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Bill to Reform 527s Attracts Schumer, Lott

Campaign finance reform advocates in the House and Senate will declare all-out war on 527 groups today — with two key Senators by their side, Charles Schumer (D-N.Y.) and Trent Lott (R-Miss.).

The 527 Reform Act is aimed at getting the lightly regulated political groups to comply with federal campaign finance laws. The groups, which organize under Section 527 of the Internal Revenue Code, spent more than $300 million in the previous election cycle to support candidates from both parties.

The bill’s lead sponsors will be veterans of the campaign finance wars: Sens. John McCain (R-Ariz.) and Russ Feingold (D-Wis.) and Reps. Christopher Shays (R-Conn.) and Marty Meehan (D-Mass.).

But the addition of Lott and especially Schumer as co-sponsors amounts to something of a coup for the bill’s backers.

If Schumer, who recently took over as head of the Democratic Senatorial Campaign Committee, can live with reforming 527s — which gave a vital boost to the presidential campaign of Sen. John Kerry (D-Mass.) — then Democrats may be less worried about the fallout from reining in 527s.

Lott’s support could also be key to the effort. Advocates of 527 reform are looking to the Mississippi lawmaker, a master of Senate procedure, to help steer the legislation to the floor. Lott, the chairman of the Senate Rules and Administration Committee, has promised to hold hearings on the bill in March.

Though confirmed details about the legislation were not available by press time, drafts circulating on the Internet suggested that reform advocates may take a different approach than McCain and his allies took last year when they introduced 527 legislation. That bill would have applied a “major purpose” test to 527 groups to determine whether they were a political committee, and thus required to register with the FEC.

On www.softmoneyhardlaw.com, a widely read Web site for campaign finance specialists, Democratic campaign finance lawyer Bob Bauer recently cited a draft of the new legislation that skips the major purpose test. Instead, it “starts from the premise that an organization ‘described in Section 527 of the Internal Revenue Code’ must register and report with the FEC, and then exempts from that premise certain types of organizations presumed to play no role in Presidential, Senate and Congressional elections — for example (to take the most obvious one), state and local candidate committees.”

The draft cited by Bauer carved out special exemptions for certain types of 501(c) organizations, such as groups that only register under Section 527 because of taxes they pay on “exempt function expenditures.”

Whatever approach reformers take today, the path to passage is sure to be a bumpy one.

Efforts last year by some Federal Election Commission officials to crack down on 527s were met with a chorus of complaints from the nonprofit community. While some argued that their First Amendment rights were being trampled, others simply complained that the FEC didn’t have the authority to regulate 527s.

Several FEC officials suggested that Congress clarify the issue.

Other Senators who are expected to sign on to the bill at its rollout are Joe Lieberman (D-Conn.), Ken Salazar (D-Colo.), Olympia Snowe (R-Maine) and Susan Collins (R-Maine).

Democracy 21 President Fred Wertheimer, who has been spearheading anti-527 efforts in court and elsewhere, said the bipartisan support for the effort signaled a strong start for 527 opponents.

“I believe we will be starting the battle to rein in the 527s [today] with a real head of steam and we plan to move quickly to build on this,” Wertheimer said.

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