Donald Trump’s legal costs have ballooned so much that his allies have set up a new defense fund that allows wealthy donors to anonymously contribute massive amounts, and there are few restrictions on how much it can spend.
The “Patriot Legal Defense Fund” was created July 19 and registered with the IRS as a political nonprofit under section 527 of the tax code, and while it won’t pay the former president’s own legal fees, it will pay lawyers for potential witnesses in various Trump cases — and it will face few fundraising constraints, reported The Daily Beast.
“Federal law does not establish any limits on the amount of money that individuals or corporations can contribute” to these organizations, said Brett Kappel, a campaign finance attorney at Harmon Curran.
For example, Trump’s political committees cannot accept donations over certain dollar amounts or take corporate money, this legal defense fund can raise any amount from almost any source to “pay for or help defray legal expenses related to defending against legal actions arising from an individual or group’s participation in the political process,” according to its IRS filing.
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“Moreover, a donor can request that their name not be disclosed if they pay an excise tax equal to 35 percent of the amount of money they donate to the political organization,” Kappel said.
That last rule could allow for straw donations — or contributions made in the name of someone else — through the establishment of untraceable companies to shield donors from public disclosure, and campaign finance watchdogs say the PLDF could be particularly appealing to megadonors who want to keep their involvement a secret.
“527s are nominally regulated by the IRS, so if a donor were to try to use an LLC to facilitate a straw donation then the FEC isn’t monitoring it—the IRS is,” said Brendan Fischer, deputy director of Documented. “Only recently has the FEC really begun to enforce the law about LLC straw donations to super PACs, and it remains to be seen whether the IRS will regulate this at all.”
Those groups operate in a lightly regulated area of political spending, but 527 groups are supposed to operate primarily to influence campaigns for public office, and campaign finance experts questioned whether this pro-Trump organization deserved its tax-exempt status.
“I’m scratching my head wondering whether this group is even eligible,” said Paul S. Ryan, a campaign finance law expert and deputy executive director for the Funders’ Committee for Civic Participation.
Saurav Ghosh, director of federal reform at watchdog Campaign Legal Center, said the former president had often “ridden right over the guardrails of campaign finance law,” and he said PLDF set off a number of alarms.
“This is a situation where a 527 is being created to ‘defray legal expenses,’ but that raises more questions than it answers,” Ghosh said. “The decision to create it this way links the group to elections… doubles down on the red flags.”