The Federal Election Commission (FEC) will continue to regulate independent 527 political groups on a case-by-case basis. A federal judge ruled in favor of the FEC in a lawsuit brought by Rep. Christopher Shays (R-CT) and then-Rep. Martin Meehan (D-MA) and campaign reform groups asking that the FEC be forced to write a rule requiring that groups registered with the Internal Revenue Service (IRS) as a political organization under section 527 also register with the FEC as a federal political committee. The groups that called brought the lawsuit may now appeal the case and call on Congress to pass 527 reform legislation. The Court determined that the FEC's February 2007 explanation for their approach to enforcing 527s is sufficient. Citing fines the FEC has placed on 527 groups, the judge said, "the case-by-case approach can be at least somewhat effective."

The Center for Competitive Politics chairman responded to the Court's decision; "Forced rulemaking by the FEC would have turned thousands of citizens' organizations into highly regulated 'political committees.'" While OMB Watch opposes one-size-fits-all regulation of 527 groups, the case-by-case approach has its own problems. It is time consuming, complex, does not provide clear guidance and will only become more problematic if more cases and 527 groups appear in the coming 2008 Presidential election, leaving many groups facing legal questions. As Bob Bauer precisely comments; "Contrary to the views of reform critics, no better outcome was ever possible, nor more quickly: the law remains a riddle, and the FEC has chosen to leave it that way."

According to the FEC press release; "In reaching this decision Judge Emmet G. Sullivan agreed with the Commission that judgments about whether the major purpose of an organization is influencing federal elections are complex and therefore the FEC's decision not to draft a general rule but rather to consider this question on a case by case basis is within the agency's discretion. The Court also noted that "the FEC has successfully brought enforcement actions against 527 groups since the [Court's] 2006 opinion. . ."

The Federal Election Commission (FEC) announced that it reached a settlement with America Coming Together (ACT), ruling that the group violated federal campaign finance laws during the 2004 Presidential election. ACT agreed to pay $775,000 to settle charges that it used soft money to pay for federal campaign expenses. In 2004 the Campaign Legal Center, Democracy 21, and the Center for Responsive Politics filed a complaint against ACT for illegally spending soft money to influence the 2004 presidential campaign. ACT raised $137 million for get-out-the-vote and voter registration drives, and of that total the FEC "concluded that even for the approximately $30 million in disbursements that could properly be characterized as administrative and generic voter drive expenses, ACT should have used at least 90% federal and 10% non-federal funds." ACT should have paid for these activities with "hard money" because the FEC deemed its main purpose was to defeat President Bush. The Campaign Legal Center was pleased with this action, but disappointed that it took three years to do so.

Both the long delay in resolving the ACT case and the relatively small fine imposed on ACT for almost $100 million in illegal expenditures make a powerful case for why case-by-case enforcement by itself will not work and why without proper regulations and prohibitive fines the illegal activities of 527 groups in federal elections will continue to undermine the nation's campaign finance laws.

The Federal Election Commission (FEC) issued a proposed rulemaking, which will be published in the Federal Register next week, to implement the Supreme Court decision in Wisconsin Right to Life v. FEC (WRTL). The FEC has put forth two alternative proposals and seeks comments on many questions; asking, "Does WRTL II require the Commission to revise or repeal any portion of its definition of express advocacy?" Both alternatives would establish safe harbors for grassroots lobbying communications based on the analysis of the specific ads at issue in the WRTL case. The deadline for public comment will be October 1, 2007 and the FEC will hold a hearing on October 17, 2007 with a final rule by the end of November. Bob Bauer discusses how ambitious this timeline is. Check back for an analysis on the proposed rulemaking from OMB Watch. Read the FEC press release here and the proposed rulemaking here.

As reported last month, the Federal Election Commission (FEC) plans to issue a proposed regulation some time in August in light of the June Supreme Court ruling in the Wisconsin Right to Life case. The Washington Post now discusses the intricacies of doing so. The FEC is likely to use the Court's opinion as a guide to make clear when an ad is permitted issue advocacy, and when an ad crosses the line into electioneering. The article discusses a debate that has unfolded between two election law specialists, Robert Bauer and Richard Hasen.

How the FEC will tilt is hard to predict, [Richard] Hasen said, especially because the commission is in some disarray, with a vacancy, a member whose tenure has expired and four who are awaiting Senate confirmation. Any new regulations require the votes of at least four members to take effect.

Three years ago Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint with the Federal Election Commission (FEC) against the 527 organization Empower Illinois Media Fund (EIMF). Now, the FEC has fined EIMF $3,000 finding that they failed to register as a political committee and knowingly accepted individual contributions of over $5,000. The group violated the Federal Election Campaign Act (FECA) by running ads during the 2004 Illinois Senate race urging voters to vote against Barack Obama. For more information and all of the documents in the case, see CREW's website.

This decision is legally significant because it is the first time that the FEC has determined that a 527 that operated a web site that distributed information critical of a federal candidate's record could be required to register as a political committee. In other words, this decision could be read as requiring any organization that raises funds specifically to establish and operate a web site to disseminate information critical of a federal candidate's record to register as a political committee and raise money within the prohibitions and limitations of FECA.

Bob Bauer responds; "This urge to bring the Internet under control can be expected to continue. And this is not because Internet politics is causing all sorts of trouble for an election law now having to struggle harder to fight off corruption. Apparently, what is at work is an unwillingness to accept that this space should not be regulated like all others."

Yesterday the Hudson Institute's Bradley Center for Philanthropy and Civic Renewal hosted a forum titled, "Should Nonprofit Organizations Play an Active Role in Election Campaigns?" Nonprofit leaders Pablo Eisenberg and Robert Egger both wrote separate opinion pieces in The Chronicle of Philanthropy that initiated the forum where the two continued this debate that developed into a discussion on the state of the nonprofit sector.

Egger, president of the D.C. Central Kitchen, said charities should be allowed to openly endorse candidates for political office, while Eisenberg, a Georgetown University scholar, said doing so would not be tolerated by taxpayers who expect the money they donate to charities to go to causes and not politics. Accurately, Eisenberg commented that nonprofits can in fact become involved in issues that are related to elections and the law allows some lobbying. Unfortunately many are either scared to cross the line, unacquainted with the laws so they simply do not lobby, and many of the foundations that fund nonprofits discourage such advocacy. Nonprofits can be blamed for not utilizing the means available to become politically engaged. Egger wants a discussion on innovation, to use any means possible to bring about change. The two actually agreed on a great deal, and one of the most distinguishing points was that Egger wants charities to be able to explicitly endorse candidates. Both agreed that charities need visionaries and new leadership as the discussion grew to address the future of the sector. A transcript of the forum will be available online by Aug.16.

The Friday Aug. 3 OMB Watch panel on the pros and cons of an Internal Revenue Service (IRS) bright line rule for campaign activities for charities and religious organizations has gained some press attention. From BNA Money and Politics: ($$)

During an OMB Watch forum on the pros and cons of bright line rules for campaign activities, attorneys said they are often left not knowing how to advise their clients on taking positions on political candidates, other than to say "be wary," and that caution is keeping some charities from achieving their core mission. The panel suggested that the nonprofit sector should come together to formulate draft rules to present to IRS that would make clear that exempt organizations cannot lose their tax exemption for engaging in prohibited political activity, although they could still be subject to excise taxes if they cross the line.

Friday's discussion successfully prompted a constructive discussion on whether the nonprofit sector would benefit from a bright line rule that defines what is and is not prohibited partisan intervention in elections. Four lawyers who specialize in nonprofit issues discussed these issues in great detail and discussed the problems that arise with the current "facts and circumstances" test which allows the IRS to apply their interpretation of the standard on a case by case basis. A suggested strategy was for the nonprofit sector to put forth and promote a bright line test because the IRS is unlikely to provide clarity otherwise. "The time is ripe for a small group of charitable practitioners to develop a draft rule referencing Internal Revenue Code Section 4965 and Section 162, Marcus Owens, an attorney with Caplin & Drysdale, said." The Wisconsin Right To Life Supreme Court decision was also addressed and its possible implications for 501(c)(3) organizations.

And from the coverage in the Chronicle of Philanthropy: ($$) "But panelists at an Aug. 3 forum organized by OMB Watch, a Washington advocacy group, said the tax agency's increased enforcement is stifling legitimate political discussions by nonprofit groups because the agency has yet to offer clear definitions about what is off limits. 'We really don't know how to comply with the ban on partisan political activities,' said Kay Guinane, director of OMB Watch's Nonprofit Speech Rights Program. 'The uncertainty surrounding these rules makes our job difficult."

And read this article on the panel from the latest Watcher.