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Groups Opposing Bill on 527s Prepare for Hearing

With the first hearing on reforming 527 groups scheduled for early this week, a coalition opposed to restricting the independent organizations are banding together to combat Congressional action.

Thus far, much of the opposition is coming from nonprofits who organize under a different section of the tax code but who nonetheless feel threatened by what they believe could become a two-pronged effort that eventually targets 501(c)(3) organizations.

Sponsors of the legislation have sworn up and down that such is not the case. But in an open letter to Congress circulating among nonprofits, the groups raise the possibility that efforts to restrain independent political groups will inevitably spill over onto their turf.

“Perhaps they have sought to limit the reach of their legislation because of the serious constitutional concerns about efforts to regulate independent political speech, but, if so, they should have similar concerns about the rights of independent 527s,” wrote a group called the Coalition to Protect Independent Political Speech. The group is comprised of an array of nonprofits, some of whom also have political arms, including the Alliance for Justice, League of Conservation Voters, NARAL Pro-Choice America, OMB Watch, People for the American Way and Sierra Club.

Late last week the Alliance for Justice also launched the Nonprofit and Foundation Advocacy Web log to “strengthen the voices of nonprofits and foundations and to provide a better understanding of the laws that govern their participation in the policy process.” The early postings were almost exclusively dedicated to discussing Congress’ efforts to restrict 527s.

At a press conference last month, sponsors of the 527 legislation said they were careful to ensure that nonprofits that don’t engage in political activity would be excluded. They repeatedly said that their targets were only 527s — the political groups that collectively spent more than $400 million outside the purview of the Federal Election Commission to influence the 2004 elections.

“Nothing in this bill will affect legitimate 501(c)(3)s,” said Sen. Russ Feingold (D-Wis.).

Senate Rules and Administration Chairman Trent Lott (R-Miss.), whose panel is holding Tuesday’s hearing, has called the funds raised and spent by 527s last cycle “sewer money.”

Despite voting against the Bipartisan Campaign Reform Act in 2002, Lott said the role 527s played in the 2004 elections prompted him to join Feingold, Sen. John McCain (R-Ariz.) and Reps. Christopher Shays (R-Conn.) and Marty Meehan (D-Mass.). The measure also counts as co-sponsors Sens. Charles Schumer (D-N.Y.), Olympia Snowe (R-Maine), Joe Lieberman (D-Conn.), Ken Salazar (D-Colo.) and Susan Collins (R-Maine).

The companion bills unveiled last month would require all 527s to register as political committees — and thus with the FEC — 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.

But the groups argue that the current bill subjects 527s to regulation if they engage in voter-registration drives, despite the fact that 501(c)s carry out the same activity in limited amounts.

“Already the reformers have termed the 501(c) community the ‘new stealth PACs.’ It’s not a question of ‘if’ they try to regulate 501(c)s, it’s a question of ‘when,’” the Alliance for Justice asserts on its blog.

Under the legislation, 527s, as political committees, 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.

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 be 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.

Despite repeated assurances to the contrary by McCain and Feingold, Robert Bauer of the Political Law Group at Perkins Coie LLP believes that nonprofit groups operating as 501(c)(3)s could get caught up in efforts to reform 527s. On his Web site, www.softmoney, Bauer argues that that while the 501(c) fight may be deferred to another day, the “battle, however, still looms, and the passage of this bill would shift the advantage in favor of those who would seek at some later date to extend regulation still further to the 501(c) tax-exempts.”

Bauer is scheduled to testify at Tuesday’s hearing. Also scheduled to appear as expert witnesses are McCain and Feingold, along with FEC Chairman Scott Thomas and Commissioner David Mason, professor Frances Hill of the University of Miami School of Law, and Michael Malbin of the Campaign Finance Institute.

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 general concept of prohibiting 527s from raising and spending unlimited sums of soft money appears to be gaining momentum in both chambers.

Lott said last month that he expects “a bipartisan result” out of the hearing. A markup has not yet been scheduled.

Like Lott, House Administration Chairman Bob Ney (R-Ohio) opposed the enactment of BCRA but now supports reining in 527s. Ney has declined to endorse the proposal, but he has made statements supporting the measure’s overall goals and plans to hold hearings.

Despite the effort’s momentum, however, many in both parties either don’t want to give up a source of funds that, if left unchecked, is likely to grow. Still others are philosophically opposed to further restrictions on campaign activities because they believe it tramples on the First Amendment’s guarantee of free speech.

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