the host committee was seeking to reverse the IRS ruling but also was trying to work around the obstacle.
Historically, host committee funding for each major party's convention has reached nearly $40 million or more for conventions held since 2000, forming the biggest share of overall funding for each convention, according to past FEC reports analyzed by Bloomberg BNA. Most of the host committee funding has come in large contributions from big companies and wealthy individual donors.
For example the biggest donor to the Republican Convention host committee in Tampa in 2012 was Adelson of Las Vegas Sands, who gave $5 million. Meanwhile the 2012 Democratic Convention host committee in Charlotte largely was funded by Bank of America Corp., which provided a total of $13 million in loans, and Duke Energy Corp., which provided a $1.3 million in-kind contribution.
A critic of the current convention funding system is Larry Noble, a former FEC general counsel now with the nonprofit watchdog group Campaign Legal Center. Noble said in a recent phone interview with Bloomberg BNA that the current controversy over who is funding the party conventions emphasizes how far the system has strayed from its original rationale.
Host committees originally were allowed by the FEC because they ostensibly had nothing to do with the party or candidate involved and everything to do with promoting the city hosting the convention.
Over the years, the FEC “has shredded the laws that explicitly ban corporate spending on conventions,” Noble said in a statement releasing a new report from the Campaign Legal Center. “Now, corporate interests and wealthy individuals gain political access and influence over government officials by spending tens of millions of dollars to fund nominating conventions.”
The center's report traced the history of an exemption approved by the FEC to allow local products and gift bags to be distributed to convention attendees. The exemption quickly turned into a loophole that swallowed the law, the report contends, allowing massive contributions supporting the major parties and their nominees despite continuing technical restrictions on campaign contributions.
In order to restore public confidence, the report concluded, the FEC should simply eliminate the rules allowing large contributions to convention host committees, and Congress should reinstall public financing of the conventions.
Recalling how public financing was first established in the 1970s, the center's report traced creation of the system to the Nixon administration's campaign finance scandals including an episode in which the communications company International Telephone and Telegraph (ITT) pledged to provide $400,000 to fund the 1972 Republican Convention in San Diego.
Shortly afterward, the Justice Department dropped an antitrust suit against ITT. Later a memo surfaced, written by ITT lobbyist Dita Beard, which linked the convention contribution to the antitrust case and ended with words “please destroy this.”
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