Much of the justification for last yearÕs proposals to regulated independent political committees like campaigns and parties stemmed from a fear that independent groups would replace soft money that formerly went to parties. The CFI findings show that soft money actually decreased in 2004 by $302 million. In addition, most of the federal 527 funds in 2004 came from one-time groups, as opposed to established political committees active in previous elections.

CFI found that individuals were by far the largest source of funds for 527 groups. Individuals gave 527s over $250 million, while labor gave less than half that, and business contributions were even smaller. Donations from business decreased from 2002 levels, while labor donations nearly doubled.

In 2004 the number of individual donors giving to 527s rose to 1,882 from 1,231 in 2002. While the vast majority gave in the $5,000 to $100,000 range, 56 percent of the money came from contributions of $2 million or more.

The make up of these 527 groups is complex. CFIÕs statement said, ÒWe also discovered that the simple image of Republican-created vs. Democratic-created 527s overlooked important political distinctions between groups that existed before BCRA and those constructed afterwards.Ó They went to note that parties and consultants helped foster development and fundraising for 527s in 2004.

CFI sees a large potential for expansion of 527 activities in upcoming federal elections. Weissman noted that Òthe effectiveness of potential regulation of 527s in eliminating soft money will depend, in part, on whether the FEC and IRS develop a coherent policy relating to alternative nonprofit vehicles for soft money.