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Ney Ready to Act on 527 Regulation

House Administration Chairman Bob Ney (R-Ohio) is planning to hold hearings on 527 groups in the next few weeks, with the goal of introducing bipartisan legislation soon that would rein in funding for the controversial and largely unregulated organizations.

Ney wants to start the hearings in two weeks and hopes to have a deal hammered out quickly. The Ohio Republican said he has heard from “top Democrats” who are also interested in pushing such legislation through Congress before it adjourns for the fall elections. He declined to name those lawmakers.

Ney hasn’t made any final decisions on what he would like to see in a new 527 proposal, but he suggested that limiting the size of donations that individual donors can give to the tax-exempt groups could play a role. Ney offered $5,000 as one possible limit. That’s the same level that PACs can give a federal candidate for primary or general elections. Currently, there are no limits on the size of contributions 527s can accept.

Ney sees the 2002 Bipartisan Campaign Reform Act, which he opposed, as a failure since it did nothing to prevent the flow of huge, unregulated soft-money donations to outside groups, even as it prohibited the national parties from accepting such contributions. Ney believes that Congress must move quickly to impose new limits on 527s.

BCRA, he said, “failed. We need to do something to address this problem now.” Ney expects to win significant Democratic support for his initiative. “I predict we will have bipartisan legislation,” he said.

Ney’s 527 proposal, however, could prove difficult for many Democrats to support. Democratic-leaning groups such as America Coming Together, the Media Fund, and the Joint Victory Campaign 2004 have far outraised their GOP counterparts, $132 million to $48 million, according to PoliticalMoneyLine. With these funds, the Democratic-leaning 527s have helped support Sen. John Kerry’s (D-Mass.) bid for the White House through large-scale TV ad blitzes that criticize President Bush. Because of this, Democratic lawmakers might be unwilling to close off a huge source of financial support for the party.

“There is no way that Democrats are going to agree to any cap [on 527 donations] right now, since they are helping us,” said a Democratic insider. “There’s no way it gets through the Senate, even if the House somehow passed it. I just don’t see that happening anytime soon, not with an election two months away.”

But Ney pointed to the fact that several wealthy individuals have given enormous sums to the 527s, giving these individuals undue influence on federal races since their funds can be used to attack candidates right up until Election Day.

For instance, three wealthy Democratic donors — George Soros, Stephen Bing and Peter Lewis — have given a combined $35 million to 527s, and a leading pro-Republican 527, the Progress for America Voter Fund, has received pledges of $5 million each from Alex Spanos, owner of the San Diego Chargers football team, and Dawn Arnall, a wealthy California Republican.

“Let’s put a limit on what millionaires and billionaires can give” to 527s, said Ney.

The Ohio Republican first took aim at the controversial groups late last year, when he asked the heads of several 527 groups to testify before his committee. Ney’s request prompted an outcry from the targeted organizations, but several of the groups eventually coughed up information about their operations.

Ney faces doubts over whether Congress has the authority to limit donations to 527s. Some campaign finance experts believe it does, although the FEC has refused to take such a step so far. Bush and Sen. John McCain (R-Ariz.), one of the principal authors of BCRA, have threatened to sue the agency over its unwillingness to assume control over 527s, which currently register with the Internal Revenue Service.

McCain has also vowed to push legislation that cracks down on 527s through the Senate, but has made no specific proposal so far.

“Essentially 527s would be subject to the same dollar limits as non-connected PACs, and those limits, and even lower ones, have been upheld several times,” said one campaign finance lawyer, speaking on the condition of anonymity in reference to Ney’s proposal. “[The Supreme Court decision] McConnell v. FEC gave Congress and the FEC a great deal of discretion to regulate political contributions.”

GOP attorney Ben Ginsberg, who recently resigned his role in the Bush-Cheney ’04 re-election campaign when it emerged that he had advised an anti-Kerry 527 group, blames the FEC for failing to properly regulate 527s.

The FEC last month issued new allocation rules for 527 groups that will take effect in 2005 and will put limits on fundraising activities by any group if those solicitations are for the purpose of supporting or opposing federal candidates.

But the agency again punted on the larger question of whether the groups should be automatically considered political committees and thus subject to campaign finance laws.

“I think the FEC failed in its duty to describe a clear set of rules. I think they took a pass,” Ginsberg said in an interview last week. Ginsberg also acknowledged that there are constitutional disagreements over whether the government may exercise limits over such groups’ activities.

“Whether these groups qualify as political committees is obviously a legal question upon which honorable and smart people disagree,” Ginsberg said.

Democratic FEC Commissioner Ellen Weintraub has rejected the notion that her agency is somehow responsible for the 527 explosion and suggested that Congress could have dealt with the issue if it had wanted to do so.

“There is this other issue that Congress actually looked at, the issue of 527s,” Weintraub told Congress earlier this summer. “They’re not new. Back in 2000, this big issue about stealth PACs came up. And Congress looked at it, considered making them all report and be registered with us, rejected that and instead decided to have them report to the IRS.”

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