Laws Permit Thousands of Chamber-like Groups to Keep Donors Secret, Review Finds

WASHINGTON, Oct. 15, 2010— -- President Obama and top Democrats have singled out for criticism the U.S. Chamber of Commerce for not disclosing the identities of donors behind its massive 2010 election advertising campaign.

But the administration's focused criticism belies the fact that nonprofit groups' practice of keeping identities of their donors secret is not unusual or illegal.

An ABC News review of Internal Revenue Service records finds that the Chamber is one of at least 90,908 nonprofit groups that enjoyed the same political campaigning and financial disclosure privileges in fiscal year 2009.

Under the 501(C)(6) section of the tax code, "leagues, chambers of commerce, and real estate boards" that promote a "common business interest" can register with IRS for tax exempt status and engage in political campaigning relatively unrestricted so long as it's not their primary activity.

These nonprofit groups, including those that engage in political activities, are not required to publicly reveal the names of donors -- a practice many, including liberal groups, defend.

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"It would be an administrative nightmare," said William Lutz, a spokesman for the group Defenders of Wildlife, responding to some critics' calls for greater disclosure. "The vast majority of donors are small dollar amounts not given for a specific race."

Colin Hanna, president of the conservative nonprofit group Let Freedom Ring, Inc., said privacy is important because "donors who are disclosed wind up being subjected to increased appeals -- and donors wind up, in effect, being hounded."

If an individual or corporation donates money to a nonprofit group with specific instructions that the funds be used in a political race, the group must then publicly disclose the information to the Federal Election Commission. But experts say most donations do not come with such political strings attached.

At the same time, at least 137,276 "social welfare" nonprofits, known as 501(C)(4) groups and including the National Rifle Association and Planned Parenthood Action Fund, also enjoy similar disclosure rules and the ability to keep donors' identities private, according to IRS.

"The world of 501(c)(4, 501(c)(6), tax-exempt organizations is vast," said Tara Malloy, associate counsel for the Campaign Legal Center.