Newly filed campaign reports are now showing that most the millions of dollars donated to this year's presidential and congressional contestants have come masked to the public eye, as so-called Super PACs are maneuvering legal loopholes at alarming rates.

Super PAC campaign donor names are supposed to be disclosed; however, Super PACs are now creating 'non-profit' sub-branches which act as a donation go-between, serving to hide donor names before allocating the money to campaign causes. In the most blatant example, in the first three months of 2012, more than $8 out of every $10 collected by two conservative groups associated with Republican strategist Karl Rove went to a related non-profit branch that does not have to reveal its donors.

"We have a dysfunctional system for financing our elections," when anonymous donations can fund political activity, said Richard Hasen, a campaign-finance expert at the University of California-Irvine. "It's bad for our democracy when people refuse to be held accountable."

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USA Today: Reports Show Hard-to-Track Donors Dominate Outside Giving

"We have a dysfunctional system for financing our elections. It's bad for our democracy when people refuse to be held accountable."Using undisclosed or hard-to-track money in politics is legal, under the patchwork of court decisions, campaign-disclosure regulations and IRS rules that govern federal elections.

Recent court rulings, including the Supreme Court's 2010 decision in the Citizens United case, cleared the path for unlimited corporate and union money to go to super PACs. Super PACs must report contributors' names and addresses to the Federal Election Commission and can run ads directly advocating for the election or defeat of a federal candidate. But dozens of contributions to the largest super PACs have come from privately held corporations, whose ownership often is difficult to discern.

At the same time, groups backing Democrats and Republicans have established non-profit arms under long-standing IRS rules. These groups, operating as social-welfare organizations under the tax code, can take anonymous contributions of any size. They are required to spend less than half their money on politics. Their advertising must center on so-called "issue advocacy," but they can and do attack politicians by name. [...]

During the first three months of the year, donors gave $49 million to American Crossroads and Crossroads GPS, two conservative groups spending heavily on advertising opposing President Obama, Crossroads officials announced last week.

But campaign-finance reports filed late Friday show that less than 20% of that figure — $9.7 million — went to American Crossroads, the super PAC that must publicly disclose the sources of its money. The rest went to its non-profit branch, Crossroads GPS, which this month spent $1.7 million on "issue" ads in several battleground states that slam Obama on high gas prices. [...]

Campaign-finance watchdogs argue that limited liability corporations, which are not required to publicly reveal their owners in some states, offer a way to obscure political givers' identities.

"There are well-known, legitimate LLCs," said Bill Allison of the non-partisan Sunlight Foundation, which tracks campaign money. "But we know very little about many of them. They are almost black holes in terms of campaign-finance disclosure."

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