WASHINGTON Senate Republicans blocked a bid by Democrats on Monday to require political fundraising groups to reveal their anonymous contributors who are fueling negative television advertisements ahead of the November election.
By a 51-44 party line vote, supporters of the Disclose Act of 2012 fell short of the 60 votes needed to clear a Republican procedural hurdle.
But Democrats promised to debate the bill late into the night and seek another vote on Tuesday, hoping to paint Republicans as thwarting transparency.
"This is too important an issue to let it die quietly," said Senator Jeanne Shaheen, a Democrat.
Senate Republican Leader Mitch McConnell called the act a waste of time and said Democrats should instead try to remedy the ailing U.S. economy.
"Think about it: we've had 41 straight months of unemployment above 8 percent," McConnell said. "But this is what they want to do."
President Barack Obama said in a statement that Republicans had a chance to "change it" but stood with corporate interests and "instead chose to block it."
"If we allow this practice to continue, special interests will have unprecedented influence over politicians," Obama said.
The bill was drafted amid an outcry that political organizations were exploiting a tax law provision allowing certain "social welfare" groups meant to educate the public to collect unlimited contributions without disclosing their donors. Backers of the legislation say the loophole must be closed.
The debate stems from a divided U.S. Supreme Court decision that opened the way for unlimited corporate and special-interest spending in elections.
The proposal defeated on Monday was a scaled-back version of a measure that was blocked by Republicans in 2010.
The centerpiece of the legislation would force tax-exempt "501(c)" groups, which include labor unions and chambers of commerce, to publicly report any donor giving $10,000 or more to the Federal Election Commission.
The FEC, which oversees elections, is currently split along party lines and is deadlocked on whether social welfare groups must disclose donors if they engage in political activity.
The groups are raising money for both political parties but many Democrats fear they will be outspent this election season.
The 501(c) contributions go mainly for so-called issue advertising, not to the campaigns. Almost all of the groups run ads.
Democrats have sought to slow down one of the more prominent conservative groups, Crossroads GPS, in its bid to assist Republican candidates. It has backed ads on home foreclosures, taxes, healthcare and the budget deficit.
Obama's re-election is being helped in part by the Priorities USA non-profit.
Another type of fundraising entity, so-called super PACs, are required to disclose donors and have revealed million-dollar contributions from corporate executives, unions and celebrities this year.
Charitable organizations, which are prohibited from spending money to influence elections, would remain exempt from the disclosure requirements.
Democrats, backed by public-interest groups, argue that voters have a right to know who is funding ads. Republicans, with the support of business groups, argue that the measure would amount to an infringement of free speech and primarily hit corporate America, not unions.
With no apparent chance of passing the bill this year, Democrats are leaning on the Internal Revenue Service to enforce laws that limit the tax-exempt groups' political advocacy.
Earlier this year, the IRS yanked the tax-exempt status of two small political groups, concluding they were more interested in political objectives than social welfare.
Democrats are hoping the IRS will take further action against these groups.
"I think ultimately that they will act," said Senator Sheldon Whitehouse, a Democrat. "But the question is, will they do it in time to keep improprieties out of this year's elections."
(Editing by Jim Loney)