Proliferating 527 Groups Spark Ire of Reformers

As hundreds of millions of dollars are raised by advocacy groups — also known as "527s" —  to influence the 2004 elections, reformers who pushed for this country's sweeping new campaign finance laws are watching their dream of small dollar politics disappear.

As a result, they have filed a complaint with the Federal Election Commission (search) against three 527s whose primary purpose is to raise millions in unregulated soft money in order to elect Democrats or Republicans this November. The reformers charge that the groups should be subject to strict federal regulations that currently apply to special interest groups.

“It seems to us they’ve crossed a line and they need to be registered with the FEC and reporting to the FEC,” said Paul Sanford, general counsel for the Center for Responsive Politics (search), which has joined Democracy 21 (search) and the Campaign Legal Center (search) in filing the complaint.

“It’s the new Main Street for big donors to inject money into the system,” Sanford said.

The targets include the Media Fund (search), founded in 2002 to raise $75 million to pay for advertising against President Bush and Republicans; America Coming Together (search), which seeks to raise $90 million to mobilize voters against Bush and the GOP; and the Leadership Forum (search), which seeks to raise multiple millions of dollars to improve Republican ranks in Congress come November.

The complaint, filed Jan. 15, alleges that these groups are too closely tied to unions, corporations and lawmakers, the very groups whose activities recent campaign finance reforms limit; are obviously working to elect and defeat federal candidates; and, therefore, must be considered political action committees.

But FEC officials and campaign finance watchdogs say it is not clear whether the 527s are actually breaking any laws. FEC Chairman Bradley Smith, told that the commission will be hashing out that question as it tackles an advisory opinion request from Americans for a Better Century (search), a newly-launched Republican-leaning 527.

Bradley said ABF's request, which questions the legal activities 527s can employ under current campaign finance laws, will get a preliminary ruling in mid-February. He added that, if necessary, the commission will pursue new rules this spring to clarify the role of 527s. The regulations would apply to 2004 election fund raising.

“We need to know one way or another,” said Bradley, a Republican-appointed commissioner who opposed the Bipartisan Campaign Reform Act (search) of 2002. “What the reformers are arguing is if your purpose is to elect federal candidates, you are automatically a PAC. That’s a key issue facing us.”

But just what is a 527? Named after a section of the Internal Revenue Service tax code, political organizations under this designation enjoy tax-free status, as long as their money does not go directly to a candidate or party. If it does, the groups are to be reclassified as taxable political action committees and must report their earnings and expenditures to the FEC.

Until then, 527s are not prohibited from starting voter mobilization efforts or raising and spending unlimited amounts of soft money on issue advertising. They can spend freely until 60 days before the general election.

Critics of the BCRA — also known as “McCain-Feingold” for Sens. John McCain, R-Ariz., and Russ Feingold, D-Wis., who successfully shuttled the new regulations through Congress and won affirmation from the Supreme Court — said they anticipated that once the clamp was placed on giving to national parties, the money would shift elsewhere.

“It’s going to do exactly what McCain and Feingold didn’t want to happen,” said Craig Shirley, head of Americans for a Better Century. He said he and other Republicans started the group, which has not yet begun fund raising, to compete with the liberal 527s that have emerged to beat Bush.

“We would like to play and that’s why we asked for the [FEC] ruling,” he said.

Jim Jordan, spokesman for America Coming Together, doesn’t buy it.

“ABC is a fake group founded only to put a stick in our spokes, that much is clear,” he said.

Nonetheless, Jordan said that ACT — which was recently given $10 million from anti-Bush billionaire George Soros — is operating within the law. ACT is also filing a request to the FEC to clarify the rules once and for all.

“The purpose of BCRA and the justification of it argued before the Supreme Court was to eliminate corruption and the appearance of corruption among candidates and elected officials,” he said. “We’re not politicians, we’re not elected officials and we’re not beholden to anyone.”