FEC Won't Change 527 Rules This Year - June 13, 2006 Vol. 7, No. 12

June 13, 2006 Vol. 7, No. 12:

Published: 06/13/2006

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According to the Campaign Finance Institute 527 fundraising was slower in the first quarter of 2006 than in 2004.

See the Aug. 8, 2004 OMB Watcher FEC Adopts Rule to Control 527 Groups

See the Feb. 22, 2005 OMB Watcher Study Looks at Independent 527s in 2004 Election

See the Jan. 24, 2005 OMB Watcher Post Election Analysis of 527s Dispels Myths, Shows Trends

FEC Won't Change 527 Rules This Year

The Federal Election Commission (FEC) on May 31 announced it will provide a better explanation and clear justification of its 2004 rule limiting regulation of 527 independent political committees. The move can in response to a court order that calling on the FEC to either explain the rule or open up a new rulemaking providing more limits. The timing for the FEC action is not clear.

Some campaign finance reform groups have advocated applying federal contribution limits to all independent 527s. The FEC's August 2004 rule requires 527s to follow federal limits when raising funds for support or opposition to specific federal candidates. Contributions from such individuals are subject to a $5,000 limit and must be reported to the FEC. The 527 group must also pay for voter mobilization activities and administrative expenses, including salaries and overhead, with 50 percent hard money funds. There is no limit on other funds raised by the 527s, and such contributions are disclosed to the IRS, not the FEC. The rule was approved in August 2004 after a controversial rulemaking that generated over 100,000 comments from the public.

The 2004 rule was challenged in a suit filed by sponsors of the Bipartisan Campaign Reform Act of 2002 (BCRA) and the Bush-Cheney campaign, who claim BCRA requires the FEC to adopt broader regulations. The court order instructed the FEC to provide a better explanation of the 2004 rule or initiate a new rulemaking. The FEC announced that it will not appeal the court decision, and it will keep the current rule in force during this election year.

The FEC is, thus, required to provide greater justification for its 2004 rule. No timetable has been given for when the FEC will publish the new explanation and justification for its rule. Advocates of stricter regulation, such as Democracy 21's Fred Wertheimer, have already said they are unlikely to accept the clarifications, and the issue will likely end up back in court. These same groups are advocating legislative solutions to "rein in" 527 groups. Their latest target is lobby reform legislation. (Link to Jennifer's story about lobby reform bills.)

In related news, on June 5 a federal court ruled that the FEC can proceed with its enforcement case against the Club for Growth for violating the current 527 rule, which took effect on Jan. 1, 2005. It alleges that the group solicited contributions for specific federal candidates, raising more than $4 million in 2004 from donors that exceeded the $5,000 contribution limit.