Final Soft Money Rule Limits Candidate Fundraising for Nonprofits - Elections and Issue Advocacy

Elections and Issue Advocacy: News Background Analysis Correspondence Blog

Published: 07/08/2002

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Final Soft Money Rule Limits Candidate Fundraising for Nonprofits

The FEC has approved a final rule implementing the soft money ban in the Bipartisan Campaign Finance Reform Act of 2002 (BCRA), which becomes effective the day after the election this fall. It limits fundraising and donations by federal candidates and political parties for groups exempt under 501(c) that are involved in voter registration and get-out-the-vote (GOTV) efforts for federal elections, even if they are nonpartisan. Fundraising for Political Action Committees (PACs) (exempt under 527 of the tax code) is also prohibited. However, exceptions allow federal candidates to make general solicitations for a 501(c) organization even if it conducts some voter registration and GOTV activity, if that is not its primary purpose, and the funds are not earmarked for it. Federal candidates and political parties can also respond to requests from donors for information about tax-exempt groups that share their "political or philosophical goals."

Federal candidates or political parties can rely on certification from nonprofit organizations in order to determine whether or not they are involved in voter registration or GOTV activities (called "federal election activity" in the rules). The rules only apply if the organization makes expenditures for "federal election activity" during the current election cycle.

Once the FEC staff completes an official "explanation and justification" for the rules that are approved by the Commission, the rules will be transmitted to Congress. BCRA sponsors, upset with provisions allowing federal officeholders to solicit soft money for state or local political parties, have promised to introduce a resolution in the Senate seeking to overturn the new rule, under procedures established in the Congressional Review Act. They also indicated they would support litigation to overturn the rules. A recent study by campaign finance reform groups found that large amounts of soft money have been transferred to state parties from national parties. See related story.