WikiLeaks Document Release http://wikileaks.org/wiki/CRS-RL33888 February 2, 2009

Congressional Research Service Report RL33888 Section 527 Political Organizations: Background and Issues for Federal Election and Tax Laws R. Sam Garrett, Government and Finance Division; Erika Lunder and L. Paige Whitaker, American Law Division

February 8, 2008

Abstract. This report explores the evolution of the 527 issue and attempts to address it in the courts, the Federal Election Commission, and Congress. http://wikileaks.org/wiki/CRS-RL33888 Section 527PoliticalOrganizations:Background and Issuesfor Federal Election andTaxLaws Analyst inAmerican National Government Erika LunderandL.Paige Whitaker Government andFinance Division Updated February 8,2008 American Law Division Legislative Attorneys Order Code RL33888 R. Sam Garrett R. Sam http://wikileaks.org/wiki/CRS-RL33888 reflect further Election Commission,andCongress. Federal theevolutionof527issue and explores that would affect527shaveal 463) havebeenofferedinthe110 a similar measure, but the Senate di state and local elections. The SenatereportedCommitteeAdministration Rules and organizations toFECA’s for tax-exempt status under IRCstatus §527.Suppor tax-exempt for unlimited funding sourcesno longer availabl efforts. Groupswishing toengage inthes aire suchareasasbroadcasts unregulated days ofageneral electionthatreferred advocacy, regulated but only 30days messages within broadcast ofaprimary or60 Summary not engaging advocacy inexpress that are less accountable to thepoliticalsyst parties, thusredirecting since 2004wasthepredictableresultofth failure existing law. toenforce BCRA critics, however, insistthat what occurred enormous amountsofmoney raisedandspent federalelectionlawre extend to groups advocacy. thatconductexpress treatment the favorabletax disclosure, contributionlimits, positions in reference to particular federal federal candidates). express advocacy precedent haspermittedFECA was not necessarily truebecau Federal ElectionCampaign Ac organizations generally thought that,withresp andlocal state, federal, to status exempt purview offederalelection oftherace.Yet,someso-calle outcome approximately $435millionand (IRC) wereprominentplayers inthe2004 Section 527PoliticalOrganizations:Backgroundand In the109 theIn Bipartisan Campaign 2002, Re prominent groupsSeveral organized unde Issues forFederalElectionandTaxLaws correlated directly with developments. th Congress, the House twice passed similar billstoadd 527 Congress,twice the House (i.e., explicitly urging theelecti (i.e.,explicitly Bysuch terms,groupsavoiding couldarguablyissue promote massive amountsofunregulated money to outsidegroups political committee law. Section527,addedto of §527organizations because gulation tothesetypesorganizations,527 seeing of the so beenintroducedinthe110 se prevailing judicialinte t (FECA). Itbecame clearby (FECA). t 2000,however,thatthis and source restrictions.S regulation ofonly those th cannot beconstituti being widelybeing seenashaving animpact onthe Congress. Other b d not act on it. ect tofederalelectionactivities, political committees political elected officialswit to a federal officecandidate.BCRAfederal left to a e activitiesandstillava d “527” organizations remain outside the d “527”organizations remainoutside d beforeelectionsandvotermobilization presidential election, political organizations e banonsoftmoney byactivity national em; they insistthatmany ofthesegroups attempts toaddress form Act (BCRA) addressedexpress form Act(BCRA) e topoliticalpartie definiti in recentyears asaresultoftheFEC’s r § 527 oftheInternal RevenueCode It willbeupda ters of BCRA haveledtheeffortto on or defeat ofclearlyon ordefeat identified Similar the IRC in1975,providestax- on, unless onally regulated. ills (H.R rpretation ofSupremeCourt communications containing till, thegroups qualifiedfor thatbenefitisnotlimited th hout triggering FECA’s Congress. Thisreport bills (H.R. asdefinedunderthe raising andspending . 2316; H. . 2316; s generally qualify il themselves ofthe it in the courts, the courts, it inthe ted periodically to involved solely in . At first, itwas . At 420 andS. R. 1204) R. political http://wikileaks.org/wiki/CRS-RL33888 Appendix. SummaryAppendix. ofInternal Reve Conclusion ...... 35 Efforts toRegulate 527s 527 Activity in2000-2006Federal Elections Congress’s Responseto527sandIssue Advocacy Foundations ofthe527Issue Introduction Contents Table 3.Top Ten527sin2002Elections, Rankedby Receipts Table 2.TopTenDonors toKey 527sin2000Elections Table 1.TopTen527sin 2000Elections,Rankedby Receipts ofTables List 527 Organizations Legislative Activity toRegulate 527s FEC EnforcementActionAgainst Three527sfor2004Activities 2004 FEC RuleandRe FEC-Proposed Rulesin2004 Summary of2000-2006Data 2006 Elections 2004 Elections 2002 Elections 2000 Elections Bipartisan Campaign Re 527 DisclosureRequirements: Emergence ofthe527Issue Emergence ofIssue Advocacy Campaigns P.L. 93-625andSection527of Federal Election Campaign Act ...... 2 110 109 108 Proposal toRedefine“Expenditure” Proposal toRedefine Spending by 527sin2004andIts Impact Fundraising by 527sin2004 527 Activity in2000 Effect on Campaign AdvocacyExpress Test” Purpose “Major andthe FinanceKey Provisions Reform Debate of ...... 5 FECA ...... 2 ...... 1 th th th Congress Congress ...... 30 ...... 30 Congress ...... 32 ...... 20 ...... 16 ...... 15 ...... 13 ...... 36 ...... 22 lated Litigation form Actof2002(BCRA) ...... 2 Political Committee ...... 8 ...... 7 and ConstitutionalConcerns P.L. 106-230andP.L. 107-276 ...... 22 the Internal RevenueCode nue CodeProvisionsApplicableto ...... 18 ...... 30 ...... 27 ...... 25 ...... 13 ...... 5 ...... 10 ...... 23 ...... 19 ...... 11 ...... 14 ...... 3 ...... 15 ...... 14 ...... 23 ...... 4 ...... 10 ...... 29 http://wikileaks.org/wiki/CRS-RL33888 Table 11.DisclosureRe Table 10.H.R.420(Meehan-Shays) a Table 9.ReceiptsandDisbursement Table 8.TopTenDonorstoKey 527sin2006Elections Table 7.TopTen527sin2006Elections,Rankedby Receipts Table 6.TopTenDonorstoKey 527sin2004Elections Table 5.TopTen527sin2004Elections,Rankedby Receipts Table 4.TopTenDonorstoKey 527sin2002Elections Reform Actof2007,ComparedwithCurrentLaw quirements undertheIn s by Federal-Re nd S.463(McCain-Feingold), the527 ternal RevenueCode lated 527s:2000-2006 ...... 33 ...... 21 ...... 18 ...... 16 ...... 21 ...... 17 ...... 36 ....22 http://wikileaks.org/wiki/CRS-RL33888 disclosure wasrequiredunde Campaign Act(FECA).Thesegroups thanjustthosethatareco organizations uniform opinion as to what election law itself regulates ormay permissibly regulate. lawtax as towhat constitutes political orelection-related activity and the lack of subject ofcontroversyto due exempt status exempt under IRC §527while not be some groups engaged infederal-electi status underIRChave tax-exempt §527.In 2000,however,itcametolight that political parties, political action committees (PACs),orcandidate committees — elec operating underfederal organizations respecttogroups with that, thought political organizations interchangeably torefer tothem. underIRCexempt §527andusestheterms of current controversy. Thisreport discusses thislimited subset oforganizations waysmayelections in that beoutsidethe colloquially toas527s(i.e.,thos referred IRCWhile §527appliestoabroadra organizations involvedinstate and local ar applies notonlythat toorganizations Section 527 of the Internal Revenue Code (IRC). Section 527oftheInternal RevenueCode thefactthattheseorganizati from stem 2 1 mayelections inwaysthat beoutsidethe been usedinterchangeably todescribe Garrett provided recentupdates. 26U.S.C.§527. Now-retired CRS E. Cantor specialistJoseph report. CRS co-authoredthis analyst R. Sam Background andIssuesforFederalElection Strictly speaking, IRC statustomany §527providestax-exempt more Strictly Section 527wasaddedtotheIRC in Section Inyears,recent theterms“527organi Section 527PoliticalOrganizations: correlated directly with , as defined, inthat statute. Atthat time, itwas generally and TaxLaws the differentdefinitionsused r either the tax orelec r eitherthetax tion law.Indeed, politicalcommittees—whether Introduction participating in elections andcertainnon-electoralactivities. on-related issue advocacy wereclaiming issue on-related lloquiallysection referredtoas527s. The ons are provided tax-exempt statusunder ons areprovidedtax-exempt scope of federal election law) are the focus arethe law) election scope offederal political committees e active in federal elections, but also to also but elections, federal in e active groups thatintendtoinfluencefederal scope offederalelec e groups thatintendtoinfluencefederal zations,” “527groups,”have zations,” and“527s” were shrouded inmystery were becauseno 527 organizations nge oforganizations, only thegroups ing regulated under th 1975 to provide tax-exempt status to 1975 toprovidetax-exempt 2 Thesegroups havebecomethe 1 tion lawsatthattime. federal elections, infederal election law and , 527 groups as labeled by labeled and as tion law. The terms e Federal Election , and political 527s http://wikileaks.org/wiki/CRS-RL33888 Federal Election Campaign Act Campaign Election Federal 5 4 3 include the following: impose mandatory limitsoncampaign sp certain court rulings. Generally, FECA Campaign Act (FECA) of1971,asamended,(2U.S.C.§431 money from certain sources a unconstitutional initslandmark1976 in federal tothe elections. Supreme Courtstriking Due downspending limitsas law, forinflation. benefits. limits areaccepted These limits These areineffectforthe2007-2008 el Although suchlimits existinpresidentialr Buckley v. 424 U.S.1(1976). Valeo, ! ! Key Provisions ofFECA. Financial activity isgoverned by infederal the elections Federal Election to formula-based limits, indexed fo to formula-basedlimits,indexed the with advertisements forand expenditures coordinated may $5,000perel give acandidate candidates, par aggregate federal of$108,200 inatwo-yearall electioncycleto election; per $2,300 percandidate, PACs infederal elections(e.g., are foran limited individual — Contribution Limits resident aliens(i.e.,green forpermanent anexemption with level, orlocal state, federal, the from contributing orspending money at inanyelection, American Foreign U.S.C.§441b] nationalsarealsoprohibited [2 elections. designated classesofindividuals committee (PAC))may voluntaryraise contributions from elections,ase federal corporat uniontreasuryand While was firstenactedin1907,thelaborban1943. corporate ban making contributionsorexpenditu Source Prohibitions Foundations ofthe527Issue voluntarily ties, and PACs). — Unions and corporations areprohibitedfrom and Unions — —Contributionstoca nd requirespublicdisclosure by candidates, usually in exchange for public funds or byfunds candidates,usually inexchange forpublic parate segregated fund(i.e.,politicalaction card holders). [2 U.S.C.§441b] card holders).[2 Key features offederal election law regulation topay forcampaign servicesor Buckley v.Valeo Buckley CRS-2 5 MostPACsand party committees cooperation ofa candidate, subject imposes limitations aces (and insomeaces statesandlocalities),these ending by candidatesorgroups. $5,000 peryear toaPAC;andan ection cycle, whererequiredby as adjusted, , to give orspendinfederal , ection. (Partiesmay alsomake r inflation.) [2 U.S.C.§441a] r inflation.)[2 res infederalelections.The e money may notbeusedin ndidates, parties,and ruling, of money raisedand spent 3 et seq et federallawdoesnot and prohibitions on .) as well well as as by .) 4 http://wikileaks.org/wiki/CRS-RL33888 Issue Advocacy, not aLoophole:Examining McConnell’sExcepti makes nosense” to examine only whetheran of acandidate);and James B determinewhetherto advocacy itsmajor order purposeisnominationexpress in or election committee.” issubjectto $1,000 in“expenditures,” organization, if “major purpose test,” established the of value“forthepurposeinfluenc advocacy. “political committee”statustoonly those Supreme CourtprecedentstilllimitsFECA advocacybeyond express toascertainitsma some observers proffer that it is relevant to examine an organization’s activities constitutionally be considered FECA regulated “political committees.” For example, circumstances underwhichnon-party test works,andtowhatgroups it applies, ar themajorpurposeofanor ascertain to money to influenceanelectionfor requirements and the accordingand spent to purpose isnomination orelectionofa candidate). examine anorganization’s expressadvocacy activ 10 9 8 7 6 is the nomination orel “organizations thatareunderthecontrolof Courtconstruedthete Likewise,the phrasesandwordssuchas “vote fo explicit for spent donated foror construed theterms“contribution”a the Supreme Courtin invalidationvagueness, forconstitutional to preserve the law’s regulation of Focused andIssue-FocusedGroups, Buckley, 424U.S.at44,n.52. 2U.S.C.§431(8)(A),(9)(A). See Id.

See, e.g., at79. 2U.S.C.§431(4)(A). Neither FECA northeSupremeCourt, Express Advocacy andtheTest”. “MajorPurpose ! . FECA definesboth“contribution” a Disclosure Requirements $200. [2 U.S.C.§432-437] $200. [2 receipts andexpend reports on in federal elections mustregister withthe FEC and file periodic Edward B. Foley, Foley, B. Edward 10 9

31N. it raises more than $1,000in“contributions” or makes more than

K Y ection of acandidate.” ection .

L. express advocacy opp, Jr. andRichardE.Coleson, opp, Jr. The “MajorPurpose”Test:Di federal office. Suchfunds

R EV . 289, 323 (2004) (arguing that “it is only proper”to “it . 289,323(2004)(arguing that — Candidates, PACs, andpartiesinvolved PACs, Candidates, — 31N. ing any election for Federal office.” ing any forFederal election CRS-3 nd “expenditure” to encompass onlyencompass funds to nd “expenditure” ganization. Indeed, howthemajorpurpose rm “politicalcommittee”toincludeonly itures, itemizing foramountsover

K contributions and expenditures against and expenditures contributions a candidate or the majorpurposeofwhich acandidateor r,” “vote against,” “elect,” and“defeat”). “elect,” against,” r,” “vote regulation underFECA asa“political which determineswhetherornotan Y e at the heart of a debate concerning the concerning e attheheartofadebate however,hasyet defined precisely . nd “expenditure” asmoniesoranythingnd “expenditure” organization spends mostspends ofitsfundson organization (thatis,votercommunicationsusing jor purpose, while othersmaintainthat organizations, including 527s,can

restrictions of mayrestrictions law federal beused L. regulation through the designation of regulation through thedesignation ityorder todetermine in whether itsmajor on toBuckley’sGeneralRule Protecting organizations engaging in express organizations engaging

R 8 In sodoing, the EV . 341,355(2004)(arguing that“it are often referredtoas are stinguishing BetweenElection- The First Amendment is Still Only money raised Buckley v.Valeo Buckley Buckley 6 In order Court hard how 7 http://wikileaks.org/wiki/CRS-RL33888 an exempt function,as an exempt is anyincome function amountreceived,tothe functionincome,”less$100and “exempt gross income,excluding organization income.”Thisistheorganization’s taxable elector. orvice-presidential presidential public office, local to or state, federal, influence the selection, nomin func function.”Anexempt “exempt an primarily directlyto orindirectly accept association, including aparty, committee, 106-230 andP.L. 107-276andintheAppendix). requirements that currently (these exist 93-625 issimilartothecurrentversi partnerships, depending onth and pay taxes. committees and parties with investment and other types ofincome returns tofile tax of donatedproperty. In 1973, the IRS a of incomeotherthancontributions,suchas income. By theearly 1970s,itbecameappare Committees ofPolitical Parties, 37 Hearing Treatment withTax Respect tothe P.L. 93-625andSection527of 14 13 12 11 Internal RevenueCode organizations asgifts, taxes. It the IRSbecause appears was treated this contributions topolitical Service (IRS) did notgenerally primarywhose organizations purposeisinfl

IRS Announcement 73-84, 1973-2 C.B.461. See Id See . Section 527politicalorganizations ar Section 527appliesto“politicalorgani ! ! ! ! byIn adding Section527tothe 1975,Congressaction respondedtotheIRS to1975,theInternal RevenueCode Prior H.Rept.93-1502 at 104. IRS Notice ofOpportunity toSubmit Public WrittenComments andtoRequest proceeds fromconducting abingo game. of campaign materials,and from politicalfundraising andentert received arenot proceeds, which in membership dues, f contributions ofmone 12 Parties and committees were as taxed corporations, trusts,or 11 (P.L. 93-625;88Stat.2108). which meant that the organizations didnothavetaxable whichmeantthattheorganizations ees, orassessments, e surrounding circumstances. y orotherproperty, ation, electiation, requiretheseorganizations Fed. Reg CRS-4 an officeinapoliticalorganization, orasa nnounced it would begin requiring political contributions and/or make expenditures for expenditures make and/or contributions are discussedbelowinthesectiononP.L. on, with the exception ofthereporting on, withtheexception . 22,427-28 (October19,1972). of Contributions investment income and gain fromthe sale tion istheinfluencingto orattempting on, or appointment of an individual toa or fund,thatareorganized andoperated uencing elections. TheInternal Revenue the InternalRevenue Code the ordinarythe courseofbusiness, zations” which are those organizations,which arethose zations” ainment events or from thesale ainment eventsor nt thattheseorganizations hadsources e subject to tax onlytax on“political e subjectto any Exempt allowabledeductions. extent thatitissegregatedfor use extent to was silent as to the tax treatment of treatment was silentastothetax 14 Section527asenactedbyP.L. 13 to file tax returnsto file orpay tax Appreciated Property to http://wikileaks.org/wiki/CRS-RL33888 that, wheninvolvedinfederalel candidate funds andpoliti candidate time ofthelaw’senactment, maythe requirements ofreporting Thelack at havebeenbecause, them. regulating properly thought ofasaddre law Thus,the income. theytaxable because had return atax file to were required apply forcampaign committees ofcandidates forstate orlocal office. encouraged morepositiveornegative vi of clearly candidate identified usingtaxed thegraduatedis corporatetax however, income ofthe principal campaigncommitteeof a congressional candidate rateisgenerallyThe tax the highest cor 16 15 perceptions ofamajorloopholebywh levelsof “issuespendi increasing in 1998,andsome$509million2000. spent onbroadcastissueadvocacy in 1996,rising tobetween$250and$341million Annenberg PublicPolicy disclosure made it impossibleforknow sure to the extent of such activity, the it quickly caught onas the new growththemoney lackWhile area of of politics. in either. source and in any amount(i.e.,softmoney) candidates. Notonly couldthesecommunica activities were labeled public federal races.As law criteria forelection-related activity, were widely viewed as intending toinfluence with particular issue positions,which, while technically not meeting federal election made broadcastcommunicationsthatdisc moneyin federal elections. forfederalofficeareconducteda campaigns President and Congress that marked a turning pointbothinthe waywhich in Emergence ofIssueAdvocacy Campaigns advocacy.pdf]. contributions they receive”). taxed oninvestment income andonincome fro thatpoliticalpartiesorcommittees“provid[ing] be (andseparate campaign funds)areto [http://www.annenberg

Annenberg PublicPolicy Center, See, e.g. Under P.L. 93-625,political organizations Effect onCampaignFi issueadvocacyWhile caught muchofth During the 1996 electioncycle, anew , H.Rept.93-1642 at22 (describing th publicpolicycenter.org/ISSUEADS/02_01_2001_1999-2000issue issue advocacy policy messages withoutexpr Center estimatedthatbe cal partiesandcommittees Politicalpartiesandintere ssing the tax treatmentofth ssing thetax s, entities coul political organizations weregenerally thought ofas political organizations nance ReformDebate. nance ections, areregulated by FECA). Issue Advertisinginth ng” inthe1996-2000electionsreinforced . By not explicitly urging the defeat orelection CRS-5 porate income tax rate porate incometax 16 rate schedule. Thisspecialruledoesnot ews of public officials whoalsowere officials ews ofpublic ussed candidates’ merits inconjunction ussed d present information to the public which public the to information d present ich politicallyich interestedgroups were phenomenon was seenincampaigns for phenomenon m a trade orbusiness,butnotoncampaignma , butthey were not uniformly disclosed tions be paidforwithfundsfromany e politicalworldby surprisein1996, nd in efforts to regulate the flow of nd ineffortstoregulate theflow onlythey hadcontactwiththeIRSif e provision thataddedIRC § 527as tween $135and$150millionwas 15 st groups hadin1995and1996 (i.e, the same typesentitiesof e 1999-2000ElectionCycle ese organizations, ratherthan ess advocacy language, such Thehighly visibleand . Under IRC §527(h), was , at http://wikileaks.org/wiki/CRS-RL33888 reconciled in conference(asS.3)andsenttothePresident, who vetoed itonMay 9, 1992. start ofthe105 in Congress responded with significant chan activity appeared toovershadow the regulated activity,the leading reform advocates local political parties.) raising the and spending on curbs stricter earlierthe also expanded bills’treatment on ofparty softmoney, withinclusion of the needforprivatefunds,especially PA reform that prioritized curbing the high cost ofcongressional elections and replacing relatively lessapointofcontention. debate overPACsshifted advocates on spendingandlimits it reflected the same pre- previous three Congresses,the and successor tothein reform billsthat had passed themselves astheleading re Russell Feingold finance introducedcampaign their reform first bill,establishing arranged in amanner suggesting anattempt toat to stateswhere suchsourceswere permi byraised national partiesfrom sourcesnotperm the House and Senate in the 101 the HouseandSenatein reductions). formofcost-reducing publicbe some or congressional elections,inexchange forca funding source infederalelections,a proposals cametofeatureprovi played therein by political two issues:therising costsof elections to favoring greater regulation —had focused their efforts during much ofthistime on funds. Thoseinterestedincampaign fina costs campaign ofseekingof office and the concomitant needsources forprivate address concernsaboutthe advocacy.issue such growth andrespondedquickly by redi was established, proponentsof circumventing federal election law. But ev 18 17 party softmoney, wereincluded in law with these such asonesdealing of campaign finance measures, 3750; andinthe103 In the 101 Party soft money, since prohibited by by Party softmoney, sinceprohibited Following thewatershedelection of the 104 On September7,1995,during These provisions were key elements in comprehensive reformpassed bills by During the1980sandearly 1990s,pressu st Congress — S. 137 and H.R. 5400;inthe102 CongressH.R. —S.137and th Congress. In Congress. S.25,introducedby 18 the major pointofcontention the rd Congress — H.R. 3 and S. 3.Only the102 Congress —H.R.3and 1996 consen over time,andeventhatprovisioneventually became form advocatesintheSenate.Thatbill,S. 1219, was the action committees. The most prominent legislative role of money in politics, primarily involving thehigh involving role ofmoney inpolitics,primarily campaign financereformr st , 102 sions tocurb,ifnote public funding orbenefits nd CRS-6 , and103 BCRA, mostBCRA, commonly took theform offunds nd to impose voluntary spending limitsin nd toimposevoluntary sus among advocates of campaign finance ssible in state elections, and which could be which ssible instateelections,and federal office andthegrowing funding role nce “reform”—generally by characterized Cs, withotherfunding sources.(S.1219 en before the evidence ofagrowing evidence trend en beforethe ndidates’ receiving 1996,inwhichunregulated campaign of softmoney by nationalandstate nefit (suchasposta th leastindirectly influencefederal elections. recting theirefforts towardaddressing issible infederalelections and transferred ges intheir proposed legislation atthe Congress, Senators John McCainand Congress, SenatorsJohn re had been building inCongress to building re hadbeen rd Congresses. was the insistence of the reform ofthe insistence was the Senators McCain and Feingold,and SenatorsMcCain liminate,PAC money as a nd ecognized thepotentialfor Congress —S.3andH.R. . Thedynamics ofthe 17 either publicfunding nd While otheraspects While l orbroadcastrate Congress billswere http://wikileaks.org/wiki/CRS-RL33888 Act (BCRA) in2002. elections, wouldcontinue untilthe enactment ofthe Bipartisan Campaign Reform This newly emerging campaign practices. regulatoryof face the in system meaningless becoming from saving it to existing nature ofthe campaign froman attempt toimprove finance the debate had shifted years, were eliminated fromthe billentirely. Thus,inone year’s time, the very 10 previous the the key least forat and onPACs, objectives ofreformers’ elements issue advocacy. Theprovisionsoncongressi amendment, S.25featuredprovisionsaddre Inc., notably didmakespecificreferenceto reformsincethe1970s,arevisedS. finance the fallof1997,following themostinte activity. advocacy”“express By election-related ofmore regulation federal to allow Attacks fromNowhere,” above couldqualify aselec it becameapparentthatsome rulings, these and MartinMeehan,provisions offere companion measureH.R.493, its and 20 19 without conforming toFECArules. Spor 527 statusthatwereengaging inactivitie statusunderIRCbenefit oftax-exempt §527. arguablyactivities,while not required toreport tothe FEC,qualify could still the for rulings helpedcreatean awareness that that qualifyactivities as thewhich IRS year beganthe in issuing several private rulings onthe types of Emergence ofthe527Issue to categorize themsimply astax-exempt a 527. York Times Priv. Ltr.Rul.9808037(November 21, 1997); and LeslieWayne, “NonprofitGroupsWerePartne Door fortheCons

Carles R. BabcockCarles andRuthMarcus,“For See over thegroups’ activities. generousbreaksfor theirlargest tax donorswhilethickening theveil ofsecrecy code intersectswith federalelectionlaws. Switchingtax statusmay their allow gamble thatthey will stillremain outsideofthereachfederalelectionlaw. with theIRSstatus andreclassifying th politically active non-profit groups areabandoning theirtraditionaltax-exempt After the1996election,mediaandcongressi Not only was1996theyear inwhichissueadvocacyalso emerged, butitwas Priv. Ltr.Rul.9652026(October1,1996); 20 One1997newsacc The groups exactlyThe have atthepointwhich tax foundasafehaven campaignthe Call financeworld. ittheCayman Severalof Islands , October24, 1997, atA1,A28. ervative Donor,” Washington Post influencing an election forpurposesofIRC §527. tion-influencing activitiesunde ount, on the activitiesthe on ofount, Triad Management Services, were addedtotheir104 New York Times York New CRS-7 , March9,1997,atA6;Leslie Wayne, “ABack groupsadvocacy issue participating inthese emselves aspoliticalgroups, takingbold a adic newsaccountsof groups, withoutthemorespecificlabelas Targets,Their Mystery Groups’AdsHitLike nsive congressional activity on campaign nsive congressionalon activity oftheissueadvocacydescribed activities Priv. Ltr. Rul. 199925051(March29,1999). s aimedatinfluenc 527 status.Thearticlebegan asfollows: d by RepresentativesChristopherShays onal spending limits a debate, startedin ssing theissuesofparty soft money and 25wasoffered.Asmodifiedbyfloor Priv. Ltr.Rul. 9725036(March24,1997); rs to Both Parties in Last Election,” rs toBothPartiesinLast , May Abramson 22, 1997,atA24; Jill onal attention turned togroups with th Congress billstoredefine r IRC §527.Thus,these the wakeof1996 their activities tended ing federalelections nd public benefits, 19 Under New http://wikileaks.org/wiki/CRS-RL33888 Pay Fine,” Doyle, “FEC Enforcement:P. After Decade-L a politicalcommittee, FEC v.Malenick, D.D.C., No. 02-1237, (July 26,2005). forerunner ofthe527groups at issue,topa the Call Congress, Senator Joseph LiebermanCongress, SenatorJoseph intr 23 22 21 3, 2000,newsaccount, Clean Airenteredduring thepresidentialpr circumvention offederalel without triggering thedisclosure promote theirviewsandissuepositionsinre identified federalcandi termsur communications containing explicit permitted regulation of only those communica prevailing judicialinterpre issue oftheongoing campaign finance advocacy issue election-related campaigns. NAACP andasnewentities,suchCitizen During thistimeperiod,527swereestablishe groups: organizations.” In hisfloorstatement, things, “seek tobetterexempt election-related define the tax the limitson activitiesof the1996fe connection with Governmental Affairs Committee’s investig Notably, in2005,aU.S.distri Damon Chappie and Amy Keller, “Several PoliticalGroups Seek IRS SafeHaven,” 144C , October20,1997,pp.1,24. into the1996elections. Senate’s investigativethe organizationof thatwill hearings soonbethesubject Services, Inc.,Management aconservative consulting andfundraising for theRepublicEducationFund—non-profit arms Triad ofthecontroversial $2 millioncommercials inpresidentialprimary worth oftelevision states is broadcastingA mysteriousAir moreClean for than group calledRepublicans this environmentofra into It was 527 Activity in2000. essentially thesame terms asSection527. even though FECAdefinesthegroups itcovers in particular candidates, toFECAbecausethey don’tengage inexpressadvocacyare notsubject of on politicalactivity.restrictions fewer At thesamegroupsclaim time,they these to Sec status have switchedtheirtax A number of501(c)(4)groups active infederalelectioncampaignsapparently The emerging 527groups alsoreceive ONG Two ofthegroups making the switch are Citizens forReform andCitizens BNA Money& Politics Report .

R EC . 1568(1998) (statement dates). By avoiding such ection lawrestrictionsthat 21 tation of Supreme Court preced Court tation ofSupreme By 2000,issueadvocacy had deral electioncampaigns. ct court ordered Triad, generally considered to havebeen generallyto ct courtorderedTriad, considered and sourcerestrictionsofFECA. CRS-8 , July 27,2005. , July Senator Lieberman made referenceto527 Lieberman Senator made tion 527,whichofferstaxbenefitswith debate, owing toth of Sen.Lieberman). oduced a bill — S.1666to,among other imaries of 2000. As described in a March 2000. As describedina of imaries ong Pursuit by FEC, Court Orders Triad to ong Pursuitby FEC, Court Orders Triad y a fine totheFEC forfailing toregister as 23 ation ofillegal orimproper activities in d by such groups astheSierra Club and tions advocacy containing express (i.e., pidly evolving methodsofalleged s forBetter Medicare,allto engage in ference to particular elected officials, elected particular to ference ging the election or defeat ofclearly ordefeat election ging the d some attentionduring theSenate some d terms, groups arguably could a group calledRepublicansfor 22 In 1998,during the105 emerged asthethorniest ent. Thatinterpretation e conundrumbasedon See Kenneth Roll th http://wikileaks.org/wiki/CRS-RL33888 circuit thedebateonregula groups receiving thebenefitoftax-exempt advocacy issue ofelection-related practice by the with confronted was Congress officials. elected for money PACs leadership outlined howthenewlyvehicle discovered527 the IRC and issue also-complicated on the regulate activity that wa of BCRA, andopinionwasstillevolving burst onthescene. Means Subcommittee onOversight, Senator Feingold stated, In measure. as aprovisional preparedtestimony HouseWays forthe and action law andaddressedwhatwasseenasth deba the Congress thuskept section), next in 527statusinP.L. groups withtax-exempt 106-230(discussed nature ofthe entity engaging init.By simply requiring disclosure tothe IRS by byapproach having regulati Use Tax LoopholestoPromoteUse Tax Politicians,” only their political philosophiesbuttheirpoliti at A19. Times, attention tothat section of thegroup asa527organization. Itslabel it didnot activitiesdid,however,call thatarticleidentifie While 26 25 24 news accountswerefocusing specificallygroups. on527 A at the end of March 2000,identified gr waging issue advocacy campaigns. advocacy waging issue of advantages spectrum andanalyzed the John Mintz, John “‘CleanAir’ Leadership PACs referto PACs set up and M.Broder andRaymond John Bonner, “A environmental record. attacking McCainanddefending Gov. SenatorJohn Texas George W.Bush’s When the 527 issue emerged in 2000, Cong 2000, the527issueemergedin When Sponsors ofwhatwasultimately tobeco on softmoney, will continue.At thesame time, we cannotletourdesirefor first step.Our fighta intheSenate formore farreachingreform,ban including a to cure the ills of the campaign finance system. It isacrucialfirststep,butonly illusion thatapositive resolutionofthe 527 problems is allthatneedstobedone want tomake itveryany clearthatnoneofuswhosupportreform areunder campaigngenerallyissue finance andtostrengthen disclosureinparticular.... I much course, of is, now hide.There pass abillthat,ifnothing theveil else,will ofsecrecy end behindwhich 527s I hopethattheWays andMeansCommittee House willfull promptly andthe March29,2000,atA1,A18. political committee s not express advocacy. With the emergence of527s, advocacy.s notexpress emergence the With Group Cloudsthe Airwaves,” 24 thecodeindramaticenoug d businessman the Sam sponsor ofthead(Texas Wyly), ting non-express advocacyting non-express activ te going aboutstandardsfo on triggered not by thenatureofactivity butby the of differing definitions of under the FECA, Congress adopted adifferent adopted undertheFECA, Congress 25 A CRS-9 e mosturgent needatthatpoint. more thatcanandshouldbedoneonthe oups withoups maintained by elected officialstopromote not PoliticalVoice,WithoutStrings,” Wall StreetJournal Wall StreetJournal cal ambitions also.Greg Hitt, “‘527Groups’ about whether and how Congress could about whetherandhowCongress status under theIRC.status Ratherthanshort- various vehicles under the tax codefor various vehiclesunderthetax me BCRA recognized the need forthis me BCRAthe recognized 26 In afewmonths,the527issuehad was by thenbeing usedtocreate soft ress wasenmeshed in consideration 527 status across the political Washington Post r regulation undertheelection h fashionthat,withinweeks, political organization New Times York ity andbegin yet another , May 25,2000,atA28. articleinMay 2000 , March3,2000, New York New account, under http://wikileaks.org/wiki/CRS-RL33888 (statement of Sen.Feingold). $200 during theyear, along withthe amounta contributor whomadeacont periodic report must include(1)thename, either a quarterlyon IRS ormonthly to filethe a disclosure basis. A report with makes an expenditure foraSection 527 makes anexpenditure exem a state. political organizations527 arerequiredtore advocacy. issue ofelection-related question organizations andonelaw,BCRA, which the IRS. provision thatrequiresthe periodic disclosu candidates and state and local committees ofpolitical parties. by addingrequirement an forpolitical exemption committees ofstate and local is required to report totheFEC asa tohave organization expects an unless organizations mustnotify theIRS ofthei currently exist. 2002. It wassigned intolawonNovember 2,2002. byunanimous consentintheHouseonOct signed intolaw billthatbecame onJuly 1,2000.The P.L.107-276, H.R.passed 5596, was 28,2000, and by avoteHouse onJune of92to6intheSenateonJune v. UnitedStates,353 F.3d 1357(11 with instructionsto decision fortheEl 2003, however, theCourtofAppeals (S.D.Ala.2002), 1300 unconstitutional. National Fed’nofRepubli 527 DisclosureRequirements: 29 28 27 had todisclose information tothe IRS wa 276; 116Stat.1929). (P.L requirements in2000 disclosure Subcomm. on Oversight of the House Comm.onWaysHouse andMeans the of Subcomm. onOversight Congress’s Responseto527sandIssueAdvocacy In 2002, a U.S. district court held that Inthat 2002,aU.S.districtcourtheld bill The that became P.L. 106-230, H.R. 4762,was approved by avote of385to39inthe

Disclosure ofPoliticalActivitiesTax- the 527problem inthisCongress, andhopefully inthenextfewweeks. moresweeping reform, orforbroaderdi In additiontothe initialnotification requirementa The firstdisclosure Prior to 2000, theonlyto Prior timeanorgani The 106 Table 11 29 Under thisprovision,any organiUnder th and107 , in the summarizes Appendix, the 28 as amendedby Asa result ofthese twolaws, the general rule isthat IRC § th Congresses passedtwolawsa dismiss for lack MobileRepublicanAssembly of jurisdiction. ribution during the reporting period andgave atleast period ribution during thereporting th Cir.2003). 2002U.S.Dist.LEXIS 20845(S.D.Ala.2002).In political committee.P.L. 107-276amendedthe . 106-230;114Stat.477)and2002(P.L. 107- CRS-10 annual gross receipts of lessthan$25,000or ober 16, 2002, and in the Senate on October 17, October on Senate ober 16,2002,andinthe can Assembliescan v. United States,218F.Supp.2d dded by P.L. 106-230isthatIRC §527 s if it had taxable in requirement, P.L. 106-230alsoincludeda r existence within24hoursofformation r existence Exempt Organizations: Hearing Beforethe address, occupation,a addressed, among otherthings, thelarger sclosure, prevent usfrom dealingwith zation exempt from tax underIRC fromtax 527 zation exempt § P.L. 106-230and 107-276 port information to the IRS, the FEC, or FEC,port informationtotheIRS, the most ofthedisclosureprovisions were eventh Circuitreversed andremanded the re of contributions and expenditures to re ofcontributionsandexpenditures nd date of thecontribution;and(2) pt functionduring theyearrequired is zation thatacceptsacontributionor zation disclosure requirementsas they ddressing disclosureby 527 come. Congress added , 106 nd employer ofany th Cong. 10(2000) 29, 2 27 000. It was http://wikileaks.org/wiki/CRS-RL33888 disclosure penalty ifthe failure was due toreasonable cause and notwillfulneglect. eliminated by P.L. 107-276. P.L.While 106-230hadrequiredthatthe reports ontheInternet andalsorequired IRSthe postalladditional electronically requirement that submitted disclosure names andaddresses andtheIRS,publicallyorganization andtheIRS availableby mustpostthe the andcontributions expenditures political party committee, or required toreport tothe FEC as a political committee. party,FECA §301(14)ofapolitical under FECA §301(6)ofacandidatefor candidate, a caucus orassociation ofstate orlocal officials,authorizedcommittee an local committee ofa political partycommittee ora political ofa state orlocal ($100,000 ifaqualifiedstateorlocalpolitical a political organization file a return of at if least ithas gross $25,000 receipts respectto return.With file atax to P.L. 106-230,sothatcurrently only organiza returns, respecttotax With provisions. returnalsofilean information a tax political required organization that anyand taxable income, organization that filed at least$25,000ingross receiptstofilea never hadtofileaninfo organization only filedorganization apolitical return tax ifithad taxable income and organizations and mustfile information tax returns. Under priorlaw, a political committees ifthey are required toreport similar information toa state. Additionally, 107-276addedanex P.L. amount, date,andpurposeofeachexpenditure for acandidatebutaremadewithoutth apply toindependentexpend grossr tohave candidate, orexpects or localcommitteeofapoliticalparty organization that isrequired to report to the FEC as a political committee, isa state occupation, andemployer. Thedisclosure tothatpersonwasatleast expenditures “contribution,” TitleII createdanewterm amending FECA’s committee,”“political definition of “expenditure,” or Without scrutiny. judicial chancesofwithstanding enhanceits large to measure Title II ofBCRA a signed intolawby (BCRA), was PresidentBush, asP.L. 107-155(116Stat.81). Act Reform Campaign of2002(BCRA)Bipartisan Finally, P.L. 107-276grants the IRS the authority towaiveany notificationor the initialnotifi Under P.L. 106-230, political when P.L. 106-230andP.L.for 107-276alsochanged therules On March 27, 2002, H.R. 2356, the Bipartis the On March27,2002,H.R.2356, ddressed the express advocacyddressed theexpress i of all organizations ontheInternet. P.L. 107-276imposes an rmation return.P.L. 106-230 itures, which are expenditures that expressly areexpenditures which advocate itures, disclosures, and the information return must be made information returns, P.L. 107-276requiresthat eceipts of lessthan$25,000.Theyeceipts alsodonot CRS-11 return. P.L. 107-276 amended both ofthese both return. P.L. 107-276amended $500, along with the pe $500, along withthe P.L. 107-276reversedthechange madeby a congressional campaign committeeofa e candidate’sinvolve or apoliticalcommitteeofnon-federal federal office,anationalcommittee under requirements do not applynot do toany requirements political the IRS toimprove itsonline database. tax return, regardle return, tax emption forstateandlocalpolitical in federalelectionlaw,“electioneering in tax returnsbemade tax tions with taxable incomearerequired taxable tions with cation ofSection527status,the organization) unless it is a state or state a is organization) unlessit madetoaperson an Campaign Reform Actof2002 Campaign an ssue, butinalimitedfashion, in required any organization with rson’s name, address, ment orcooperation. ment ss ofwhetherithad if thetotalannual public, thiswas public, http://wikileaks.org/wiki/CRS-RL33888 communications).” activities, mailings, and broadcast advertising (other than electioneering to theCourt,“remainfreeraiseso continue tobeinvolvedin ofBCRAprovisions intact,IRC Sec line.” vague bere noroverbroadwould neither problems ofvagueness andoverbreadth,it“d Court announced that, by narrowly reading theFECA provisionsin as amatterofstatutory interpretation, when the not necessarilydo definition, containexpr “electioneering communicati First Amendmentnor of aclearlycandidate. defeat identified funds usedforcommunicationsthatcont and reporting requirements, as well as itsexpenditure limitations, toapply only to Court determined that itsdecision in Court in electioneering speech from a true issue ad,” the Court observed. Court ad,”the issue atrue speechfrom electioneering candidates, broadcastwithin communications”— political advertisements that refer toclearly identified federal 35 34 33 32 31 30 FEC, in Court, struck down.In December2003,however,theSupreme commentators predicted that Title II, inparticular, was potentially vulnerable tobeing toitsregulation in Due Constitution. Ame First the violated newlaw of the methods, voteridentification,andget- pub specified periodbeforeanelection, election-rela groupother involvementinsuch or morearerequiredtobe corporate treasury funds,anddisbur Generally,comm such thelawprohibits Paige Whitaker. Finance Law: ALegalAnalys For further discussion of McConnell v. FEC, ForfurtherdiscussionofMcConnell McConnellv. FEC,540U.S.93(2003). McConnell,540U.S.at192. Buckley, 424U.S.at80. Id. Id. at187-188. at193. Shortly after BCRA was enacted, plaintiffs filed suit arguing that key portions 30 33 largely TitleII. upheldtheentire law,including “[T]he presenceorabsenceof magi “[T]he Buckley McConnell Court distinguished between express and issue advocacy andissue express between so did distinguished it Court 35 also specifically noted that even with the electioneering the evenwith specifically also that noted Buckley, federal electionactivity. Su is of the SupremeCourtRu of is disclosed tothe FEC. B ons,” eventhough electi 30 days of a primary or 60 60 30 days ofaprimaryor however, prohibits BCRA’s regulation of however,prohibits sements ofover Buckley v.Valeo Buckley CRS-12 notconstitutionalcommand.Moreover,the out-the-vote andregistration drives. ft money to fund voter registration, GOTV registration, ft money tofundvoter 32 tion 501(c)and527organizations would unications frombeing fundedwithunion or lic communicationsthrough non-broadcast The The ndment and other provisions oftheU.S. provisions ndment andother quired to toe the same express advocacy express same the toe to quired ess advocacy. TheCourtdeterminedthat ain express advocacyain express or oftheelection the area of express advocacy, theareaofexpress some c wordscannotmeaningfully distinguish ted activities asbroadcastspriortothe ted McConnell id not suggest that a statute that was that suggest not astatute id that see CRSReportRL32245, $10,000 anddonorsof $1,000 ling inMcConnellv.FEC, CRA did not address interest CRA didnotaddress construed FECA’s disclosure oneering communications,by ch interestgroups,according 31 Court held that neither the days ofageneral election. In upholding TitleII, the 34 Buckley TheSupreme McConnell v. Campaign toavoid by L. http://wikileaks.org/wiki/CRS-RL33888 2000 Election, R [http://www.tray.com/cgi-win/irs_ef_527.exe?DoFn=&sYR=2000]. compiled by PoliticalMoneyLine. the new statuteandthelargest donorsto 501(c)(4) status(wherelimited it stoppedaccepting contributions asofJuly 1,2 the 2000election. ClubandtheNAACP,alsoestablished527sfor Sierra the interest groups, suchas status underIRC §527. sources ofmoney nolonger available to political parties may qualify for tax-exempt wishing toengage inthese activities and unlimited stillavail themselvesthe of money)permissible funds(i.e.,soft to and $21.6millionby Republican-orientedgroups. Among these key groups, $39.7millionwasra federal elections)hadreceiptsof PoliticalMoneyLine foundthat“keygroups”(i ofre federal elections.Anexamination 2000 Elections in thewakeofTitleI’s prohibitiononna 39 38 37 36 advocacy. for Better Medicare,which Citizens particular relevance,however cash-on-hand at to difference owing largely ex of $73.5millionand receipts showed Reports 2000, whenthelawtookeffect. first groupsthe wouldbecomeavailablefor Cigler, Allan J., “Interest J., Groups Cigler, Allan Cigler, C PoliticalMoneyLine, ECOMMENDATIONS FOR A ECOMMENDATIONS AMPAIGN AMPAIGN Tables 1 The activities notaddressed byIITitle BCRA in particularlyloomedhave large The largest and most prominent 527 group during the2000electionswas 527 The largest andmostprominent ofP.L. 106-230meantthat Enactment 527 Activity in2000-2006FederalElections 37 supra The aggregate totals,however,donotincludethisgroup’s activity, The as F p.180(David B.Magleby, ed.,2002). and INANCE INANCE note36,p.182. 39 2

provide data onthelargest 527 provide I NSTITUTE NSTITUTE N EW Money inPoliticsDatabases:527Groups , wasthefinancial activity A PPROACH disclosure rules apply).rules disclosure T $61.3 million and expenditures of$88.6million. $61.3 millionandexpenditures ASK andFinancing the 2000Election,”in CRS-13 spent anestimated$40-$65milliononissue F pay forvotermobiliza penditures of$103.0million(the$30 ORCE ON A8-A9 (2001). ports of all groupsall filing withtheIRSof by ports those groups inthe2000election cycle, as tional political partytional non-federally- useof filed withtheIRS underthenewlaw time, atleastforthe period after July 1, data onthefinanc the start ofthe law’s coverage). Of .e., thosethatwereclearly related to ised by Democratic-oriented groups D ISCLOSURE 36 groups filing withtheIRS under 000, and000, switched to section of groups solely involvedin 38 Prominent, established , I tion activities.Groups SSUE ial activity527 of A D Financing the D ISCLOSURE , at : http://wikileaks.org/wiki/CRS-RL33888 Source: a. Figures represent gross receipts, reflectingFigures receipts, gross represent a. some [http://www.tray.com/cgi-win/irs_ef Source: a. Excludes transfers [http://www.tray.com/cgi-win/irs_ef at Table 1.TopTen527sin2000Elections,Rankedby Receipts committees Table 2.TopTenDonorstoKey 527sin 2000Elections PoliticalMoneyLine, PoliticalMoneyLine, PoliticalMoneyLine, 10. Democratic Governor’s Assn. $ 2,016,475 $ 2,810,939 $ $2,954,655 $3,059,730 10. Democratic Governor’s Assn. $6,337,785 9. EMILY’s List Non-federal $3,542,722 3,685,287 $ 8. Working Families 2000 $12,364,150 7,217,204 $ 7. Republican Leadership Council 6. Democratic Legislative Campaign Cttee. $7,211,773 5. Gore-Lieberman Recount Committee 4. New York Senate 2000 3. Bush-Cheney 2000,Inc. - Recount Fund 2. Planned Parenthood Votes 1. ProChoice Vote 0 r n r.Jh .Hri,I $652,500 $750,000 925,250 $ 1,442,755 $ 1,110,000 $ 970,000 $ $1,655,071 10. Mr.And Mrs. John A. Harris, IV $8,233,648 $11,955,000 9. Steven and Michele T. Kirsch $1,429,935 8. Service Employees Intl. Union 7. Alida Rockefeller Messinger 6. DNC Services Corp. 5. Dem. Congressional Campaign Cttee. 4. AFL-CIO 3. AFSCME 2. Pro-Choice Vote 1. Jane Fonda 2000 Cycle Large Donors toPo aeReceipts Name Name Total Donations Total Name _527.exe?DoFn=&sYR=2000]. _527.exe?DoFn=&sYR=2000]. CRS-14 2000 Cycle 527Committees double-counting transfersamong due to affiliated liticalMoneyLine’s Key 527Groups a a , at , http://wikileaks.org/wiki/CRS-RL33888 Source: reflectingFigures receipts, gross represent a. so [http://www.tray.com/cgi-win/irs_ef 2002 Elections 40 compiled by PoliticalMoneyLine. the newstatuteand largest donors to groups and$78.2millionby Republican-oriented groups. 2000. Among thesekey groups,million wa $104.3 million; thisrepresentedmorethandoubleth PoliticalMoneyLine hadreceiptsof of $229.5millioninthe cgi-win/irs_ef_527.exe?DoFn=&sYR=2002]. PoliticalMoneyLine, Table 3.TopTen527sin2002Elections,Rankedby Receipts Tables 3 Reports filedwiththeIRS showed committees PoliticalMoneyLine, and .NwAeia piit $ 4,621,154 $6,948,686 $4,235,722 6,662,333 $ $5,533,588 10. New Democratic Network — Non-fed. 6,729,860 $ 9. New American Optimists 8. AFL-CIO COPE Treasury Fund 7. EMILY’s List Non-federal $8,435,903 $7,421,456 6. Republican Governors Association $8,781,418 5. IMPAC 2000 $16,115,035 4. Democratic Legislative Campaign Cttee. 3. College Republican National Cttee. 2. Michael Steele for Maryland Cttee. 1. Democratic Governor’s Association 4 providedataonthelargest 527 Money inPoliticsDatabases: 527Groups 2002 electi _527.exe?DoFn=&sYR=2002]. aeReceipts Name $183.6 million and expenditures of$193.6 $183.6millionandexpenditures CRS-15 on cycle. The “key groups” identified by meaffiliated double-counting transfersamong due to 2002 Cycle 2002 Cycle receipts of $215.2 millionandexpenditures of receipts those groups inthe2002electioncycle, as e levelofspending by in keygroups s raisedby Democratic-oriented groupsfiling withtheIRS under 527 Committees 40 , at [http://www.tray.com/ , at a , at http://wikileaks.org/wiki/CRS-RL33888 Source: a.Excludes transfers [http://www.tray.com/cgi-win/irs_ef 41 key2002. Among these groups, $264.0millionwa thisrepresentedmorethandouble million; PoliticalMoneyLine hadreceipts of of $595.5 Integrity, presidential election.According toaD BCRA, andtheextraordinary levelofvoter setbyexamples 527sinthe2000and2002el federal electionregulation reachedbey a financial level 2004 Elections Fundraising Center for Public Integrity, Integrity, CenterforPublic Reports filed with theIRS showed a nationalelection. they played amajor role, perhaps a deci least thepastthreeelec at for politics the fringesAlthough ofAmerican the527 committeeson have beenoperating In the 2004 elections, severalfactorspr Table 4.TopTenDonorstoKey 527sin2002Elections PoliticalMoneyLine, million in the , at[http://www.publicintegrity.org/527/report.aspx?aid=435]. .SehnL ig$1,677,090 1,539,900 $ $2,305,000 $2,452,000 $1,715,000 $2,667,240 $1,805,000 2,094,826 $ 10. Republican National Committee 9. Stephen L. Bing $3,950,968 8. Mr.And Mrs. John A. Harris, IV 7. Woodland Group Indiana L.L.C. 6. Democratic National Committee $2,500,329 5. Sierra Club 4. AFSCME 3. Democratic Congressional Campaign Cttee. 2. AT&T 1. Gordon Humphrey nd importanceof 527 organizations: 41 2004 electioncycle. The“key groups” identifiedby Name Total Donations Total Name _527.exe?DoFn=&sYR=2002]. 527s in2004ShatterPrevious RecordsforPolitical $431.5 million and expenditures of$434.9 andexpenditures $431.5million CRS-16 tion cycles,time election2004was thefirst ecember 2004study by the Center for Public 2002 Cycle 527Committees receipts of$582.1millionandexpenditures ond the “express advocacy” “express standard,the ond the sive role,indeterminingoutcomeof the interestandintensity regarding the 2004 the levelofspending by key groups in oduced an exponential riseinboththe oduced anexponential ections, thebanonparty softmoney in s raisedby Democratic-oriented the unresolvedissueofwhether a , at http://wikileaks.org/wiki/CRS-RL33888 PoliticalMoneyLine. donors tothosegroups inthe2004electioncycle, ascompiledby data onthelargest 527groups filing with groups and $165.7 millionbygroupsand Republican-orientedgroups. 42 reflectingFigures receipts, gross represent a. so [http://www.tray.com/cgi-win/irs_ef Source: cgi-win/irs_ef_527.exe?DoFn=&sYR=2004]. PoliticalMoneyLine, Table 5.TopTen527sin2004Elections,Rankedby Receipts committees PoliticalMoneyLine, PoliticalMoneyLine, 0 olg eulcnNtoa te.$12,780,126 $22,227,050 10. College Republican National Cttee. $24,172,761 $59,414,183 $33,848,421 Truth Swift9. for Veterans and POWs Boat 8. AFSCME Special Acct. $44,929,178 7. Democratic Governors Association $71,811,666 6. Republican Governors Association Education and Action Intl.Political Fund 5. Service Employees Intl. Union (SEIU) 4. Progress for America Voter Fund $79,795,487 Media3. The Fund 2. Joint Victory Campaign 2004 1. ACT NOW PAC Non-federal Account Money inPoliticsDatabases: 527Groups aeReceipts Name _527.exe?DoFn=&sYR=2004]. CRS-17 meaffiliated double-counting transfersamong due to 2004 Cycle 527 Committees the IRS under thenewstatuteandlargest 42

, at [http://www.tray.com/ , at Tables 5 $17,008,090 $40,237,236 a and 6 provide , at http://wikileaks.org/wiki/CRS-RL33888 a.Excludes transfers [http://www.tray.com/cgi-win/irs_ef it found tobe in 2002: with the$591millionitfound had been raised [http://www.cfinst.org/pr/prRelease.aspx?ReleaseID=63]. Malbin, ed.,2006). CampaignReform: Money,PoliticsandtheBipartisan Reform Act 44 43 the McCain-Feingold law.” thegroupssome extent, “replacedpart,but funding in2004,theCampaign Finance Institute foundthatwhile thisdidoccurto moneyto outsidegroups.flowing In the BCRA’s passage thatthesoft money ban the 2004elections.Certainly therehadb prohibition onparty softmoney in BCRA ha the 2004elections,analysts haveinpart Source: Steve Weissman and Ruth Hassan, “BCRA and the 527 Groups,” in in 527Groups,” Hassan,“BCRAandthe Ruth Steve Weissmanand Campaign Finance Institute (CFI), of the$591million. andcandidatesoftmoney,party this527money failedtoreplace$318million onlyraised $273million527s morethe ...[s]ince in2004thanthelast yearof Fundraising by 527sin2004. Table 6.TopTenDonorstoKey 527sin2004Elections PoliticalMoneyLine, a $273milli 10. T. Boone Pickens $ 5,620,000 $ 8,090,000 $ $8,793,700 Boone10. T. Pickens $13,952,682 $23,997,220 (and localbranches) 9. US Chamber of Commerce $27,030,105 8. BobJ.Perry $13,510,679 7. AFSCME (SEIU) $70,019,391 6. Service Employees Intl. Union 5. Herbert M.and Marion O. Sandler 4. Stephen L. Bing 3. Peter B.Lewis 2. George Soros 1. Victory Campaign 2004 44 2004 Cycle Large Donors to Po on increase in2004r 43 Looking atthebig pictur _527.exe?DoFn=&sYR=2004]. Name Total Donations Total Name CRS-18 In studying theactivity ofgroups activein one majorstudy527 thusfaron sourcesof New CFIStudyof“527” Groups sought to understand what impact the impact sought tounderstandwhat een the expectation by skeptics priorto byskeptics een theexpectation not the majority of soft money bannedby would in fact lead to more unregulated more to lead fact in would d intheupsurge indonationsto527s in soft money by allparty committees eceipts by 527sover 2002receipts, liticalMoneyLine Key 527Groups e, thestudywhat contrasted $ 5,688,000 $ 9,777,589 , p.81(MichaelJ. The Election After a , at , at http://wikileaks.org/wiki/CRS-RL33888 had given soft money topolitical the parties in Institute foundthat73ofthe113donorswhogave at least $250,000 to 527s in 2004 Fundraising, supra 49 48 47 46 45 abilitymessagescoordinatethe to being communicated, whether by campaigns orby credit theBush victory in2004partto limited thepotentialeffectiven prohibition against coordinating their activities withcandidates and political parties America. Pro-Choice Sierra Club,theLeagueCons the of coalition.” Ledby AmericaComing Togeth Republican NationalCommittee,wastheground big story of2004,inadditiontothe the ground(i.e., war)thantheyregistration amuchgreat placed Noting that527s America) organized later inthe election had substantial impact inthe fall campaign. Republican-leaning groups (notably SwiftBo MoveOn) keptthepresidentialraceclose It foundthat majorDemocratic-leaning impactonthe2004campaign ground andairwars.” that 527shad“asubstantial would disagree withpreliminary findings of the unionleveldoubledandindi business le unincorporated entities).The $30 millionwasfrombusinesses(including co million wasfromindividualdonors, $256 had notmerely tr combin 2002 and had tothepartiesin2000 however, foundthatthesedonorsgave three 2004 camefromthetop15individualdonors. Integrity for Public study foundthatmore put anendtovery large donationsby w 20%282%29.doc]. [http://csed.byu.edu/PressReleases/Dec%20%2016%20CSED%20Press%20Release% W a SubstantialImpacton theGroundandAirWars in2004, CFI, Center forPublic Integrity, CenterfortheStudy ofElectionsa Weissman andHassan, Id. Notwithstanding thatconclusion,however Still, itremains open todebate and a topic forfurther study whether the legal Spending by 527s in 2004andIts Impact. Finance Institute,Of the$405millionin527receiptsfoundby theCampaign New CFIStudyof ansferred to527s. note40. “527” Groups,supra BCRA andthe527Groups, supra ess of the major 527s in2004.Sincesomeobservers 527s in2004ShatterPreviousRecordsforPolitical nd Democracy, Brigham Young University, 47 ervation Voters,Pl vidual componentrosesevenfold. CRS-19 ealthy individualsandentities. The Center vel actually droppedslightly from2002,but tremendous ground strategy runby the 2004, butthat in thespring and summerof the clarity ofitscampaign “message,” the er emphasis on voter mobilization and er emphasisonvotermobilization groups (the Media Fund, AFL-CIO,groups (theMedia and $112 million was from labor unions, and $112 millionwasfromlaborunions, than one-fourthofallreceipts527sin er, thelargest 527, thiscoalitionincluded ed, indicating thatsoft money donations had before, the findings statedthat“the times more to the 527s in 2004thanthey times moretothe527s astudy by Brigham Young University note42. at Veterans For TruthandProgressVeterans for at 45 , thereis no doubtthatBCRA didnot Moreover, the Campaign Finance the Moreover, rporations, trade associations, and associations, rporations, trade 2000 or2002. work oftheliberalAmericaVotes It few observers appearsthat anned Parenthood,NARAL note43,pp.11-12. 46 The same study, ill Return 48 527s Had , at 49 http://wikileaks.org/wiki/CRS-RL33888 on 2004Campaign,” instituted in2000. oriented groups, nearparity betweenthepar million wasraisedby Democr el 2002 (thelastcomparablemidterm 2006 Elections (Coordinating the527’smessages with sympathetic outsidegroups, couldwellha 51 50 compiled by PoliticalMoneyLine. the newstatuteandlargest donorsto roughlyfi halfthelevelof of$215.2millionandexpend receipts had are filedfor2006.The“key final reports of $395.6millioninthe2006electioncycle; th least, 527activity hadaclearimpactontheelection. byextent the political parties. There seems tobe widespread agreement that here at mobilizationvoter efforts, an area traditionallythe relatedto dominated toa large th that legal jeopardy.)be It maywell constituted an in-kindcontribution tothe candidate,placingorganizationthe thus in [http://www.tray.com/cgi-win/irs_ef_527.exe?DoFn=&sYR=2002]. Kenneth P.Doyle, “LeadersSay Kenneth Nonpa PoliticalMoneyLine, Tables 7 IRSshowed Reports filedwiththe and 51 8 Money & Politics Report provide data on the largest 527 provide dataonthelargest nancial activity in2004,this Money inPoliticsDatabases: 527Groups, atic-oriented groups and CRS-20 e mostnovelaspectof527activity in2004 rty Impact GroupsObeyed LawButHadMajor ection). Among thesekey groups, $109.4 receipts of$361.3millionandexpenditures those groups inthe 2006 election cycle, as groups” identifiedby PoliticalMoneyLine ve hadanimpacton the final outcome. ties forthefirsttimesincedisclosure was , February 9,2005. itures of$234.7million;whilethiswas a candidate’s campaign would have a candidate’scampaign would ese figures are likely toclimbonce groups filing withtheIRS under $103.0 millionby Republican- represented anincrease over at 50 http://wikileaks.org/wiki/CRS-RL33888 Source: a. Excludes transfers [http://www.tray.com/cgi-win/irs_ef Source: a. Figures reflecting receipts, gross represent some [http://www.tray.com/cgi-win/irs_ef Table 7.TopTen527sin2006Elections,Rankedby Receipts committees. Table 8.TopTenDonorstoKey 527sin 2006Elections PoliticalMoneyLine, PoliticalMoneyLine, .Cu o rwh$6,346,665 $8,094,443 $6,175,025 $11,775,201 $17,410,657 10. Progress for America Voter Fund 9. Club for Growth 8. America Votes, Inc. Committee 7. Democratic Legislative Campaign 6. EMILY’s List - Non-federal 5. AFSCME Special Acct. $28,045,313 (RSLC) $40,763,546 Committee Republican StateLeadership 4. Intl. Fund Education and Action Political SEIU 3. 2. Democratic Governors Association 1. Republican Governors Association 8. Peter B. Lewis $ 2,684,458 $ 2,060,000 $ 2,946,000 $ $3,720,000 2,370,980 $ 4,067,500 $ 10. Richard and Betsy DeVos 9. National Education Association 8. Peter B. Lewis $12,300,000 7. Linda Pritzker (and localbranches) 6. US Chamber of Commerce 5. AFSCME $10,239,703 4. George Soros Perenchio 3. Andrew and Jerrold Margaret 2. Service Employees Intl. Union 1. BobJ.Perry 2006 Cycle Large Donors to Po aeReceipts Name _527.exe?DoFn=&sYR=2006]. _527.exe?DoFn=&sYR=2006]. Name Total Donations Total Name CRS-21 2006 Cycle double-counting transfers due to among affiliated liticalMoneyLine Key 527Groups 527 Committees $ 3,692,000 $ 5,450,000 $19,122,544 $22,367,120 $ 8,676,292 a a , at , at http://wikileaks.org/wiki/CRS-RL33888 Summary of2000-2006Data an effort to replace the agency the enforcement replace they what to effective effort with seeasamore an they argue isthe FEC’s failure toenforce existing law, and theyhave also launched enormous amountsofmoney raisedandspen those concernshavedifferentorigins. 527s hasbeenvoicedacro the about concern Congress; andtheHouse passedsuchle committees reportedbillstoregulate Senate RulesandAd prominent 527groups during the2004elections;bothHouseAdministrationand The Bush-Cheney campaign fileditsown groups onthatbasis. law and havethe filed court challengesof view tothe activities ofprominent 527 dismayfailu have expressed overtheFEC’s of thenaturespecific activities in register as political committees aspects ofthat and law, comply regardlessall with the electionorde that groupsfor working BCRA haveof led theserequires efforts,federalelectionlaw insistingexisting that underway onseveralfronts: in outsidetheregulaoperating organizations Source: receipts by 527organizations clearly [http://www.tray.com/cgi-win/irs_ef 06$3. 252$0. $103.0 $165.7 $78.2 $21.6 $109.4 $264.0 $104.3 $39.7 $215.2 $431.5 $183.6 $61.3 $234.7 $434.9 $193.6 $88.6 2006 2004 2002 2000 Election Cycle Total Spending Total Cycle Election Concerns about thisissuehavebyConcerns During andsincethe2004elections,effo Table 9 PoliticalMoneyLine, summarizes data compiled by summarizes PoliticalMoneyLine onspending and Table 9.ReceiptsandDisbursementsby Federal-Related 527s: 2000-2006 Federal-Related 527s: ministration Committees held hearings in2004and2005; both Efforts toRegulate527s the courts, at the FEC, andinCongress. Supporters (dollars in millions)(dollars PoliticalMoneyLine’s Key 527Gr involvedinfederalelections. CRS-22 527 organizations underFECA inthe109 Total no meansbeenlimitedtoBCRA supporters. which they engage. TheseBCRA advocates BCRA supporters havetendedtoseethe BCRA supporters gislation on two occasionsin2006. While feat ofcandidatesforfederalofficemust tory havebeen frameworkoftheFECA ss the political spectrum,tosomeextent t inrecentelectionsasa result of what re to issue regulationsre toenforce that lawsuit to block activities of some of lawsuit toblock activities _527.exe?DoFn=&sYR= rts to address the activity of 527 of rts toaddresstheactivity oriented 527s Democratic- Receipts oriented 527s Republican- oups, 2000]. at th http://wikileaks.org/wiki/CRS-RL33888 11, 2004). such newregulations asof rules adoptedinOctober2004,di committee relevant totheregulation to theNovember2004 presidential election th major purpose “it need only encompassorganizations that political committee of the commissioners. Hence,theFECsix proposal alternative finalrule in 2004, butwhenthatdeadlineexpired comments. TheFEC votedtodeferconsid two days ofhearings regarding andreceivedarecord150,000public theNPRM accountable tothepoliticalsystem. redirecting massive amounts of unregulated predictable resultofthebanonsoftmone nonconnected political committee (a PAC which nonconnected politicalcommittee(aPAC regulations promulgated unde “major purposetest.” discussed, thesecondpartof of a political result.” for encomp “potential has the nomination Valeo, definition of purpose ofinfluencing anyoffice.” electionforFederal contributions $1,000intheaggregateexceeding during acalendaryear. this “major purpose”test. (1986). FEC-Proposed Rulesin2004a body. 57 56 55 54 53 52 regulated “political (NPRM), whichpresentedvariousapproach 2U.S.C.§§431(8),(9). 2U.S.C.§431(4). FederalElectionCommn., Buckley v. 424U.S.1,79(1976). Valeo, Id. See (emphasis added).In asubsequentopi Proposal toRedefine In its NPRM, the FEC discussed FEC In itsNPRM,the On March2004, 11, H.R.421(Meehan-Shays) andS.478(McCain-Feingold) inthe110 52 cautioned that the phrase “for the pur phrase“forthe the that cautioned BCRA critics, however, insist that what has occurred has been BCRA critics, the however, insist political committee and ofwhich is the nomination expenditures asanyreceives groupthat committees” underFECA. 56 Therefore, inorderto avoi See of 527 organizations, and with the exception of the political of 527organizations, ofthe andwiththeexception thedateofthisreport. Notice ofProposedRulemaking, FEC v. MassachusettsCitizens for Life, Inc., 479 U.S. 238 the FEC issued a Notice of Proposed Rule Making the court’sdetermin s, neitherofwhich garnered r FECA defining whenanentity a isconsidered to apply when any gift orpurchaseismade“forthe Political Committee , theSupremeCourtinits1976decision, CRS-23 nion, the Court reaffirmednion, theCourtthe applicability of assing both issue discussion and advocacy and assing discussion issue both August, theCommissionconsideredtwo or electionofacandidate.” whether andhowitshouldamendits nd ConstitutionalConcerns are under the controlofacandidateor under are eration of the NPRMfor90daysMay of in eration did notadoptany newregulations prior y activity byparties, thus the national money tooutside es for classifying 527 organizations as es forclassifyingorganizations 527 at wouldhaveaddr scussed below,ithasnotadoptedany contributions pose of influencing” an electionor pose ofinfluencing” 53 OnApril14,2004,theFEC held d overbreadth,theCourtfoundthat is not sponsoredbyis anotherentity, ation has come tobeknownasthe has ation . FECA generally definesa 69 therequisitevotesoffour 55 ormakes Fed. Reg In interpreting the 54 It further defines further It groups that essed thekey issues . 11,736 (March 57 th Congress. As has been has As expenditures Buckley v. Buckley are less http://wikileaks.org/wiki/CRS-RL33888 of paidtimeinamonthonactivities by partyservices 25% orlocal (4) astate least or employee against); at whospends (regardlesscandidate they office for ofwhether that expressly advocate a vote for or drives inlast120daysregistration ofafe totalannualdis its or an whether it wasconsidering: on aproposedregulatory test,andhence, regulated community.NP the Asstated in setregulation forththree alternative tests forcomment and consideration bythe major purposeofnominating orelecting to a non-elected office or topoliticalpa or to anon-electedoffice solely for the purpose ofinfluencing the government, showing allactivitie statelaw,mustfilefina to pursuant and, for federal office appears ontheballot;(4)if activitiesnomination election relateor whose solely toelections wherecandidate no or election of acandidateto office; (2)if the 527 isorganized solely individual seeking nomination,election,appoi (1)if candidates, withfiveexceptions: of that all527shavethemajorpurpose alternative consisted oftwo“sub-alternativ office candidate,”thatwoul an organization has“themajorpur whether clearly identifiedfederal which a federal candidate isonthecommunications ballot; (3)public that refer toa Out-the-Vote (GOTV)drives, and generic activity inconnection with an election in election activities (including independent 11,756 (2004). such asacorporationorlaborunion). 60 59 58 major purposeofnominating orel aggregatingexpenditures over$1,000percal ormakes contributions receives it bywhether determined test: atwo-part proposed regulations, whetheranorgani the“majorpurposetest”sothat,under political committeetoencompass “political co of within thedefinition 100.5(a), donotexpressly incorporatethe 2U.S.C.§431(20). FederalElectionCommission, Id. at11756-57. In defining how theFEC wouldascertainwhetheranorganization has“the In defining The FEC also sought comment ona determining fourthalternativeof method . 59 bursements onacombinationof FECA defines “federal election activity” to include (1)voter activity” include to election “federal defines FECA expenditures), electioneer expenditures), candidate andpromote,su d specifically only apply to 527organizations. Thefourth anon-federaloffice;(3)ifthe527isgroup of persons Notice ofProposedRulemaking, ganization hasspent$10,000,$50,000,or50%of s withinthatstate;or(5)ifthe527isorganized ecting afederalofficecandidate.” CRS-24 mmittee.” TheNPRMproposedtoredefine connectionwithafederalelection. for thepurposeofpromoting thenomination the 527iscampaign organization ofan Current FECA regulations, at11CFR § regulations, CurrentFECA deral election; (2)vot nomination orappoin zation is a political committee would be would zation isapoliticalcommittee RM, theFEC didnotmake a final decision sought commentonthethreealternatives a federal office candidate,”theproposed a federal e” tests: Alternative 2-A would consider e” tests:Alternative2-Awould nominating orelecting federaloffice nominating pose of nominating orelecting afederal ncial disclosurerepor Supreme Court’s“m rty leadershippositions.In contrast, the527operatessolely within one state endar year, and whether ithas“the whether endar year,and ntment, orselecti ing communications,and contributions,expenditures pport, attack,oroppose a pport, er identification,Get- 69 tment ofindividuals on toanon-federal ajor purposetest” ts withthestate Fed. Reg 58

60 . 11,736,

federal http://wikileaks.org/wiki/CRS-RL33888 political_comm_st Status 11,757. (2004). organizations. individuals wouldbelimitedto contribu unregulated treasury funds,tomake individuals other than candidates, and organizations other than political committees. political than other organizations and individuals other candidates, than office,” created expenditures made constitutional by problems asto applied the purpose of theoperativephrase,“for per candidateelection. separate segregated f test, withoutany exemptions. disclosure requirements. FECAthe regulation ofcontribution limits,sourceto restrictions, and subject expenditure anyAlternative 2-B wouldcategorize 527 or 68 67 66 65 64 63 62 61 vaguene the Therefore, inordertoavoid amending FECA regulations redefining what constitutes a accordingly, regulation. FECA to besubject not would proponents maintain,non- cannot, by definition,haveamajorpurpose of argument that itwillchillspeechby non- advocacy. Ontheotherhand,thosefavoring regulation. Furthermore, they argue, committee and thus,erroneously subjecting and unconstitutionally them toFECA many501(c) organizations,example, for file disclosure reports; organizationswould such is, forexample, committees) as than party committees, FEC-registered political committees, and candidate

Buckley, 424U.S.at77. Federal ElectionCommission., See, e.g., See See See See Id. at11756-57. Proposal toRedefi theproposedregulations ar Those opposing If theFEC promulgates regulations cla 2U.S.C.§441a(a)(2)(A). 2U.S.C.§441a(a)(1)(C). 2U.S.C.§441b(a),(b). 2U.S.C.§§432,433,434. (April14,2004),(visited January FederalElectionCommission, is also critical for determining which organizations and activities are 64 political committees Further, suchorganizations atus/trans_04_14_04.pdf]. unds (politicalactionco 62 corporations and laborunionswouldberequiredtouse and corporations 67 In In 65 profits wouldnot fall withintheproposeddefinitionand ne “Expenditure”. toredefine the term 61 political committee Buckley, Notice ofProposedRulemaking , they wouldbe subject to FECA regulation. That CRS-25 the Supreme Court found that the ambiguity theSupremeCourtfoundthat Transcript from Hearing onPolitical Committee ss andpotentialoverbreadthofthestatutory contributions totheorganizations; ting no more than $5,000 annuallytingsuch nomorethan$5,000 to profit groupsprofit because501(c) organizations such regulation willthreatengrassroots non-profit groups, tothestatus of political be requiredtoregister withtheFEC and of influencing any electionforFederal ssifying certain 527organizations (other ganization asmeeting themajorpurpose 8, 2007)[http greaterregulation by the theFECreject could contributenomore than $5,000 influencing federalelections.Hence, In addition to proposing options for proposing options to In addition , the NPRMpresentedoptionsfor mmittees or PACs) instead of gue thatthey risksubjecting too expenditure 66 ://www. , 69Fed.Reg. 11,736, . The definition of . Thedefinition fec.gov/pdf/nprm/ 63 and 68 http://wikileaks.org/wiki/CRS-RL33888 reading theFECA provisionsin influencing anyis Federal election.” That purpose of the constitutional barrier inascertaining“for whetheris an expenditure a not is it that determined court the Clarifying advocacystandard, express the regardless they advocacy. ofwhether elections express contain influencing overbroad would be required to toe the same express advocacy express same the toe to line.” berequired overbroad would nowheresuggestedwe overbreadth, that Congress,’ ‘vote against,’ ‘defeat,’‘reject.’” of advocacy, ‘elect,’ “suchas,‘vote for,’ 11,757 (2004). definition, 73 72 71 70 69 and wouldpass constitutional muster. favoring the change tothe definition maintain that it is sufficiently narrowly tailored of thereby potentiallyproblem a creating as politicalcommitteesmanygro non-party the “promote,support,att of importation also proposedtoamendthedefinitionof advocacyin express Court’s articulated test the electionordefeatofa onlyexpenditure appliesto“funds used fo Court consideredtheconstitutiona adsandcam issue true between distinction FEC trans_04_14_04.pdf]. Status 540U.S.93(2003). Commission., FederalElection See Id. Id. at79-80. In afootnotetothe decision, th at93. , Those opposing the proposedamendeddefinitionof 11 C.F.R.§100.26,isanexpenditureifthepubliccommunication: made by, oronbehalfofany person for a public communication, asdefinedin a payment, distribution,loan,advance, or In viewoftheSupremeCourt’sjurisprude Over time, manythe campaign in finance reform community observed that the , e.g.,Federal ElectionCommission,, T 70 (visited January 8,2007) itconcluded that certain communicati (b) Promotes oropposesany politicalparty. or supports,attacks oropposes an (a) Refersto a clearly identified candidate for Federaloffice,andpromotes Buckley adopted a narrow construction sothatFECA’s definitionof adoptedanarrow clearly identified candidate.” Notice ofProposedRulemaking, [http:// lity of BCRA inits2003decision, Buckley CRS-26 73 www.fec.gov/pdf/nprm/po ranscript from HearingCommittee onPolitical ack or oppose” standard risks categorizing risks ack oroppose”standard ‘support,’ ‘castyour ba expenditure r communications that r communications Id. e Courtsuppliedexamples ofexpresswords a statute that was neither vague nor wasneither that astatute depositofmoney oranything of value to avoid problems ofvagueness and toavoidproblems overbreadth. Ontheotherhand,those , according to the court, “[i]n narrowly according tothecourt,“[i]n , y candidateforFederaloffice;or paign ads.Indeed, whentheSupreme ups thatmakepubliccommunications, Buckley at44,n.52. ons can have the purpose or effect of effect or ons canhavethepurpose nce inthis area, in itsNPRM,the FEC 72 failedtoprovideameaningful toinclude 69 expenditure 69Fed.Reg. 11,736, litical_comm_status/ expressly advocate llot for,’‘Smith for argue that the argue that 71 McConnell v. http://wikileaks.org/wiki/CRS-RL33888 paid entirely withfederally regulated hard money. the court, “it isapparentan effortpromulgated toclosein FEC thatrules the anthese designedprotectcircumvention thatlimits tointerest. ofcontribution According to elections andthatthe inpreventing corrup interest important v.Valeo Buckley Communications thatsupportoropposeclearly — such asget-out-the-vote (GOTV) effort organizations pay at least 50%oftheir expenses forfederal election related activities upheld thenewrule. 2005, thecourtdeniedEMILY’s List particularly election activities. OnFebruarylocal withregard and toitsstate 25, violates it andthat newrule the for notice rule. In itscomplaint, EMILY’s List ar newin U.S.District Courtforthe FEC District ofColumbia seekingthe toenjoin political committees. solicitation messages, nonparty groups arere rule failed toaddress the keynew the FECA regulation. Therefore, any organization with$1,000or mo ofsuch asaresult collected ca federal “support oroppose”theelectionofa based onwhetherthey conductfundraising w solicitations,” thenewrule election. November 2004presidential 527 Groups,” exemption from FECregulation, is“going tobe kind of a hairy issue,I have toadmit.” in were new ruleon527organizations that Politics article,Lizinforma Kurland,oftheFEC’s year.” 2U.S.C.§431(4). of personsthatreceives contributionsa Cir. 2005). 2004 FECRuleandRe 78 77 76 75 74 committees. to political Octobe in regulation, asacompromise, Kenneth P.Doyle, “FEC FacesCourt Battle FECA defines“politicalcommittee” as“any EMILY’s Listv. FEC, 11C.F.R.§100.57(b)(2006). See The new rule also revised itsallocation regulations requiring that such regulated In January 2005,EMILY’spolitical committee,filedsuit List,nonconnected a While theFEC wasunabletoadoptnew While re 11C.F.R.§100.57(2006). Money & Politics Report in1976,thecourtfoundthatitis 75 Notably, ithasbeenreporte 78 76 Citing the Supreme Court’s jurisprudence beginning CitingCourt’s the with Supreme

362 F. Supp.2d43(D.D.C.2005), 362 74 Supreme CourthasupheldFEC actiontoprevent Accordingly, thisnew rule was ineffect during the providesthatpoliticalgr solicitations are considered a areconsidered solicitations lated Litigation ggregating in excess of$1,000during acalendar excess ggregatingin , January 21, 2005. According to the Money & 21,2005.Accordingthe , January to CRS-27 r 2004,itadopteda new the organization’s First Amendmentrights, gued thattheFEC proper didnotprovide tion andtheappearanceofcorruptionin question ofifand Entitled “Fundsreceivedinresponseto s Over New Rule ImposingSection Limitson s —withfederally regulated hard money. committee, club,association,or other group motion for a preliminary injunction and motion forapreliminary injunction volved infederalelections,but claimed ith solicitationsthatinclude appeals to tion division, stated that theeffectof stated division, tion identified federal identified quired to register with the FEC as FEC quired toregister withthe re in such contributionsissubjectto ndidate. Funds oranything ndidate. ofvalue gulations central to theissuesof527 d that the FEC acknowledged that the d that 77 clear that the government has an clear thatthegovernment has

oups areregulated underFECA aff’d contribution , 170 Fed. Appx. 719 (D.C. 719 , 170Fed.Appx. when, basedontheir regulation relevant candidates must be underFECA. Id. http://wikileaks.org/wiki/CRS-RL33888 committee status. different and broader set ofcriteria” than is used by the FEC indetermining political IRS’s requirementsforgranting exem tax political for 2004rule its and the reas entitled“PoliticalCommitteeStat Justification,” concluded that the regulations appeared topass constitutional muster. the FEC appearedtohavefollowedproperpr contributions.” regarding expenditures, the major purpose doctrine, and solicitations resulting in co regulated the enforcement actions “places Explan “Supplemental the and amendedrules, regardless stat ofthatorganization’s tax organizations thatshouldberegist cases,eviden enforcement guidance,throughpubliclyprovided available advisory opinionsand filingscivil in [http://www.fec.gov/law/cfr/ej_compilation/2007/notice_2007-3.pdf]. received contributionsormadeexpend and majorpurpose requirements.” does notnecessarily satisfy “FECA andS committee underFECA. It foundthatanor evidence insufficient FEC, Section527stat the According to loopholein oft-exploited 84 83 82 81 80 79 advocacy “constituted express forcommunicati organization’s expenditures clearly identified Federal candidate,” and willanalyze whether any the of of the fundsreceivedwouldbeus portion any that indicated solicitations “becausethe contributions in resulted solicitations FEC specifically noted that itwillconsiderany whetherof the organization’s whether the organization’s “majorpurpose” continue todetermine FederalElectionCommission,

Id. Id. Id. Id. Id. at57. at44. at43,citing 11C.F.R. §100.22( at11. at10. On February theFEC issued 1,2007, In concluding, theFECannouncedthat Pursuant to FECA and Supreme Court precedent, the FEC stated that it will it that stated FEC the precedent, Court andSupreme FECA to Pursuant committee 84 82 insuchamannertospecifica political committee alone federal electionlaw.” todetermine whether an organization isa political ce a “very effective mechanism for regulating for ce a“very mechanism effective ons itdeclined to revise the regulatory definition of ” underitsregulations. Political Committee Status, 81 a) or11C.F.R. §100.22(b). In addition,theCommissiondeterminedthat ered as political committees underFECA, ered aspolitical CRS-28 us.” Moreover, the FEC announced,itsnew itures over $1,000 in a calendar year and itures over$1,000inacalendar status based on whether anorganization whether on statusbased ption under Section 527 arebasedon“a 527 Section ption under us undertheInternal RevenueCodeis upreme Court contribution, expenditure, upreme Courtcontribution, ed tosupportoropposetheelectionofa ganization’s tax status under Section527 status ganization’s tax mmunity on notice of the state of the law ofthe state ofthe notice mmunityon was campaign activity.was Tothatend,the ons, madeindependently of a candidate, ocedures inissuingand itsnew rules, ation andJustifica a “Supplemental Explanation and a“SupplementalExplanation its recent enforcement actions and itsrecentenforcement 79 us,” to more fully thebasis explain Thedeterminedthat court further lly regulate 527organizations. 83

(visited February 1,2007) tion,” anditsrecent 80 http://wikileaks.org/wiki/CRS-RL33888 to Pay $580,000 Civil Penalty,” pressreleaseNovember 19,2007. 501(c)(4) organizations during thepastyear a $580,000civilpenalty. FECAlimitsorwerefrom imp that exceeded enforcement. clearly federal identified candidates —traditionally a trigger forFECA federal election activities, including get-out-the-vote (GOTV)efforts that mentioned account andanon-federal(527)account,ha activities.federal PAC Thea FEC determined that ACT,which maintainedboth agreement forcertain2004campaign withAmericaComing(ACT) Together In August 2007,theFEC announced thatithadreacheda$775,000settlement had failed to register asapolitical had failedto The Media Fund (TMF) inNovember 2007.TheFEC determinedthatTMF, a 527, some ofthosecases. agai number ofenforcementactionstaken Under Review 5440at[http://eqs.nictusa.com/eqsdocs/000066D5.pdf]. NovemberFederal ElectionCommission,and 19,2007; Conciliation Agreement in Matter Organizations [http://eqs.sdrdc.com/eqsdocs/000061AA.pdf]. Conciliation Agreement in Matters Under Review 5403 ComingAu Together,” pressrelease, the agencyact on527 hasbeentooslowto Three 527sfor2004Activities FEC EnforcementAction Against 88 87 86 85 requirements oftheFedera with the Commissionand abide by the c involvement of $1,000,anditsmajorpurposeis excess in expenditures ormakes contributions receives “[i]f anorganization FEC, the file disclosureand reports.prohibitions, Accordingand limits to with contribution that they were political committees, buthad failed toregister withthe FEC, comply contributions, andotherpubliccommunicati 0, the FEC determined that through their public statements, solicitations for for Truth agreed topay $299,500,allincivil Voter FundMoveOn.org agreed topay The League of Conservation Vote organizations accused ofviolating FECA 2006, theFECannouncedthatithadr as politicalcommitteesandweresubject Indetermined severalnotablecases,theFEC FederalElectionCommission,to PayFund $580,000Civil “Media Penalty,” pressrelease FederalElectionCommission, Co “FECTo Election Commission, Federal As of November 2007, the FEC had The FEC reached similarconclusionsin FEC The The FEChasassessedmajorfinesfor 86 , at [http://www.fec.gov/press/press2006/20061213murs.html]. , at In anothercase,theagency 88 Somecampaign financeintere 87 In theseandothercases,theFEC the hasemphasized l Election Campaign Act.” FEC Collects $630,000inCivil Penalties from Three527 committee andhadacceptedsomecontributions gust 29,2007;andFederalElectionCommission, reached conciliation agreements with 11 rs 527a CRS-29 $150,000; andSwiftboat . FederalElectionCommission,. “MediaFund during the2004presidentialelection cycle. to FECAregulation. OnDecember13, llect $775,000Civil Penalty From America nst 527sandthelarge finesassessedin nst enforcement mattersandthatevenlarge d improperly spentnon-federalfundson some 527 activitiesinrecentelections. some thatcertain527sshould have registered ontribution restrictionsandreporting ontribution two notable 2007enforcementactions. reached a conciliation agreement with conciliation reached a ermissible sources. penalties. By aunanimousvoteof6to ons, the organizations had established ons, theorganizations had eached settlements with three 527 three eached settlementswith nd 527II agreed incampaign activity, it must register 85 st groups havecounteredthat

Veterans andPOWs topay $180,000; TMF agreed topay

and 5466at 527s and http://wikileaks.org/wiki/CRS-RL33888 and Meehan—whoofferedidenticalbills sponsors oftheBCRA —Sena Committee ChairmanLott, whohadopposed BCRA butwhosesponsorshipofS.271 elections).Inbills, therevised “majorthe purpose” standard contained inthe 108 (such standardsforexemption specified political organizations aspoliticalcommitt on theFEC. Administration Committee,which,onJuly 14, addressedonMa also was committee” toincludeactivity byissue many527 The 527groupsoperation. thenin postponement of a decisi process,promptedby theagency’shearing onthe FEC andthe527rulemaking that day. On hearing scheduled subpoenas tocompeltestimony BCRA. OnNovember 20,2003,the committee authorized itschairman toissue oftheroletax-exempt examination Fund case. anFECcomplaint Media inThe filed 21 press release,November 19,2007.Democracy on FEC Finding MediaFundIllega thatThe Organizations: Legislation inthe109 Legislative Activity toRegulate527s spending. fines represented organizations’ a small share allegedly ofthose illegal campaign 91 90 89 well. exempt organizations that their activities could be subjected toFECA regulation as bills wasdropped,appa Congress Senators McCain,Fein 513, sponsoredby RepresentativesShay Congress wereintroducedFebruary 2,200 entities wouldhave tofully comply withthat law’s requirements. adding 527organizations totheFECA than$25,000orareexclusivelyless devoted have themajorpurposeofinfluencing elec the respectivestatutes,by specifically d the differencesinhowfederal election la Congress. The527 Reform Actof2004(S See,forexample, Democracy 21, “Democracy Amy Defense,” “527sPrepareTheir Keller, Foramore completeof discussion 91 The initial legislative re 109 108 Senate sponsorswerebol th th 89 Congress. Congress. Revised versions ofthe billsoffered at the end ofthe 108 gold, andTrentLott.gold, The House Administration Committee beganan on a pr rch 1,2004,atahearing by theSenateRulesand sponse to the pe to sponse tors McCain and Feingold from severalgroupshad that the legislation, see CRSReportRL32954, stered by theadditionof rentlyconcer toaddress May 20,2004,thecommitteeheldanoversight th Congress CRS-30 527 politicalorganizations since enactment of eclaring that 527 organizations under the IRCthe eclaringunder that527organizations w and tax lawdefined w andtax oposed regulatioposed lly Spent Over$50 Millionin2004Election,” llySpent definition of “political committee,” such committee,” definition of“political s andMeehan,S.271,sponsoredby in September 2004, at the endof 108 at 2004, September in tions (unless they ha ees under FECA, unlesstheyunder ees metcertain 5, as the 527 ReformActof2005:H.R. 527 the as 5, Roll Call . 2828andH.R.5127)sought tobridge as involvementsole 21andCampaign Legal CenterStatement , by E.Cantor andErika Joseph Lunder. rceived 527problems came from the 90 tonon-federalelections).Bythus 2004, also heldanoversight hearing 2004, Thebillsproposedtotreat527 , February 22,2005. on toredefine “political and RepresentativesShays Rules andAdministration ns voicedby §501(c)tax- declined totestify inits who iscoveredunder ve annualreceiptsof ly in non-federal 527 Political th th th http://wikileaks.org/wiki/CRS-RL33888 provisions, and theSenateresi provisions, withthe Senate.conference a The Senate-passed billdidnotcontain the 527 ofS.2349,theSena text the for it substituted campaign committees). Afterpassing H.R.4975,theHouse principal funds in them to betransferredwithoutlimit to na prohibit leadership PA Co 2006; italsoincludedanamendmentaddedby theHouse Accountability Actof Transparency and coordinated expenditure limits. 527 ReformActof2006,includedonefloor H.R. 513(Shays-Meehan), asamended,by and H.R.513.Thatdebateneveroccu potential Housefloordebate stage fora amended toreflectthesponsors’ Committee held a markupofH.R.513(Sha committee before itwas reported. On J newprovisions,many of added version amended by afavorably.reported committeeorderedwas substitute, 1316 (Pence-Wynn) While theprimaryof thebill. thrustof 271(McCain-Feingold-Lott)on S. hearing regulation. appeared to signal a broadening of support for this aspect of federal election law 93 92 for politicalmoney toflow527groups ope the 527s).By so doing, proponents expected theyhen couldassumeagreaterand role Act of2005(i.e.,to loosen restrictionsonot approach totheperceived527problemas 2005. Esse of Act Fairness H.R. 1316,the527 calendar. legislative Senate’s onthe and placed 271, S. from thecommitteeasS.1053,thussupplanting reported was bill original an communications overtheInternet from loosen certainhardmoneyadded to restric Administration Committee expanded itsfocus considerably. Amendments were prohibitions and disclosure requirements), the billordered reported by the Rules and election law regulation to

See See The text ofH.R.513,aspassed,was The text The HouseAdministrationCommitteeheldahearing April20,2005,onH.R. On March8,2005,theSenateRules On March15,2005,RepresentativesMike H.Rept.109-181 (2005). H.Rept.109-146 (2005). and H.R. 513(Shays-Meehan). C funds from funds C being 527s i 527s sted considering 527s inthe changes, withoutrecommendation. nvolved infederal elections (source limitsand CRS-31 rred, butonApril5,2006, the House passed S. 271wastoapply the on thetwocontrasting measures:H.R.1316 ce offset the perceivedundueroleplayedoffset ce by election lawregulation. On May 17, 2005, tional party committees(asisthecasewith 2006,whichpassedtheHouseonMay 3, une 29,2 was taken byReform was 527 sponsorsofthe tions, tolowerbroadcas whichhadbeenaddedtoS.1053in rating outsidetheframeworkofFECA. and on April27proceededtoamarkup her players inthepoliticalprocesssothat later addedtoH.R.4975,theLobbying a 218-209vote.Aspassed,thebill, ys-Meehan), andordered itreported,as and AdministrationCommitteehelda converted topersonal use buttoallow that there would be less of an incentive an of that therewouldbeless te-passed versionofthebill,toenable amendment, to remove politicalparty amendment, to ntially, thisbilladoptedtheconverse Penceand Albert Wynn introduced 005, the House005, the Ad On June 7, On June context ofethicsreform. context mmittee on Rules to full scopeoffederal t rates, and tofree 92 H.R.as 1316, 93 The reported This set the ministration http://wikileaks.org/wiki/CRS-RL33888 Finance: LegislativeDevelopments committee 527s. measures passedby109 the theHousein Reform McCain andRussellFeingold,527 the Shays, Marty MeehanandChristopher law (P.L. 110-81)didnotaddress527s. 2007 wouldhaverequired lobbyists to disc bill(H.R.2316, lobbyingreform andethics regulate 527searly inthe110 reports in a timely manner. Finally, the b rather than the FEC. The billwouldalso amendpenalties the forfailing tofile such periodic disclosurerequireme A summary ofthese bills,compared withcurrent law, followsin (amendments onparty coordinated expenditures and leadership PACswere omitted). reports filed withthe IRS also be filed withthe FEC. committees atthe same rateascongressional candidates’principalcampaign committees. level equivalents), wouldpermit taxation ofst abillaffecting political-committee(Sensenbrenner), purposes. H.R. 3771 527s (orstate- in this report, political committees, asdefine report, in this election-related issue advocacy. Four a election-related issueadvocacy. vi most the communications, electioneering also politicalcommitteesundertheFECA frommaking not organizations thatare sponsored byapproach. H.R.4696, Repres discussed above. To the extent thatwh Totheextent above. discussed Congress, seeking amorelimited approach to Congress. This conflictbeingresolved betweenfrom inthe issue 109 the theSenate House kept and 97 96 95 94 Phil English; andH.R.19422204, s sponsored by Larson; RepresentativeJohn who finan to knowaboutthesegroupsand requirements intheInternal election law,theseproposal under federal groups’ activityaccountab istheirlackof Rules Changes inthe110 Thetextreferstotwo billsaffecting Oncampaignactivity finance during the110 On110 SeeH.R.2316aspassedby theHouse, Sec.204. Two other527 bills have alsobeenintroducedinthe110 Another bill offered in the second Another billofferedinthe 110 th th Congress CRSReportRL34166, lobbying reform,see Congress. 96 However,thelobbying reform BCRA sponsors in theHouseintroducedtheir legislation to sponsors BCRA th Congress RevenueCodeandthuso th nts for those 527 organizations that report to the IRS nts forthose527organizations thatreporttothe Congress. andPolicyIssuesinthe110 , by Jack Maskell. non-political committee CRS-32 97 at hasconcernedmany th Second, H.R. 1204 (English) would change Second,H.R.1204(English) would th ill wouldill require that 94 Congress, asthey pertainedstrictly to 527s Congress, seeCRSReportRL34324, and S.463,sponsoredby SenatorsJohn dditional billswereofferedinthe109 d inFECA, arealsoconsidered527s fortax ate andlocalcandidates’principal campaign entative MikeRogers, wouldprohibit527 ces them.ThesebillsincludedH.R.471, H.R.420,sponsoredby Representatives lose certaincontributionstonon-political H.R. 914, sponsoredby H.R. Representative ility relativetoorga session reflectedalimitedregulatory ponsored by RepresentativeClay Shaw. Conyers) passedby theHouseinMay the 527 issue than reflected in the bills the in the527issuethanreflected s sought tobolsterthedisclosure sible, buthardly theonly, formof Actof2007,areidenticalto the two measurethatultimately became ffer votersagreater opportunity th Congress 527s.Asnotedelsewhere the periodic disclosure th Lobby LawandEthics observersabout527 Congress. nizations regulated , by R.Sam Garrett. Table 10 95 Campaign . First, a First, th th http://wikileaks.org/wiki/CRS-RL33888 opoiinMakes lastexemption (above) No provision $5,000 inacal.year [2U.S.C.§431(4)] contribution/expenditure inexcessof exempted from definitionof calendar year, ormakes payments aggregating in excessof$5,000ina calendar year, receives contributions aggregating in excessof$1,000ina makes contributionsorexpenditures (C) alocalcommittee ofaparty which or membership group); or up by aunion,corporation,tradeassoc., (B) aseparatesegregated fund(PACset calendar year; aggregating inexcessof$1,000during a contributions ormakes expenditures other group ofpersonswhichreceives (A) acommittee, club,association,or triggering FECAregulation) as: Defines politicalcommittee (thus (McCain-Feingold), the527ReformAct(McCain-Feingold), of2007, Table 10.H.R.420(Meehan-Shays) andS.463 Current law Compared with CurrentLaw Compared with CRS-33 group tofederalcandidates[Sec. 2/1002] (4) nocontributionsaremade by the AND spending; organization’s dire or natl.party official/agent isinvolved in (3) nofederalcandidateorofficeholder substantive way; candidate orparty isreferredtoinany in allvoter drive activities andnofederal (2) non-federal candidatesarereferredto state; (1) sponsorconfinesactivity solely toone a group inacalendaryear, unless: • forany voter drive effortconductedby candidate isseeking office;or year ofthegeneral electioninwhichthat identified federalcandidatewithin one support, attack, oropposeaclearly • publiccommunications thatpromote, spends more than$1,000for: inapplicable iftheIRC §527organization 2/1002] selection ofnon-elected officials[Sec. non-federal elections,ballotissues,orto where nofederalcandidateisonballot,to • isexclusively devoted toelections candidates andparties;or drive activities referonly tostate/local officeholders orcandidateswhosevoter • iscomposed solely ofstateorlocal qualified newsletter; administrative expensesorofa • existssolely topay certain local party orcandidate; • isapoliticalcommittee ofastateor $25,000; • hasannualgross receiptsoflessthan unless it: committee any IRC §527organization, Includes indefinitionofpolitical S. 463(McCain-Feingold) H.R. 420(Meehan-Shays) ction, funding, or http://wikileaks.org/wiki/CRS-RL33888 ..Provides specialexpeditedjudicial Statesthatthisactshallhave nobearing N.A. N.A. committees [2U.S.C.§441i(b)] two ormore stateorlocalparty fundraisingofficial, orjoint activities by a nationalparty, federalcandidateor transferred, orspentby orinthename of were solicited,received, directed, person andthatthey usenofundsthat less, ifstatelaw solimits) from any accept nomore than$10,000ayear (or of money forthem, including thatthey on theuseofthesefundsandraising accounts operateunderseveral conditions non-federal so-called funds.These Levin activities” using amix offederaland may undertake certain“federalelection of stateandlocalparty committees that regulation ofspecialnon-federal accounts provision toFECAthatimposes some BCRAaddeda but non-federal accounts, No limits on funding sourcesforPACs’ political party [11C.F.R. §106.6] of whethercommunication referstoa money from afederalaccount,regardless candidates befinancedwith100%hard activities thatrefertoonly federal public communications andvoter drive finance suchactivities, butrequirethat hard money from federalaccountsto elections togenerally useatleast50% affect bothfederalandnon-federal activities orpubliccommunications that disbursements forvoter mobilization compliant 527groups —thatmake those associatedwithnon-FECA- party politicalcommittees) —including 2005, requirePACs(non-candidate, non- FEC regulations 1, thattook effectJan. Current law CRS-34 intervene inany suchcase[Sec.9] and allowsany Member to bring or for achallenge onconstitutional grounds, BCRA’s, to similar procedures, review [Sec. 8] a politicalcommittee underFECA a 501(c)tax-exempt organization may be Code, oronany determination ofwhether political organization inInternal Revenue on FECregulations, onany definitionsof officeholders [Sec.3/1003] officials andfederalcandidates for suchaccountsby nationalpartiesand $25,000 peryear; prohibitsfundraising by tolimit individuals andsubject of accounts making allocations(above) only Allows contributionstonon-federal affected by currentrules[Sec.3/1003] makes them applicableto527snot Codifies 2005FECregulations and S. 463(McCain-Feingold) H.R. 420(Meehan-Shays) http://wikileaks.org/wiki/CRS-RL33888 and §501(c)(6)tradeassociations. finance lawsbanunionsandcorpora finance by abide campaign also since any Forexample, laws. election applicable must organizations lessefficientthanSecti limitati purpose. Thereare,however,two political campaign activity so long as it is consistent withthe organization’s exempt organizations, suchasI of tax-exempt require furtherregulati does threatens tounderminetheeffectiveness criticismthatactivity bycontinued 527s muchcontroversyof anddeba topic a is activity needstobelimitedonly thoseor as well. organizations any tax-exempt incorporated inconnection w expenditure in politicalcampaign activity cannotbe campaign activity thatthese organizations election-related activities.First, the I re to additional attempts perhaps mostimportantly, itremainsunc ofexisting regulations.enforcement Regardless ofhowpolicy change occurs, additional regulation shouldoccurvialegi Disclosure Requirements see 1969). 100 99 98 function expenditures. lesser oftheorganization’s IRC §527(f),theorganization istaxe Under an officeinapoliticalorganization, oras an election, orappointmentof function is influenc exempt foranIRCmake anexpenditure §527 ex underIRCSecond, §527(f),IRC §501(c) orga political organization andthe IRC §501(c) Assuming anIRC thefund issetupandadministered properly,as §527 itwill betreated For more information on thepoliticalactivity restrictions ontax-exempt For more organizations, information

See IRC §501(c)organizations may setupaseparatesegregatedIRC fundunder §527(f)(3). CRS Report RL33377, CRSReport Another issue that has received attention is whether, in the event that Congress that event the in whether, is attention hasreceived that issue Another If the110 Treas. Reg. Treas. §1.501(c)(4)-1(a)(2)(ii); IRS Gen. Couns. Mem. 34233 (December 30, th Congress choosestoaddress527s 100 , by Erika Lunder. Finally, organizations itshouldbenotedthattax-exempt Tax-Exempt Organizations: Politic gulate 527activity. Indeed, ing orattempting toinflue on of 527 organizations, money might flowtoothertypes ith federalelections,IRC net investmentincomeor individual toafederal,stat Conclusion 98 These types oforganizations These may engage in RC implicitly restrictstheamountofpolitical CRS-35 on 527political organizations for carrying on RC § 501(c)(4) social welfareorganizations social RC §501(c)(4) organization totax. will not besubject tions frommaking any contributionor of regulation underfe may conduct—specifi a presidentialorvice-presidentialelector. ganizations engaging advocacy inexpress slation, new FEC or other regulation, or regulation, other slation, newFEC or empt function. As discussed above,an discussed empt function.As the organization’ the aregenerally prohibited from doing so, te. Nevertheless, there islikely tobe in themannerseenrecentelections lear whether the courts would uphold would lear whetherthecourts ons intheIRC thatwouldmakethese d at the highest corporate rate on the d atthehighest corporaterateon nizations are subject to tax ifthey tax to subject are nizations , akey questionwillbewhether nce theselection,nomination, § 501(c)(5)laborunionsand whetherregulation of527 its totalamountofexempt e, orlocalpublicoffice,to al ActivityRestrictionsand s primary activity. deral electionlaw. cally, participating 99 Description ofRequirement IRS Form Appendix. Summary ofInternalRevenue Code Table 11.DisclosureRequirementsunder theInternalRevenue Code om87 om87 om90Form 1120-POL Form 990 [IRC §527(i)] http://wikileaks.org/wiki/CRS-RL33888entities. Form anyrelationship to 8872 related and directors; and name of and addresses of certain employees and purpose; names and address, name, organization’s Notification must include the IRS of itsexistence. must the notify Organization Form 8871 Notification of527Status [IRC §527(j)] name, address, and employer. year, along with the person’s received atleast $500during the period if that person has person during the reporting each expenditure made toa (2) the amount and purpose of amount of the contribution; and $200 during the year, and the least at given has and period reporting the during gives employer of acontributor who includes (1)name, address, and withreport the IRS. Report function expenditure for an an makes or contribution Organization that accepts a Disclosure ofExpenditures and Contributions and must disclosure a file CRS-36 Provisions Applicable to527 Organizations exempt [IRC §6033] Schedule B. must bereported on the return’s Contributions of at least $5,000 expenses. functional and sources revenue organization’s information asthe Return includes such information return with the IRS. an must file Organization nomto eunTax Return Information Return [IRC §6012(a)(6)] IRS. must file atax return with the income taxable organization Organization with political Frequency Exceptions Disclosed to the Public? the to Disclosed a of itsformation. notify the within IRS hours 24 Once —the organization must e e e No Yes Yes committee.FEC asapolitical the to report to - isrequired party, or committee local or of apolitical state orlocalcandidate orastate http://wikileaks.org/wiki/CRS-RL33888 committee- isapolitical of a any year receipts of less than $25,000for gross having - anticipates that Any organization Yes Notification of527Status reports. general election, and year-end pre-general post- for election, requirements Additional basis. any other year ora monthly in semi-annually and election year with aregularly scheduled Either on aquarterly in a basis the candidate’s cooperation). candidate but is made without expressly advocates for a (i.e., an expenditure that an independent expenditure apply any to expenditure that is requirementThe also does not information toastate agency. similar thatorganization reports political local - isastateor file aForm 8871, or not did or to - isnot required that Any organization Disclosure ofExpenditures and Contributions and CRS-37 nulyAnnually Annually committee. committee party of apolitical - is aCongressional campaign party, or FECA §301(14)of apolitical - isanational committee under candidate for federal office, under FECA §301(6) of a - isan committee authorized state orlocalofficials, - is acaucus orassociation of committee,as apolitical the to FEC report to - isrequired candidate, committee of astate orlocal party a political or a political - is astate orlocalcommittee of organization); political local state or $25,000 ($100,000if aqualified - has gross receipts of less than that: Any organization nomto eunTax Return Information Return taxable income. $100 in politicalorganization Any with organization lessthan b. Under IRC § 6652(c)(1)(A),IRC§ Under the penalty b. for failing tofile Form a.The IRSa.The and 527organization must make Forms 8871, 8872,and 990publicly available. An organization that fails to doso is manner return inatimely oraccurate the file to failing for Penalty to file Form 990...donot apply to afailure to file Form 1120-POL.” Rev. Rul. 2003-49, 2003-1 C.B. 903. applies6651 under ratherIRC§ than the penalty under IRC §6652and that “[a] technical correction may beneeded to clarify t databaseThe also includes some organizations’ Forms 8871,8872, an failuresfor $10,000 relatingto toForms 8872 and IRS 990. The must post electronically-submitted Formso anin 8871and 8872

http://wikileaks.org/wiki/CRS-RL33888change and the notification. for the period between the be treated as a527organization information willthe reported not days of any material change to notifyto the within IRS thirty filing. An organization that fails between itsformation and the tax on allincome the for period Organization will to subject be Notification of527Status 1120-POLsamethe is the failure relates. which to expenditures and/or contributions of amount the tax multiplied rate by corporate penalty that the equals highest Organization a will to subject be Disclosure ofExpenditures d 990that were submitted on database paper.The is availab and Contributions and CRS-38 penalty that applies for failing tofil [IRC §6652(c)(1)(A)] day and is limited to $50,000.) receipts, the penalty is $100per more than million $1 in gross receipts (for organizations with gross organization’s the of 5% exceed the lesser of $10,000or penalty of $20perday, not to Organization a will to subject be nomto eunTax Return Information Return e Form 990.Itappears tobethe IRS position that the penalty subject to a penalty of $20 perday, which is limited hat penalties underfailureapply §6652 thatto n-line database withinn-line database of their hours filing. 48 le at [http://www.irs.gov]. at le [IRC §6662and 6663] negligence orfraud. cause, but will for increased be the failure was due toreasonable will if assessed Penalties be not [IRC §6651(a)(2)] tax. unpaid tax, not toexceed 25%of the that equals 0.5%of the unpaid payment islatein an amount penalized for each month the paying itstaxes will be An organization that islatein 6651(a)(1)] of the tax § due. [IRC the tax due, not toexceed 25% in an amount that equals 5%of for each month the return is late Organization will penalized be b