Background & Facts

see also the skinny, pro & con, links

During the 2004 election, campaign finance rules did not apply to 527s. These tax-exempt partisan groups raised hundreds of millions and spent the majority on activities such as television ads and partisan voter registration drives.

FEC Regulations.

The The Federal Election Commission (FEC) tried to put an end to the soft-money extravaganza by regulating 527s and other nonprofits beginning January 1, 2005.

The rules don't do much more than tell 527s that if they're raising money to support a candidate, they have to abide by the same rules as other political action committees.

The regulations specify how soft-money can be raised, and how both soft and hard-money can be spent. Until the regulations went into effect, hard-money could be spent in any way, including direct support for specific candidates, while soft-money spending was regulated. The new FEC changes require that: (WP)

• Hard-money now be regulated. Hard-money now must be used to cover at least half the cost of overhead, nonpartisan voter drives and ads, phone banks, and mailings that refer to a specific candidate.

• If a fundraising plea suggests any part of the funds will be used to support or oppose a federal candidate, the maximum contribution is limited to $5,000 and cannot come from corporations or unions. (In the 2004 election, known democrat George Soros contributed $27 million total to 527s.)

• If a fundraising solicitation suggests any part of the funds will be used to support or oppose the election of a federal candidate, all contributions in response to the solicitation will now be treated as political contributions under federal election law. This requires any nonprofit taking in over $1,000/year in this manner to send a report to the FEC, regardless of the organization's mission.

Emily's List, a 527, has challenged the FEC rules in court, saying they violate the organization's freedom of speech. At the same time, lawmakers are using the courts to push for stricter campaign finance rules on 527s (WP).

In December 2006 the FEC slammed three 527s with $630,000 in fines for violating FEC rules back in 2004. Even though the 527 rules weren't in place, the FEC basically said the 527s were acting like political action committees, so should have been following political action committee rules. (FEC)

In Congress.

McCain and Feingold proposed a new bill in 2005 to put the regulatory reins on 527s.

Approved by committee in April, 2005, the Senate bill, S 271, would:

• require 527s register with the FEC and limit how much "hard money" they could accept from individuals. Individuals would be allowed to contribute no more that $32,500 to 527s.

• ban federal regulation of political activity on the web,

• increase how much individuals could give to PACs - from $5000 to $7500 - and how much PACs can give to candidates and political parties - up to $7500 and $25,000 respectively. (WP)

The Senate bill has no signs of making it to a floor vote anytime soon. The House's companion bill, HR 513, made it through the committee process last June, but it's also unclear when they'd vote on the bill.

Meanwhile, the House moved to rein in 527s as part of their lobby reform bill in April 2006, but there's no saying whether the 527 reforms - which would force 527s to comply with fundraising rules for political action committees - will make it into a final bill with the Senate.

At the same time, a competing House bill, HR 1316, would push campaign finance law back in the other direction, loosening limits on personal donations to committees and parties. Under the bill individuals would have no cap on how much they could give to federal committees (currently there is a cap of $40,000) and overall two year limit for individual giving would go up from $101,400 to $1.1 million.

Updated December, 2006

Did we miss something, let some slant slip in, lose a link - or do you just have something to say? Drop a line below! In the spirit of open dialogue, cJ asks you keep it civil, keep it real and keep it focused on the message, not the messenger. See our policy page for more on what that all means.