But campaign watchdogs are sounding the alarm about the group's lack on transparency. In late 2010, Americans Elect changed its tax status from a tax-exempt 527 group to a 501(c)(4), or social-welfare organization—the same classification as Crossroads GPS and other dark money outfits. Under tax law, such groups are not permitted to make political advocacy the majority of their activity. Unlike 527 groups, which must publicly disclose its donors, 501(c)(4)s are under no such obligations.
In September, campaign finance watchdogs Democracy 21 and the Campaign Legal Center requested that the IRS investigate whether Americans Elect and several other 501(c)(4)s qualify for tax-exempt status. Fred Wertheimer, president of Democracy 21, says that Americans Elect is functioning like a political party, making it ineligible for tax exemption. "A political party cannot be a social-welfare organization under our tax laws," Wertheimer says. "The danger to the integrity of the electoral system is the failure to disclose their donors, which is essential information in our political process."
Dan Winslow, Americans Elect's chief legal counsel, says the recent furor over dark-money groups "has been directed towards 501(c)(4)s that are actually [political] advocacy organizations, advancing the interests of an identifiable candidate or group of candidates." But because Americans Elect focuses on reforming the election system and not on political advocacy, Winslow argues that it shouldn't be lumped in with the others.
Americans Elect officials say they need secret contributions in order to upend a sclerotic system. "We have to be able to raise significant amounts of money to be able to take on the status quo," says Kahlil Byrd, Americans Elect's chief executive officer. Were the group compelled to disclose its donors, he says, there would be "a chilling effect…on people's willingness to participate in this process." That is, increased disclosure would dissuade potential big donors. (Before the group switched its tax status, the group received $1.55 million from its chairman, former financier Peter Ackerman, whose son, Elliot, is the group's COO.)