Bill to Regulate Independent Political Committees Introduced in Congress - October 4, 2004 Vol.5, No.20

October 4, 2004 Vol.5, No.20:

Published: 10/08/2004

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See election law attorney Bob Bauer's article 501(c)s and the Can of Worms for an analysis of why the proposed 527 Reform Act does not exempt 501(c)s.

Bill to Regulate Independent Political Committees Introduced in Congress

The "527 Reform Act of 2004", introduced on September 22, would limit soft money for independent political groups, but does not clearly exempt advocacy groups exempt under Section 501(c) of the tax code.

The Congressional sponsors of the Bipartisan Campaign Reform Act of 2002 (BCRA) announced a bill meant to regulate any group "described in" Section 527 of the tax code whose "major purpose" is to influence federal elections. The bill does not define "major purpose". There is no exemption for charities, social welfare groups or other organizations exempt under Section 501(c). There is concern that 501(c) groups could said to be "described in" Section 527 as a result of their electoral activities.

The proposal would apply to major purpose groups that receive more than $25,000 per year, prohibit corporate or union contributions and limit individual contributions to $25,000 per year. Groups focused solely on state and local elections would not be covered. These include campaign committees of state or local candidates and state or local party committee. Groups that work exclusively on elections with no federal candidates, ballot measures and influencing appointments, nominations and such would be exempt.

The exemptions would not apply if a covered organization spent money on a public communication that "promotes, supports, attacks or opposes" a federal candidate within two years of a federal election. The bill does not distinguish between statements made about federal officeholders in relation to their official duties and candidates. As a result, it could effectively ban any criticism of a member of the House of Representatives by a covered organization, since elections for House seats are held every two years.

At a press conference announcing the bill the sponsors said 501(c) groups would not be impacted and abuse would be prevented by adequate enforcement of existing laws. This position is at odds with their challenge to the FEC's rule exempting 501(c)(3) organizations from the electioneering communications rule.

The Senate version, S. 2828, is sponsored by Senators Russ Feingold (D-WI) and John McCain (R-AZ) and co-sponsored by Senators Joe Lieberman (D-CT) and Charles Schumer (D-NY). The House version, HR 5127 is sponsored by Reps. Christopher Shays (R-T) and Martin Meehan (D-MA).

This article revised October 8, 2004.