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Bill on 527s May Be on Fast Track

The usual campaign-finance reform crowd, bolstered by some newfound supporters, has kicked off what looks increasingly like a fast-track issue in the 109th Congress: prohibiting so-called 527 groups from raising and spending soft money to influence federal elections.

With a long list of original co-sponsors and tacit support for the notion of reining in 527s from President Bush and Speaker Dennis Hastert (R-Ill.), the legislation unveiled Wednesday will be the subject of early March hearings and the overall concept appears to be gaining momentum in both chambers.

The presence of Sen. Charles Schumer (N.Y.), chairman of the Democratic Senatorial Campaign Committee, and Senate Rules and Administration Chairman Trent Lott (R-Miss.) as original co-sponsors gives the legislation some political and administrative heft.

Lott — acknowledging that he was not in his “natural habitat” standing next to Sens. John McCain (R-Ariz.) and Russ Feingold (D-Wis.), and Reps. Christopher Shays (R-Conn.) and Marty Meehan (D-Mass.) — nonetheless added that he shared their desire to restrict political groups that operate under section 527 of the tax code from raising and spending unlimited sums of soft money.

Lott was one of 41 Senators who voted against the Bipartisan Campaign Reform Act of 2002, which was sponsored by the four lawmakers. But despite that, he said, independent political groups should have to operate under the same soft-money restrictions that BCRA imposed on the political parties.

“I don’t know if it means it will be called the Lott bill,” Shays joked, but the Connecticut Republican added that his help is vital.

Calling the unrestricted sums given by wealthy individuals “sewer money,” Lott reiterated his desire to move the legislation through his committee early this year. A hearing is scheduled for March 8. “I believe we are going to have a bipartisan result,” Lott said.

While quick to point out that it’s far from a “done deal,” Schumer noted that “the stars are aligned much better for this legislation than the previous bill.”

The measure also counts Sens. Olympia Snowe (R-Maine), Joe Lieberman (D-Conn.) Ken Salazar (D-Colo.) and Susan Collins (R-Maine) as co-sponsors.

Although the issue has yet to gel as quickly on the House side, all signs point to the emergence of 527 legislation in some form there as well.

House Administration Chairman Bob Ney (R-Ohio), like Lott, opposed the enactment of BCRA but now supports reining in 527s. Ney declined to endorse the proposal released Wednesday, but issued a statement supporting the group’s overall goals. He plans to hold hearings within the next several months.

Shays himself acknowledged the strong possibility that the issue would move through the House expeditiously, but not necessarily using his bill as a vehicle. The Connecticut lawmaker also said Hastert has expressed support for the concept, if not the details, of the legislation.

President Bush has said that he supports the idea of restricting 527s, which can only help the proposal’s prospects.

Despite its momentum, the bill is far from universally supported, however. Many in both parties who either don’t want to give up a source of funds or are philosophically opposed to further restrictions on campaign activities.

“The First Amendment was written to ensure that anyone who wanted to be heard in an election could speak without restriction,” said Reid Cox, general counsel for the Center for Individual Freedom, a nonpartisan Constitutional advocacy group. “This bill broadens the blunt rejection of that idea and expands the government’s unprecedented trampling of our constitutional rights.”

But many Republicans and Democrats expressed concern about the proliferation of spending by 527s in the previous election cycle. According to a Campaign Finance Institute draft report on BCRA and 527 groups, fundraising by the groups rose from $151 million in 2002 to $405 million in the 2004 election.

The legislation proposed this week would require all 527s to register as political committees — and thus with the Federal Elections Commission — unless they fall into a number of narrow exceptions. This is a different tack than legislation proposed by the four BCRA sponsors last year took. That bill would have applied a “major purpose” test to 527 groups to determine whether they were a political committee and come under the jurisdiction of the FEC.

Instead of having 527s qualify as political committees based on their major purposes, this legislation would allow a narrow group of 527s to be exempted from restrictions placed on political committees if they are sufficiently small or involved exclusively in state election activity.

As political committees, 527s would have to live under the same hard-money restrictions as the national parties and individual lawmakers’ campaign committees. The groups could no longer use soft money to buy any advertising that mentions only federal candidates. Feingold and McCain repeatedly pointed out, however, that nothing in the legislation would affect nonprofit advocacy organizations that operate under section 501(c)(3) of the tax code.

As it stands, federal political committees can maintain nonfederal accounts to pay a portion of the expenses of activities that affect both federal and nonfederal elections, such as get-out-the-vote efforts. The bill would set new allocation rules to mandate that such mixed federal and nonfederal expenditures are paid with at least 50 percent hard money.

The legislation would also limit contributions to the nonfederal accounts to $25,000 per year per person.

The combination of unrestricted donation amounts by wealthy individuals and the ability of 527s to mix their federal and nonfederal activities is what allowed organizations such as America Coming Together and the Media Fund on the left, and Partnership for America’s Future and Swift Boat Veterans for Truth on the right, to have a major impact on the 2004 presidential and Congressional elections.

Wealthy individuals such as George Soros gave millions of dollars that were spent by 527s on get-out-the-vote and other efforts that, while ostensibly a mixture of federal, state and local expenditures, had disproportionate influence on the federal contests.

The BCRA co-sponsors believe the infusion of soft money into federal campaigns through 527s was the direct consequence of the FEC’s refusal to implement the law as they wrote it.

“I think we’re essentially writing the regulations for the FEC because they couldn’t write them themselves,” Meehan said at the unveiling.

Lott agreed, saying: “I have been very disappointed. I don’t really think the FEC enforces the campaign finance laws enough.”

McCain went so far as to call the FEC a “rogue agency.” “This is a corrupt organization, and I don’t use the word lightly,” he said.

McCain, Feingold, Shays and Meehan all believe that if the FEC had written regulations implementing BCRA and previous campaign finance reform measures correctly, then there would have been no need for this legislation.

McCain and Feingold repeatedly asserted that 527s are not in violation of BCRA, but rather in violation of a 1974 law that stipulates that all organizations engaging in federal election activities fall under campaign finance laws.

“This is simply putting the genie back in the bottle,” Feingold said.

But FEC Commissioner Ellen Weintraub said it’s far from that simple. When Congress took up BCRA two years ago, lawmakers were aware that 527s were treated differently, she said, adding that the goal of the legislation at the time was to prevent lawmakers from directly raising soft money and to keep such funds out of the national parties.

“It was discussed on the Senate floor,” Weintraub said. “They talked about this.”

She also explained that various Supreme Court rulings have changed the definition of campaign finance reform statutes and thus how the FEC implements them.

Commissioner Brad Smith agreed.

“For the past year, Senators McCain and Feingold have responded to the problems inherent in the McCain-Feingold law, first by calling on the FEC to rewrite the law, and when that was properly rejected by majorities of both Republican and Democratic Commissioners, engaging a campaign of personal attacks and name calling that reflects more poorly on them than on the Commission,” Smith said in an e-mail. “I am pleased to see them recognize that legislation, rather than regulatory fiat, is the proper course to changing the law.”

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