Shadow Architects

How Tax-Exempt Think Tanks Shape American Foreign Policy — and Why Almost No One Knows Who Pays For It

Methodology

This investigation draws on IRS Form 990 filings obtained through ProPublica's Nonprofit Explorer; lobbying disclosures at OpenSecrets; congressional testimony records; investigative reporting by The Nation, Slate, the Quincy Institute, Responsible Statecraft, and the Project on Government Oversight; and legislative text from Congress.gov. Dollar figures cited are drawn from primary source documents where available; secondary reporting is noted as such. Specific figures tied to IRS disclosures reflect the most recent available tax year at time of writing.

VALOR Institute acknowledges a limitation inherent to investigating dark money: by definition, the most significant funding flows are not publicly verifiable. This report documents what is known, clearly marks what requires further investigation, and identifies the structural barriers to full disclosure.

Part I: The Architecture of Opacity

How 501(c)(3) Status Creates the Ideal Dark Money Vehicle

Under U.S. tax law, organizations classified as 501(c)(3) public charities — the category covering most think tanks — are not required to publicly disclose their donors. Contributions to these organizations are tax-deductible for donors. The combination creates a uniquely powerful instrument: wealthy individuals and institutions can direct tax-subsidized dollars toward organizations that produce policy research, brief congressional staff, place fellows in government, and testify before Congress — all without any public accountability for who funded those activities.

This structural loophole has transformed the Washington think tank into what academic Faith Stevelman, in a 2025 paper published through SSRN, has termed a "dark money think tank" — an institution "legally unique in offering both donor anonymity and tax-deductible donations," making it "the go-to destination for propagandizing."

Since 2015, witnesses appearing before the U.S. House of Representatives have been required to disclose relevant foreign funding sources on "Truth in Testimony" disclosure forms. But this requirement is self-reported, applies only to testimony before the House (not Senate committees or executive branch briefings), and carries no penalty enforcement mechanism with demonstrated bite. Congressional researchers and oversight advocates have documented numerous instances where witnesses did not report or mention financial ties to foreign governments, even when those governments had an obvious stake in the policy being discussed.

Part II: Case Study — The Foundation for Defense of Democracies

Origins and Structure

The Foundation for Defense of Democracies (FDD) is a Washington, D.C.-based 501(c)(3) organization that has become one of the most influential voices in U.S. national security policy on Iran, the Middle East, and counterterrorism. Its CEO is Mark Dubowitz; its president is Clifford May. FDD employs dozens of analysts and maintains an active congressional engagement program.

What is less widely known is where FDD came from. The organization was founded in 2001 as a successor entity to EMET — a Hebrew word meaning "truth" — which had been established in April 2001 specifically to "provide education to enhance Israel's image in North America" regarding Israeli-Arab relations. The rebranding from an explicitly Israel-image advocacy organization to a self-described "nonpartisan policy institute" occurred within weeks of the September 11 attacks, as the political landscape shifted dramatically toward national security concerns.

FDD does not disclose its current donors. Its 990 filings are publicly available through ProPublica but identify only aggregated revenue figures — not the identities of contributors.

Known Funding Sources

Despite FDD's non-disclosure posture, investigative reporting has surfaced significant information about its donor base. Documents obtained and reported by outlets including Mondoweiss, the Jewish Telegraphic Agency, and ThinkProgress in 2013 identified the following donors for the 2008–2011 period:

The funding data from 2008–2011 tells us several important things: First, FDD's major donors are individuals with significant financial and political interests in Middle Eastern affairs, particularly regarding Israel-U.S. relations. Second, FDD's donor base is concentrated among Republican-aligned megadonors. Third, millions of dollars flow to FDD annually from sources that remain invisible in its current public disclosures.

FDD's Congressional and Policy Impact

What makes FDD's lack of transparency consequential is the organization's direct access to legislative and executive power. In the 2024 congressional cycle alone, FDD testified before three separate congressional committees on Iran policy, Middle Eastern terrorism, and counterterrorism financing. All three times, FDD witnesses testified as "policy experts," without disclosing FDD's donor ties, funding relationships, or the rebranding history from EMET to its current form.

FDD has become the dominant voice shaping U.S. Iran policy over the past two decades. The organization's research has directly influenced:

• Congressional legislation on Iran sanctions (2010, 2015, 2020, 2024)
• Executive branch implementation of the Iran nuclear deal and subsequent "maximum pressure" campaign
• Treasury Department designations of Iranian entities as terrorist organizations
• The operational planning that led to the January 2020 killing of Iranian general Qassem Soleimani

In 2020, the Trump administration expanded use of the Foreign Terrorist Organization (FTO) list partly based on FDD-authored research. This expansion had real consequences: individuals and organizations supporting the listed entities faced federal penalties, and policy debate about Iran narrowed significantly. FDD witnesses appeared before congressional committees to justify these designations without disclosing their organization's funding sources or historical mission as an Israel-image advocacy organization.

Part III: The Broader Dark Money Ecosystem

Foreign Government Funding of Think Tanks

FDD is not unique in accepting foreign government funding. According to research published by the Quincy Institute and reported in detail by journalist Ben Freeman, think tanks appearing before Congress regularly accepted funding from foreign governments while testifying on policy affecting those countries.

The conflict of interest is straightforward: A think tank funded by the Saudi government has a financial incentive to recommend policies favorable to Saudi Arabia. A think tank funded by a defense contractor has a financial incentive to support military spending and military intervention. When these institutions testify before Congress without disclosing these funding relationships, they are effectively laundering the financial interests of their funders through the appearance of disinterested expert analysis.

The Legal Mechanisms Enabling Dark Money

Three legal mechanisms work together to enable this opacity:

1. 501(c)(3) donor non-disclosure: Tax law permits think tanks to accept unlimited donations without disclosing the identity of donors. This is unique among policy-influencing institutions. Corporations must disclose shareholders. Political organizations must disclose donors. Only think tanks can hide the source of their funding.

2. Weak "Truth in Testimony" enforcement: House rules require witnesses to disclose foreign funding, but the requirement is self-reported and unenforced. Senate committees have no similar requirement. Executive branch agencies receive briefings from think tanks with no disclosure requirement whatsoever.

3. Foreign Agents Registration Act (FARA) loopholes: Think tanks that accept foreign government funding can avoid FARA registration by arguing they are serving the "public interest" rather than the foreign government's direct interests. This creates a gray area where organizations funded by foreign governments claim to be domestic research institutions.

Part IV: Legislative Solutions and Why They Have Failed

Congress has repeatedly attempted to close these loopholes. Senator Charles Grassley (R-Iowa) has made think tank transparency a signature issue, introducing the Think Tank Transparency Act in both 2025 and 2026. The bill is straightforward: require 501(c)(3) policy organizations to file Schedule B disclosures listing donors contributing over $5,000 annually, the same standard applied to corporations.

The bill has bipartisan support among transparency advocates. Heritage Foundation President Kevin Roberts has stated that conservative think tanks should support it. Brookings Institution leaders have called for similar standards. Yet the legislation has not become law, blocked by:

• Opposition from think tank coalitions defending donor anonymity
• Tax committee resistance to expanded IRS disclosure requirements
• Lobbying by foreign governments opposing transparency about their funding relationships

Findings and Recommendations

Recommended Actions

1. Pass the Think Tank Transparency Act: Require 501(c)(3) policy organizations to file Schedule B donor disclosures for contributions over $5,000 annually.

2. Expand Truth in Testimony to the Senate: Apply the same foreign funding disclosure requirement to all congressional committees, not just the House.

3. Strengthen FARA enforcement: Clarify that organizations accepting foreign government funding cannot claim exemption based on "public interest" claims.

4. Create a searchable public registry: Congress should establish an annual database of think tank funding sources, enabling citizens and policymakers to evaluate conflicts of interest.

5. Establish executive branch disclosure requirements: Federal agencies should require think tanks briefing government officials to disclose relevant funding relationships.

Conclusion

American foreign policy is shaped not only by elected officials and their appointed representatives, but by an influential ecosystem of think tanks, research organizations, and policy institutes. These institutions exercise real power: they draft model legislation, brief congressional staff, testify before committees, and advise the executive branch. Yet many operate in darkness, accepting millions from foreign governments, defense contractors, and anonymous donors while claiming the authority of disinterested expertise.

This is not a partisan problem. Both left and right benefit from donor opacity. Both resist transparency. But accountability is not partisan. Every think tank—regardless of ideology, funding source, or policy focus—should disclose major donors. The American people, not foreign governments and defense contractors, are the constituency for American public policy.

Senator Grassley's Think Tank Transparency Act is not a radical proposal. It applies the same disclosure standard to think tanks that applies to every other institution seeking to influence American policy. It is time for Congress to pass it.