II 109th CONGRESS 2d Session S. 2511 IN THE SENATE OF THE UNITED STATES April 5, 2006 Mr. McCain introduced the following bill; which was read twice and referred to the Committee on Rules and Administration A BILL To amend the Federal Election Campaign Act of 1971 to clarify when organizations described in section 527 of the Internal Revenue Code of 1986 must register as political committees, and for other purposes.

1.

Short title

This Act may be cited as the 527 Reform Act of 2006.

2.

Treatment of section 527 organizations

(a)

Definition of political committee

Section 301(4) of the Federal Election Campaign Act of 1971 (2 U.S.C. 431(4)) is amended— (1)by striking the period at the end of subparagraph (C) and inserting ; or; and (2)by adding at the end the following: (D)any applicable 527 organization. . (b)

Definition of applicable 527 organization

Section 301 of such Act (2 U.S.C. 431) is amended by adding at the end the following new paragraph: (27)

Applicable 527 organization

(A)

In general

For purposes of paragraph (4)(D), the term applicable 527 organization means a committee, club, association, or group of persons that— (i)has given notice to the Secretary of the Treasury under section 527(i) of the Internal Revenue Code of 1986 that it is to be treated as an organization described in section 527 of such Code; and (ii)is not described in subparagraph (B). (B)

Excepted organizations

A committee, club, association, or other group of persons described in this subparagraph is— (i)an organization described in section 527(i)(5) of the Internal Revenue Code of 1986; (ii)an organization which is a committee, club, association or other group of persons that is organized, operated, and makes disbursements exclusively for paying expenses described in the last sentence of section 527(e)(2) of the Internal Revenue Code of 1986 or expenses of a newsletter fund described in section 527(g) of such Code; (iii)an organization which is a committee, club, association, or other group that consists solely of candidates for State or local office, individuals holding State or local office, or any combination of either, but only if the organization refers only to one or more non-Federal candidates or applicable State or local issues in all of its voter drive activities and does not refer to a Federal candidate or a political party in any of its voter drive activities; or (iv)an organization described in subparagraph (C). (C)

Applicable organization

For purposes of subparagraph (B)(iv), an organization described in this subparagraph is a committee, club, association, or other group of persons whose election or nomination activities relate exclusively to— (i)elections where no candidate for Federal office appears on the ballot; or (ii)one or more of the following purposes: (I)Influencing the selection, nomination, election, or appointment of one or more candidates to non-Federal offices. (II)Influencing one or more applicable State or local issues. (III)Influencing the selection, appointment, nomination, or confirmation of one or more individuals to non-elected offices. (D)

Exclusivity test

A committee, club, association, or other group of persons shall not be treated as meeting the exclusivity requirement of subparagraph (C) if it makes disbursements aggregating more than $1,000 for any of the following: (i)A public communication that promotes, supports, attacks, or opposes a clearly identified candidate for Federal office during the 1-year period ending on the date of the general election for the office sought by the clearly identified candidate (or, if a runoff election is held with respect to such general election, on the date of the runoff election). (ii)Any voter drive activity during a calendar year, except that no disbursements for any voter drive activity shall be taken into account under this subparagraph if the committee, club, association, or other group of persons during such calendar year— (I)makes disbursements for voter drive activities with respect to elections in only 1 State and complies with all applicable election laws of that State, including laws related to registration and reporting requirements and contribution limitations; (II)refers to one or more non-Federal candidates or applicable State or local issues in all of its voter drive activities and does not refer to any Federal candidate or any political party in any of its voter drive activities; (III)does not have a candidate for Federal office, an individual who holds any Federal office, a national political party, or an agent of any of the foregoing, control or materially participate in the direction of the organization, solicit contributions to the organization (other than funds which are described under clauses (i) and (ii) of section 323(e)(1)(B)), or direct disbursements, in whole or in part, by the organization; and (IV)makes no contributions to Federal candidates. (E)

Certain references to Federal candidates not taken into account

For purposes of subparagraphs (B)(iii) and (D)(ii)(II), a voter drive activity shall not be treated as referring to a clearly identified Federal candidate if the only reference to the candidate in the activity is— (i)a reference in connection with an election for a non-Federal office in which such Federal candidate is also a candidate for such non-Federal office; or (ii)a reference to the fact that the candidate has endorsed a non-Federal candidate or has taken a position on an applicable State or local issue, including a reference that constitutes the endorsement or position itself. (F)

Certain references to political parties not taken into account

For purposes of subparagraphs (B)(iii) and (D)(ii)(II), a voter drive activity shall not be treated as referring to a political party if the only reference to the party in the activity is— (i)a reference for the purpose of identifying a non-Federal candidate; (ii)a reference for the purpose of identifying the entity making the public communication or carrying out the voter drive activity; or (iii)a reference in a manner or context that does not reflect support for or opposition to a Federal candidate or candidates and does reflect support for or opposition to a State or local candidate or candidates or an applicable State or local issue. (G)

Applicable state or local issue

For purposes of this paragraph, the term applicable State or local issue means any State or local ballot initiative, State or local referendum, State or local constitutional amendment, State or local bond issue, or other State or local ballot issue. . (c)

Definition of Voter Drive Activity

Section 301 of such Act (2 U.S.C. 431), as amended by subsection (b), is further amended by adding at the end the following new paragraph: (28)

Voter drive activity

The term voter drive activity means any of the following activities conducted in connection with an election in which a candidate for Federal office appears on the ballot (regardless of whether a candidate for State or local office also appears on the ballot): (A)Voter registration activity. (B)Voter identification. (C)Get-out-the-vote activity. (D)Generic campaign activity. (E)Any public communication related to activities described in subparagraphs (A) through (D). Such term shall not include any activity described in subparagraph (A) or (B) of section 316(b)(2).. (d)

Regulations

The Federal Election Commission shall promulgate regulations to implement this section not later than 60 days after the date of enactment of this Act. (e)

Effective date

The amendments made by this section shall take effect on the date which is 60 days after the date of enactment of this Act.

3.

Rules for allocation of expenses between federal and non-federal activities

(a)

In general

Title III of the Federal Election Campaign Act of 1971 (2 U.S.C. 431 et seq.) is amended by adding at the end the following:

325.

Allocation and funding rules for certain expenses relating to federal and non-federal activities

(a)

In general

In the case of any disbursements by any political committee that is a separate segregated fund or nonconnected committee for which allocation rules are provided under subsection (b)— (1)the disbursements shall be allocated between Federal and non-Federal accounts in accordance with this section and regulations prescribed by the Commission; and (2)in the case of disbursements allocated to non-Federal accounts, may be paid only from a qualified non-Federal account. (b)

Costs To be allocated and allocation rules

(1)

In general

Disbursements by any separate segregated fund or nonconnected committee, other than an organization described in section 323(b)(1), for any of the following categories of activity shall be allocated as follows: (A)100 percent of the expenses for public communications or voter drive activities that refer to one or more clearly identified Federal candidates, but do not refer to any clearly identified non-Federal candidates, shall be paid with funds from a Federal account, without regard to whether the communication refers to a political party. (B)At least 50 percent, or a greater percentage if the Commission so determines by regulation, of the expenses for public communications and voter drive activities that refer to one or more clearly identified candidates for Federal office and one or more clearly identified non-Federal candidates shall be paid with funds from a Federal account, without regard to whether the communication refers to a political party. (C)At least 50 percent, or a greater percentage if the Commission so determines by regulation, of the expenses for public communications or voter drive activities that refer to a political party, but do not refer to any clearly identified Federal or non-Federal candidate, shall be paid with funds from a Federal account, except that this paragraph shall not apply to communications or activities that relate exclusively to elections where no candidate for Federal office appears on the ballot. (D)At least 50 percent, or a greater percentage if the Commission so determines by regulation, of the expenses for public communications or voter drive activities that refer to a political party and refer to one or more clearly identified non-Federal candidates, but do not refer to any clearly identified Federal candidates, shall be paid with funds from a Federal account, except that this paragraph shall not apply to communications or activities that relate exclusively to elections where no candidate for Federal office appears on the ballot. (E)Unless otherwise determined by the Commission in its regulations, at least 50 percent of any administrative expenses, including rent, utilities, office supplies, and salaries not attributable to a clearly identified candidate, shall be paid with funds from a Federal account, except that for a separate segregated fund such expenses may be paid instead by its connected organization. (F)At least 50 percent, or a greater percentage if the Commission so determines by regulation, of the direct costs of a fundraising program or event, including disbursements for solicitation of funds and for planning and administration of actual fundraising events, where Federal and non-Federal funds are collected through such program or event shall be paid with funds from a Federal account, except that for a separate segregated fund such costs may be paid instead by its connected organization. This paragraph shall not apply to any fundraising solicitations or any other activity that constitutes a public communication. (2)

Certain references to federal candidates not taken into account

For purposes of paragraph (1), a public communication or voter drive activity shall not be treated as referring to a clearly identified Federal candidate if the only reference to the candidate in the communication or activity is— (A)a reference in connection with an election for a non-Federal office in which such Federal candidate is also a candidate for such non-Federal office; or (B)a reference to the fact that the candidate has endorsed a non-Federal candidate or has taken a position on an applicable State or local issue (as defined in section 301(27)(G)), including a reference that constitutes the endorsement or position itself. (3)

Certain references to political parties not taken into account

For purposes of paragraph (1), a public communication or voter drive activity shall not be treated as referring to a political party if the only reference to the party in the communication or activity is— (A)a reference for the purpose of identifying a non-Federal candidate; (B)a reference for the purpose of identifying the entity making the public communication or carrying out the voter drive activity; or (C)a reference in a manner or context that does not reflect support for or opposition to a Federal candidate or candidates and does reflect support for or opposition to a State or local candidate or candidates or an applicable State or local issue. (c)

Qualified Non-Federal account

(1)

In general

For purposes of this section, the term qualified non-Federal account means an account which consists solely of amounts— (A)that, subject to the limitations of paragraphs (2) and (3), are raised by the separate segregated fund or nonconnected committee only from individuals, and (B)with respect to which all requirements of Federal, State, or local law (including any law relating to contribution limits) are met. (2)

Limitation on individual donations

(A)

In general

A separate segregated fund or nonconnected committee may not accept more than $25,000 in funds for its qualified non-Federal account from any one individual in any calendar year. (B)

Affiliation

For purposes of this paragraph, all qualified non-Federal accounts of separate segregated funds or nonconnected committees which are directly or indirectly established, financed, maintained, or controlled by the same person or persons shall be treated as one account. (3)

Fundraising limitation

(A)

In general

No donation to a qualified non-Federal account may be solicited, received, directed, transferred, or spent by or in the name of any person described in subsection (a) or (e) of section 323. (B)

Funds not treated as subject to Act

Except as provided in subsection (a)(2) and this subsection, any funds raised for a qualified non-Federal account in accordance with the requirements of this section shall not be considered funds subject to the limitations, prohibitions, and reporting requirements of this Act for any purpose (including for purposes of subsection (a) or (e) of section 323 or subsection (d)(1) of this section). (d)

Definitions

(1)

Federal account

The term Federal account means an account which consists solely of contributions subject to the limitations, prohibitions, and reporting requirements of this Act. Nothing in this section or in section 323(b)(2)(B)(iii) shall be construed to infer that a limit other than the limit under section 315(a)(1)(C) applies to contributions to the account. (2)

Nonconnected committee

The term nonconnected committee shall not include a political committee of a political party. (3)

Voter drive activity

The term voter drive activity has the meaning given such term in section 301(28).

. (b)

Reporting requirements

Section 304(e) of the Federal Election Campaign Act of 1971 (2 U.S.C. 434(e)) is amended— (1)by redesignating paragraphs (3) and (4) as paragraphs (4) and (5); and (2)by inserting after paragraph (2) the following new paragraph: (3)

Receipts and disbursements from qualified non-federal accounts

In addition to any other reporting requirement applicable under this Act, a political committee to which section 325(a) applies shall report all receipts and disbursements from a qualified non-Federal account (as defined in section 325(c)). . (c)

Regulations

The Federal Election Commission shall promulgate regulations to implement the amendments made by this section not later than 180 days after the date of enactment of this Act. (d)

Effective date

The amendments made by this section shall take effect on the date which is 180 days after the date of enactment of this Act.

4.

Construction

No provision of this Act, or amendment made by this Act, shall be construed— (1)as approving, ratifying, or endorsing a regulation promulgated by the Federal Election Commission; (2)as establishing, modifying, or otherwise affecting the definition of political organization for purposes of the Internal Revenue Code of 1986; or (3)as affecting the determination of whether a group organized under section 501(c) of the Internal Revenue Code of 1986 is a political committee under section 301(4) of the Federal Election Campaign Act of 1971.

5.

Judicial review

(a)

Special rules for actions brought on constitutional grounds

If any action is brought for declaratory or injunctive relief to challenge the constitutionality of any provision of this Act or any amendment made by this Act, the following rules shall apply: (1)The action shall be filed in the United States District Court for the District of Columbia and shall be heard by a 3-judge court convened pursuant to section 2284 of title 28, United States Code. (2)A copy of the complaint shall be delivered promptly to the Clerk of the House of Representatives and the Secretary of the Senate. (3)A final decision in the action shall be reviewable only by appeal directly to the Supreme Court of the United States. Such appeal shall be taken by the filing of a notice of appeal within 10 days, and the filing of a jurisdictional statement within 30 days, of the entry of the final decision. (4)It shall be the duty of the United States District Court for the District of Columbia and the Supreme Court of the United States to advance on the docket and to expedite to the greatest possible extent the disposition of the action and appeal. (b)

Intervention by members of congress

In any action in which the constitutionality of any provision of this Act or any amendment made by this Act is raised (including but not limited to an action described in subsection (a)), any Member of the House of Representatives (including a Delegate or Resident Commissioner to Congress) or Senate shall have the right to intervene either in support of or opposition to the position of a party to the case regarding the constitutionality of the provision or amendment. To avoid duplication of efforts and reduce the burdens placed on the parties to the action, the court in any such action may make such orders as it considers necessary, including orders to require intervenors taking similar positions to file joint papers or to be represented by a single attorney at oral argument. (c)

Challenge by members of congress

Any Member of Congress may bring an action, subject to the special rules described in subsection (a), for declaratory or injunctive relief to challenge the constitutionality of any provision of this Act or any amendment made by this Act. (d)

Applicability

(1)

Initial claims

With respect to any action initially filed on or before December 31, 2008, the provisions of subsection (a) shall apply with respect to each action described in such subsection. (2)

Subsequent actions

With respect to any action initially filed after December 31, 2008, the provisions of subsection (a) shall not apply to any action described in such subsection unless the person filing such action elects such provisions to apply to the action.

6.

Severability

If any provision of this Act or any amendment made by this Act, or the application of a provision or amendment to any person or circumstance, is held to be unconstitutional, the remainder of this Act and the amendments made by this Act, and the application of the provisions and amendments to any person or circumstance, shall not be affected by the holding.