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House May Limit Nonprofit Campaign Funds    [

    GOP Is Taking Aim at Advocacy Groups
    By Carl Hulse and Sheryl Gay Stolberg
    The New York Times

    Friday 31 March 2006

    Washington - To many Republicans, the liberal activist organization MoveOn.org is a political boogeyman that they hope to chase off with new restrictions on so-called 527 groups.

    But the pursuit may turn out to be fruitless. Like other major groups planning to inject themselves aggressively into the midterm elections through advertisements, voter drives and issue fights, MoveOn.org has already figured out what it thinks is a better, and less controversial, way to spend its millions. Its 527 - named for a section of the tax code - is being put on ice.

    "Our 527 is dormant," said Eli Pariser, executive director of MoveOn.org. He said his group would predominantly operate as a conventional political action committee, allowing it to more freely mix explicit political support and issue advocacy in a way that Mr. Pariser described as "squeaky clean."

    MoveOn.org might be moving on from its 527, but Congress is not. Two years after 527's burst onto the political scene, gaining notoriety by raising unlimited amounts from private donors, Congressional Republicans are moving to rein in the groups - just in time for the November midterm elections. Leading Democrats are threatening a fight.

    In the House, the Republican leadership intends to bring a plan to impose new restrictions on 527 groups to the floor next week to spur action in the Senate, where Senator John McCain, Republican of Arizona, a champion of the campaign finance bill that bears his name, is offering similar legislation.

    "I think this leaves a gaping loophole in the McCain-Feingold campaign finance bill," the House majority leader, Representative John A. Boehner, Republican of Ohio, told reporters on Thursday, referring to a bill co-sponsored by Senator Russell D. Feingold, Democrat of Wisconsin. "I think it needs to be fixed."

    But Mr. Boehner's Democratic counterpart, Representative Nancy Pelosi of California, denounced the effort, saying that Republicans could draw unlimited money from wealthy corporations and trade associations that used their own nonprofit arms to wage issue campaigns.

    Both Mr. McCain and the House leaders want to limit annual donations to 527 groups and force them to abide by the more stringent rules governing political committees if they are active in federal races.

    A federal district judge in Washington this week also called for action, ruling that the Federal Election Commission had "failed to present a reasoned explanation" for not requiring 527 groups to register as political committees. The judge, Emmet G. Sullivan, ordered the commission either to articulate its reasoning for evaluating 527 complaints on a case-by-case basis, or to "promulgate a rule, if necessary."

    But even if the campaign to stamp out 527 groups succeeds, it may not greatly impede third-party involvement in political campaigns, which is flourishing as advocacy groups adapt and discover ever more creative ways to pour their contributions into the political process.

    Independent organizations are already working on behalf of candidates in both parties, rallying support behind issues, canvassing for voters and preparing for big-money efforts, with many steering clear of the 527 approach. And some of the deep-pocketed 527 groups that were active in 2004 are so far on the sidelines.

    "Unless and until they actually manage to repeal the First Amendment itself, we are going to find a way to give voice to the tens of thousands of people who share our views and want to have a voice in the political process," said Pat Toomey, president of the Club for Growth, an anti-tax group that has been sued by the election commission over the conduct of its 527 in a 2004 Senate race.

    The 527 groups drew intense scrutiny after Swift Boat Veterans for Truth ran its campaign attacking the war record of the Democratic presidential nominee, Senator John Kerry of Massachusetts. But while Swift Boats drew the spotlight, the liberal philanthropist George Soros nearly single-handedly redefined the scope of campaign finance by contributing millions to progressive groups like MoveOn.

    So while candidates of both parties suffered at the hands of 527 committees, the drive to limit them is being pushed largely by Republicans who fear that Democratic advantages among the groups could swamp some of their candidates.

    "It is the Loch Ness monster in 527 form, rising out of the mist to eat them," scoffed Robert Bauer, an election law specialist opposed to the proposed restrictions on 527 committees.

    After 2004, the Federal Election Commission scrutinized some 527 groups and sued Club for Growth. The result, said Kenneth A. Gross, a campaign finance lawyer, was that "527's have been demonized to some extent," prompting many outside advocacy groups to rely on another provision of the tax code, 501c(4), which governs nonprofit groups.

    Business and trade associations typically operate under a similar provision, 501c(6). As a bonus, the 501c groups are not required to disclose their donors, as 527 groups are.

    Tony Massaro, executive vice president for political affairs at the League of Conservation Voters, said his group relied on its 501c(4) status because it could push directly for the election of specific candidates right up to Election Day, since the group takes no union or corporate money. Were it a 527, the advertisements would have to skirt that issue and strike a fuzzier theme of urging voters to contact candidates about their positions on divisive issues - a gimmick that Mr. Massaro said comported with the law but left the public cold.

    "Voters get frustrated by that game," said Mr. Massaro, who said his organization would spend $3 million to $5 million and was already working on behalf of Democratic Senate candidates in Florida, Pennsylvania and Washington.

    Brad Woodhouse, a spokesman for Americans United, a 501c(4) group, said that category allowed his organization to work closely with like-minded Democrats in shaping its advocacy program, including its current push for changes in Medicare's new prescription drug program. Such contact that would be prohibited for a 527.

    Representative Mike Pence, an Indiana Republican who is an opponent of restraining 527 committees, likened the current atmosphere to whack-a-mole, the carnival game where the player hits a mole with a hammer, only to have another pop up. He is backing legislation that would raise limits on contributions to political parties - an idea that opponents say would gut previous reforms.

    "We hit political parties and 527's pop up," Mr. Pence said. "We're going to whack them and 501c's are going to pop up."

    Despite the current dip in 527 activity, some new ones are being established, including one opposing Senator Rick Santorum, a conservative Republican in a tough re-election race in Pennsylvania. Veteran Democratic operatives just established a new group called Fresh Start for America, which is expected to engage in Senate races this year.

    As lawmakers prepare for a potential fight, Mr. Pariser of MoveOn.org said there could be one unexpected consequence. He suggested the effort to clamp down on 527 groups could enhance the influence of his organization because it would have the financial means to mount aggressive campaigns while potential competing groups would be handcuffed.

    "We will be better positioned to do political ads," he said. "I presume that was not their intent."

 

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    House May Limit Nonprofit Campaign Funds
    By Jim Abrams
    The Associated Press

    Thursday 30 March 2006

    Washington - The House next week will take up a bill to constrict the money-raising ability of nonprofit political groups that emerged as a substantial force in the 2004 presidential election.

    The bill to require groups known as 527s to register as political committees and abide by contribution limits is likely to meet resistance from Democrats, who in 2004 relied on 527s as a key source of financing.

    "I will strongly oppose it," House Democratic leader Nancy Pelosi said Thursday.

    The decision by GOP leaders to bring up the 527 bill separately could make it easier for the House and Senate to reach a compromise on lobbying and ethics legislation working its way through Congress.

    The Senate on Wednesday led the response to recent lobbying scandals by passing legislation that would ban lobbyists from giving gifts and meals to lawmakers and require lobbyists to disclose more about their contacts with legislators. Lawmakers would have to get approval before taking privately funded trips and file reports when they travel on private corporate jets.

    Senators from both parties warned against complicating the lobbying bill by combining it with controversial campaign finance issues, including that of 527s, but House GOP leaders have backed making that part of their package.

    House Rules Committee Chairman David Dreier, R-Calif., said that could still happen. "We're still trying to determine how at the end of the day we will put this together."

    On Wednesday a US District judge ruled, in a case brought by President Bush's campaign and lawmakers, that the Federal Election Commission had failed to give a reasoned explanation for its decision not to issue rules requiring 527s - named after the section of the tax code that covers them - to register as federal political action committees. That would subject them to the same fundraising, spending and disclosure rules as PACs must follow.

    The judge did not say that the FEC had abused its discretion, and he did not order it to develop rules for their fundraising and spending. However, he told the commission to "articulate its reasoning" or write a rule for the groups "if necessary."

    The House bill is expected to be based on legislation offered by Reps. Christopher Shays, R-Conn., and Marty Meehan, D-Mass., partners in sponsoring the 2002 campaign finance act that banned national party committees and federal candidates from raising unlimited corporate and union donations.

    Shays, who disagreed with most of his Republican colleagues in backing the 2002 act, criticized Pelosi and other Democrats who oppose his 527 bill. "There's no defense for saying you are for campaign finance reform and then not voting to close a loophole, except blatant partisan politics."

    The Shays-Meehan bill would limit to $5,000 per year what an individual can give to a federal political committee to influence federal elections. The ceiling is $25,000 for nonfederal funds to pay for voter mobilization and public communication activities.

    House Majority Leader John Boehner, R-Ohio, at a news conference Thursday, said nonprofit group spending had become "a gaping loophole" in the law. "To have all of this unregulated campaign cash going to these organizations and allowing them to engage in campaign activities without any disclosure is wrong," he said.

    The nonpartisan Political Money Line, a campaign finance tracking service, found that in the 2004 election groups supporting Sen. John Kerry or opposing President Bush raised $266 million, including multimillion-dollar donations from wealthy businessmen such as George Soros. Anti-Kerry, pro-Bush groups, most prominently the Swift Boat Veterans for Truth that questioned Kerry's Vietnam war record, raised $144 million.

    Pelosi said it was "the height of hypocrisy" that the Republicans were trying to limit 527s but were not restricting trade associations and other business groups exempt from some rules applying to political committees.

    "If they are going to do it, just do it across the board," she said.