Proposed 527 Rules Strike Fear in Nonprofits

Posted February 4, 2004 at 6:10pm

Several hundred nonprofits spanning the political spectrum are urging the Federal Election Commission to reject a controversial draft advisory opinion on 527 groups, saying it is “overreaching” and could paralyze their ability to communicate with the public on legislative and policy issues.

According to the groups’ letter, the draft advisory opinion could make it virtually impossible for groups other than federal political action committees to criticize or commend lawmakers or the president for anything they say or do. The opinion states that any communication that “promotes, supports, attacks or opposes” any federal candidate must be paid for using funds raised under the restrictions of the federal election laws.

The draft opinion at the center of the controversy was penned in response to a request from Americans for a Better Country, a Republican 527 group that has proposed raising soft money for issue ads, get-out-the-vote efforts and other political activities in the 2004 election cycle.

Several similar groups formed by Democrats and funded largely by organized labor and wealthy individuals have already raised upward of $22 million, and the FEC recently announced plans to commence rulemaking on the 527 issue to establish more definitive guidelines for such groups.

However, FEC officials say the draft opinion regarding ABC — which they will consider at an open meeting today — will likely serve as a crucial building block for any other regulatory efforts aimed toward 527s, and that has many in the nonprofit community worried.

They fear that if the FEC’s advice to 527s, as written by the watchdog agency’s top team of lawyers, is written too broadly it could unfairly curtail their legitimate programs.

“The real concern we have is while this advisory opinion focuses on the specific request of ABC, the answer is given in terms of redefining the term ‘expenditures,’ which would apply to any organization,” explained Elliot Mincberg, vice president and legal director for People for the American Way, which has helped lead the coalition of nonprofits in fighting the advisory opinion.

“It pretty much eliminates any communication in an election year that is critical or supportive of a president, a sitting Senator, etc., etc.,” said Mincberg, who argued that the general counsel’s draft opinion would give the FEC a level of power that far exceeds the Bipartisan Campaign Reform Act of 2002.

Mincberg said several groups that supported BCRA, including the Sierra Club, have signed on to their comments to the FEC.

Examples of the activities they fear could be curtailed by the opinion’s language include a Web site that criticizes funding cuts contained in President Bush’s proposed budget, an awards dinner honoring Sen. Russ Feingold (D-Wis.) for his support of campaign finance reform, or a newsletter article that lists Members of Congress who have co-sponsored legislation supported by an organization.

In separate comments, attorneys and officials for the pro-McCain-Feingold group Public Citizen also expressed concern about the implications of the proposed definition of federal election activity and “expenditures.” Public Citizen argued that the definitions are “so broad that legitimate activities of all nonprofit organizations, not just Section 527s, may be inappropriately captured” under the law.

But the leaders of other groups that supported McCain-Feingold — such as Democracy 21 President Fred Wertheimer and the Campaign Legal Center’s Glen Shor — argue in their comments to the FEC that the opinion correctly concludes that communications by ABC that “promote, support, attack or oppose” a federal candidate are indeed for the purpose of influencing an election. Instead, those watchdog groups took issue with the general counsel’s failure to conclude that ABC is a federal political committee “in its entirety.”

“The FEC has the responsibility to look at the reality of a section 527 organization’s purpose and operations,” states the letter, also signed by Democracy 21 Counsel Donald Simon, Center for Responsive Politics Executive Director Larry Noble and CRP’s FEC Watch Director Paul Sanford. “Where the facts and circumstances make clear that a section 527 organization is raising and spending money, as a whole, for the overriding purpose of influencing federal elections, the 527 organization as a whole must be treated as a federal political committee.”

The letter rejected claims that the draft opinion, as written, could be extended to apply to 501(c) groups.

“The general counsel’s discussion of the “promote, support” test is explicitly limited to the communications by a political committee. … Nothing in the opinion purports to apply this standard to section 501(c) nonprofit corporations. The opinion makes no reference at all to such groups, and provides no basis for concluding that it would be applicable to such groups.”

Mincberg is not convinced.

Noting that the McCain-Feingold bill did not even seek to restrict the activities of 527 groups, Mincberg worries that the advisory opinion “could be an attempt to drastically expand the power of the FEC in a way that Congress never even considered.”

Beyond that, Mincberg fears that some “unnamed conservatives and Republicans” have “figured out this is a great short-term strategy to get the president re-elected — by cutting out criticism of his policies.”

Mincberg and others are also watching to see how the FEC will deal with another pending advisory opinion request from lawyers for America Coming Together, a Democratic political committee that is planning to conduct massive voter mobilization efforts during the 2004 election cycle.

The group’s request takes a swipe at ABC, noting that “there have been indications that ABC seeks to model certain of its activities after ACT’s voter mobilization programs, or is seeking to portray itself as it imagines ACT to be in order to elicit an adverse Commission advisory opinion.”

The request goes on to note that “ABC has not proffered a single argument in support of the lawfulness of its proposed plans and programs.”

ACT has asked the FEC whether it may have both federal and nonfederal accounts, whether it may raise money from corporations and unions without regard to limits, and whether it may allocate costs for its voter mobilization efforts between federal and nonfederal accounts.

The group also has asked if ACT officials can refer the “Bush administration,” the “Republican Party” and “conservative” policies in its press dealings and in personal fundraising appeals.