[Congressional Record Volume 146, Number 85 (Thursday, June 29, 2000)]
[Senate]
[Pages S6041-S6047]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNAL REVENUE CODE OF 1986 AMENDMENT
The PRESIDING OFFICER. Under the previous order, the Senate will now
resume consideration of H.R. 4762, which the clerk will report.
The legislative clerk read as follows:
A bill (H.R. 4762) to amend the Internal Revenue Code for
1986 to require 527 organizations to disclose their political
activities.
The PRESIDING OFFICER. Under the previous order, there will now be 7
minutes for closing remarks, with 5 minutes of that time to be under
the control of the Senator from Arizona, Mr. McCain.
The Senator from Arizona.
Mr. McCAIN. Mr. President, I yield 2 minutes of my 5 minutes to the
Senator from Wisconsin, Mr. Feingold.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, despite the claims in the press by some
opponents of this measure, this bill is fair and evenhanded. It affects
groups on both sides of the political spectrum. It is not aimed at any
particular group or players in the elections. It is aimed at getting
rid of secrecy. It is not an attempt to silence anyone. It is an
attempt to give the American people information. They are entitled to
have this information about the groups who flood the airwaves with
negative ads during an election campaign.
I thank all my colleagues who supported the McCain-Feingold-Lieberman
amendment on the Department of Defense bill. They can be proud of what
they did. With that vote, they have started in motion a process that
has brought us to this day, when we will quickly pass and send to the
President for his signature a good, fair, bipartisan bill that does the
right thing for the American people.
Mr. ROTH. Mr. President, I believe in full disclosure of who is
funding political campaigns. The public has a right to know who is
paying for the political advertisements and direct mail that they see.
While I think this bill may not go far enough in requiring disclosure
of these groups, it is a first step and that is why I support H.R.
4762.
H.R. 4762 requires disclosure for political organizations which are
tax exempt under section 527 of the Internal Revenue Code. 527
organizations which directly advocate the election or defeat
[[Page S6042]]
of a particular candidate for federal office are subject to federal
election campaign law disclosure obligations. However, 527
organizations that do not directly advocate for the election or defeat
of a particular candidate are not subject to these federal election
campaign laws and are not obligated to disclose the names of their
contributors nor how they send the contributions they receive. This
bill correctly adds disclosure requirements to these 527 organizations
so that the activities performed and identity of contributors to these
previously undisclosed will be available for public scrutiny, much like
those 527 organizations that have to disclose under the federal
election laws.
I am also glad that this bill follows the constitutional requirement
that revenue measures originate in the House of Representatives. If the
revenue measure did not originate in the House, then any member could
subject the bill to a ``blue slip,'' thereby voiding the entire bill,
not just the part of the bill that is a revenue measure. I opposed an
amendment similar to this bill a few weeks ago when it was offered as
an amendment to the Defense Authorization bill because adoption of that
amendment would have subjected the Defense Authorization bill to such a
``blue slip'' challenge. Since we are taking up a House-originated
revenue measure, I do not have the concerns which forced me to vote
against the previous amendment.
However, I do have some concerns with this bill. First, this bill is
a tax measure and tax measures should first be addressed by this
committee of jurisdiction, the Finance Committee. This we have not
done. In fact, the Fiance Committee was scheduled to have a hearing on
July 12, 2000 to review this and other similar legislation dealing with
disclosure of political activity by tax-exempt and other organizations.
This hearing will not happen now and we will not be able to have the
Finance Committee review how effective this legislation will be.
My second concern is that this bill may not do enough. By only
focusing on disclosure in one type of tax-exempt organization and not
on others, we leave open the use of the other type of tax-exempt
organizations by those who want to hide their contributions and
activity behind the cloak of anonymity that these tax-exempt
organizations provide. This view is shared by the staff of the Joint
Committee on Taxation.
Finally, I am concerned that this legislation requires the Internal
Revenue Service to do things that it is not prepared to do with regard
to disclosure. For example, under the bill reported out of the Ways and
Means Committee, the IRS could partner with another agency--most likely
the Federal Election Commission--to provide that the results of the 527
disclosure to the public. Unfortunately, this and other technical
matters that were addressed in the Ways and Means Committee bill were
not incorporated in this bill. I fear that we will have to address
these technical issues in the future in order to make the disclosure
provisions work to effectively provide this information to the public.
Because this bill is a first step and that some disclosure is better
than no disclosure, I will vote for H.R. 4762.
Mr. President, I ask unanimous consent that a letter from the Brennan
Center for Justice expressing the view that this bill requiring
disclosure by 527 organizations is constitutionally sound be printed in
the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Brennan Center for Justice,
New York, NY, June 28, 2000.
Dear Senator: I am writing to express the views of the
Brennan Center for Justice at New York University School of
Law on the constitutional validity of attempts to seek
disclosure from organizations covered by Section 527 of the
Internal Revenue Code, as contained in the Lieberman-Levin-
Daschle-McCain Bills (S.B. 2582 and 2583).
Senate Bill 2582 seeks to completely close the current
Section 527 loophole, under which some organizations are
claiming that they exist for the purpose of influencing
electoral outcomes for income tax purposes, but that they are
not ``political committees'' for purposes of federal election
law. Senate Bill 2582 clarifies that tax exemption under
Section 527 is available only to organizations that are
``political committees'' under FECA. Senate Bill 2583 is a
more limited bill, which requires Section 527 organizations
to disclose their existence to the IRS, to file publicly
available tax returns, and to file with the IRS and make
public reports disclosing large contributors and
expenditures.
Both of these bills are constitutionally sound. Buckley v.
Valeo, 424 U.S. 1 (1976), clearly established that groups
whose major purpose is influencing elections--the operative
test under both the Federal Election Campaign Act (FECA) and
under Section 527 of the Internal Revenue Code--are
appropriately subject to federal disclosure laws. A close
textual analysis of Buckley reveals that the Supreme Court
explicitly recognized the legitimacy of mandatory disclosure
laws for organizations whose major purpose is influencing
elections.
understanding buckley's disclosure limitations
In Buckley v. Valeo, the Supreme Court considered the
constitutional validity of, among other things, various
disclosure provisions that Congress had enacted on federal
political activity. In general, the Court found mandatory
disclosure requirements to be the least restrictive means for
achieving the government's compelling interests in the
campaign finance arena. However, the Court believed that,
while it was constitutionally permissible to require advocacy
groups that ``expressly advocate'' for or against particular
federal candidates to comply with federal disclosure laws,
advocacy groups that engage in a mere discussion of political
issues (so-called ``issue advocacy'') cannot be subjected to
public disclosure.
The Supreme Court was concerned that FECA could become a
trap for unwary political speakers. Advocacy groups or
individuals that participate in the national debate about
important policy issues might discover that they had run
afoul of federal campaign finance law restrictions simply by
virtue of their having mentioned a federal candidate in
connection with a pressing public issue. The Court found that
FECA's disclosure provisions, as written, raised potential
problems both of vagueness and overbreadth.
Under First Amendment ``void for vagueness'' jurisprudence,
the government cannot punish someone without providing a
sufficiently precise description of what conduct is legal and
what is illegal. A vague or imprecise definition of regulated
political advocacy might serve to ``chill'' some political
speakers who, although they desire to engage in pure ``issue
advocacy,'' may be afraid that their speech will be construed
as regulable ``express advocacy.'' Similarly, the overbreadth
doctrine in First Amendment jurisprudence is concerned with a
regulation that, however precise, sweeps too broadly and
reaches constitutionally protected speech. Thus, a regulation
that is clearly drafted, but covers both ``issue advocacy''
and ``express advocacy'' may be overbroad as applied to
certain speakers.
The Court's vagueness and overbreadth analysis centered on
two provisions in FECA--section 608(e), which adopted limits
on independent expenditures, and section 434(e), which
adopted reporting requirements for individuals and groups.
For these two provisions, the Supreme Court overcame the
vagueness and overbreadth issues by adopting a narrow
construction of the statute that limited its applicability to
``express advocacy.'' However, the Court made it absolutely
clear that the ``express advocacy'' limiting construction
that it was adopting for these sections did not apply to
expenditures by either candidates or political committees.
According to the Court, the activities of candidates and
political committees are ``by definition, campaign related.''
Buckley, 424 U.S. at 79.
The ``express advocacy'' limitation was intended by the
Court to give protection to speakers that are not primarily
engaged in influencing federal elections. However, because
candidates and political committees have as their major
purpose the influencing of elections, they are not entitled
to the benefit of the ``express advocacy'' limiting
construction. The Supreme Court never suggested, as no
rational court would, that political candidates, political
parties, or political committees can avoid all of FECA's
requirements by simply eschewing the use of ``express
advocacy'' in their communications. As discussed above, the
Supreme Court wanted to avoid trapping the unwary political
speaker in the web of FECA regulation. However, for political
parties, political candidates, and political committees,
which have influencing electoral outcomes as their central
mission, there is no fear that they will be unwittingly or
improperly subject to regulation.
* * * * *
The Buckley Court's first invocation of the ``express
advocacy'' standard appears in its discussion of the
mandatory limitations imposed by FECA section 608(e) on
independent expenditures. Section 608(e)(1) limited
individual and group expenditures ``relative to a clearly
identified candidate'' to $1,000 per year. The Court, in
analyzing the constitutional validity of the $1,000 limit to
independent expenditures by groups and individuals, focused
first on the issue of unconstitutional vagueness. The Court
noted that although the terms ``expenditure,'' ``clearly
identified,'' and ``candidate'' were all defined in the
statute, the term ``relative to'' a candidate was not
defined. Buckley, 424 U.S. at 41. The Court found this
undefined term to be impermissibly vague. Id. at 41. Due to
the vagueness problem, the Court construed the phrase
``relative to'' a candidate to mean ``advocating the election
or defeat of'' a candidate. Id. at 42.
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Significantly, the Court did not adopt a limiting
construction of the term ``expenditure,'' which appears in a
definitional section of the statute at section 591(f).
Rather, the Court narrowly construed only section 608(e). Id.
at 44 (``in order to reserve the provision against
invalidation on vagueness grounds, Sec. 608(e)(1) must be
construed to apply only to expenditures for communications
that in express terms advocate the election or defeat of a
clearly identified candidate for federal office.''). The
limitations under section 608(e) apply only to individuals
and groups. Id. at 39-40. Political parties and federal
candidates have separate expenditure limits that did not use
the ``relative to a clearly identified candidate'' language,
see Sec. Sec. 608(c) & (f), which was found to be problematic
in section 608(e)(1).
The Court, having solved the statute's vagueness problem,
next turned to the question of whether section 608(e)(1), as
narrowly construed by the Court, nevertheless continued to
impermissibly burden the speaker's constitutional right of
free expression. The Court found the government's interest in
preventing corruption and the appearance of corruption,
although adequate to justify contribution limits, was
nevertheless inadequate to justify the independent
expenditure limits. Therefore, the Court held section
608(e)(1)'s limitation on independent expenditures
unconstitutional, even as narrowly construed.
In sum, in this portion of its opinion, the Buckley Court
did not adopt a new definition of the term ``expenditure''
for all of FECA. Rather, the Court held that the limits on
independent expenditures imposed on individuals and groups
should be narrowly construed to apply only to ``express
advocacy,'' and that these limits were nevertheless
unconstitutional even as so limited. Because the limits on
independent expenditures in section 608(e) were ultimately
struck down by the Court, the narrowing construction of that
section became, in a practical sense, irrelevant.
The only other portion of the Buckley decision that raises
the ``express advocacy'' narrowing construction is the
Court's discussion of reporting and disclosure requirements
under FECA section 434(e). It is here that the Court makes it
absolutely clear, in unambiguous language, that political
committees and candidates are not entitled to the benefit of
the narrowing ``express advocacy'' construction earlier
discussed in section 608(e).
The Court begins its discussion of reporting and disclosure
requirements, by noting that such requirements, ``as a
general matter, directly serve substantial governmental
interests.'' Buckley, 424 U.S. at 68. After concluding that
minor parties and independents are not entitled to a blanket
exemption from FECA's reporting and disclosure requirements,
the Court moved on to a general discussion of section 434(e).
As introduced by the Court, ``Section 434(e) requires
`[e]very person (other than a political committee or
candidate) who makes contributions or expenditures'
aggregating over $100 in a calendar year `other than by
contribution to a political committee or candidate' to file a
statement with the Commission.'' Id. 74-75 (emphasis added).
The Court noted that this provision does not require the
disclosure of membership or contribution lists; rather, it
requires disclosure only of what a person or group actually
spends or contributes. Id. at 75.
The Buckley Court noted that the Court of Appeals had
upheld section 434(e) as necessary to enforce the independent
expenditure ceiling discussed above--section 608(e). Id. at
75. The Supreme Court, having just struck down these
independent expenditure limits, concluded that the appellate
court's rationale would no longer suffice. Id. at 76.
However, the Buckley Court concluded that section 434(e) was
``not so intimately tied'' to section 608(e) that it could
not stand on its own. Id. at 76. Section 434(e), which
predated the enactment of section 608(e) by several years,
was an independent effort by Congress to obtain ``total
disclosure'' of ``every kind of political activity.'' Id. at
76.
The Court concluded that Congress, in its effort to be all-
inclusive, had drafted the disclosure statute in a manner
that raised vagueness problems. Id. at 76. Section 434(e)
required the reporting of ``contributions'' and
``expenditures.'' These terms were defined in parallel FECA
provisions in sections 431 (e) and (f) as using money or
other valuable assets ``for the purpose of . . .
influencing'' the nomination or election of candidates for
federal office. Id. at 77. The Court found that the phrase
``for the purpose of . . . influencing'' created ambiguity
that posed constitutional problems. Id. at 77.
In order to eliminate this vagueness problem, the Court
then went back to its earlier discussions of
``contributions'' and ``expenditures.'' The Court construed
the term ``contribution'' in section 434(e) in the same
manner as it had done when it upheld FECA's contribution
limits. Id. at 78. It next considered whether to adopt the
same limiting construction of ``expenditure'' that it had
adopted when construing section 608(e)'s limits on
independent expenditures by individuals and groups.
``When we attempt to define `expenditure' in a similarly
narrow way we encounter line-drawing problems of the sort we
faced in 18 U.S.C. Sec. 608(e)(1) (1970 ed., Supp. IV).
Although the phrase, `for the purpose of . . . influencing'
an election or nomination, differs from the language used in
Sec. 608(e)(1), it shares the same potential for encompassing
both issue discussion and advocacy of a political result. The
general requirement that `political committees' and
candidates disclose their expenditures could raise similar
vagueness problems, for ``political committee'' is defined
only in terms of amount of annual ``contributions'' and
``expenditures,'' and could be interpreted to reach groups
engaged purely in issue discussion. The lower courts have
construed the words ``political committee'' more narrowly.
To fulfill the purposes of the Act they need only
encompass organizations that are under the control of a
candidate or the major purpose of which is the nomination
or election of a candidate. Expenditures of candidates and
of ``political committees'' so construed can be assumed to
fall within the core area sought to be addressed by
Congress. They are, be definition, campaign related.
``But when the maker of the expenditures is not within
these categories--when it is an individual other than a
candidate or a group other than a political committee--the
relation of the information sought to the purposes of the Act
may be too remote. To insure that the reach of Sec. 434(e) is
not impermissibly broad, we construe ``expenditure'' for
purposes of that section in the same way we construed the
terms of Sec. 608(e)--to reach only funds used for
communications that expressly advocate the election or defeat
of a clearly identified candidate''. Id. at 79-80 (footnotes
omitted) (emphasis added).
The Court in Buckley could not have been more clear. When
applied to a speaker that is neither a political candidate
nor a political committee, the term ``expenditure'' in
section 434(e) must be narrowly construed under the ``express
advocacy'' standard. However, when applied to organizations
that have as a major purpose the nomination or election of a
candidate, the ``express advocacy'' limiting construction
simply does not apply. The activities of these groups are, by
definition, campaign related, and legitimately subject to
regulation under FECA.
This, of course, is the only sensible reading of FECA. To
suggest that political candidates, political parties, or
political committees can escape FECA's regulatory reach by
merely eschewing the use of express words of advocacy,
reduces the law to meaninglessness. It may be necessary, as
the Court held, to give advocacy groups that are not
primarily engaged in campaign-related activity a bright-line
test that will enable them to avoid regulatory scrutiny. But
organizations whose very purpose is to influence federal
elections need no such safety net, and have not been given
one.
implications for regulation of section 527 organizations
FECA's definition of a ``political committee'' mirrors the
Internal Revenue Service's definition of a Section 527
``political organization.'' Under FECA, a ``political
committee'' is, among other things, ``any committee, club,
association, or other group of persons which . . . makes
expenditures aggregating in excess of $1,000 during a
calendar year.'' 2 U.S.C. Sec. 431(4)(A). The term
``expenditures'' includes, among other things, ``any
purchase, payment, distribution, loan, advance, deposit, gift
of money or anything of value, made by any person for the
purpose of influencing any election for Federal office.'' 2
U.S.C. Sec. 431(9)(A)(i) (emphasis added).
Under the Internal Revenue Code, a Section 527 political
organization is defined as ``a party, committee, association,
fund, or other organization (whether or not incorporated)
organized and operated primarily for the purpose of directly
or indirectly accepting contributions or making expenditures,
or both, for an exempt function.'' 26 U.S.C. Sec. 527(e)(1)
(emphasis added). An ``exempt function'' within the meaning
of section 527 ``means the function of influencing or
attempting to influence the selection, nomination, election,
or appointment of any individual to any Federal, State, or
local public office of office in a political organization, or
the election of Presidential or Vice-Presidential electors,
whether or not such individual or electors are selected,
nominated, elected, or appointed.'' 26 U.S.C. Sec. 527(e)(2)
(emphasis added).
Thus, any organization that is a Section 527 organization
is, by definition, organized and operated primarily for the
purpose of ``influencing or attempting to influence the
selection, nomination, election, or appointment of any
individual'' to public office. See 26 U.S.C. Sec. 527(e)(2).
Such an organization satisfies the ``major purpose'' standard
established by the Supreme Court in Buckley, and may
therefore be subject to reasonable public disclosure of its
sources of funding for its political activities. Buckley
offered protection to issue-oriented speakers and groups that
are not organized for the explicit purpose of influencing
election outcomes. Section 527 organizations, however, are
subject to reasonable mandatory public disclosure
requirements by virtue of their central mission.
conclusion
There is no question that the Supreme Court in Buckley was
concerned with protecting the rights of advocacy groups and
individuals to engage in constitutionally protected ``issue
advocacy.'' The Court was particularly concerned that the
Federal Election Campaign Act, as written, would become a
trap for unwary or unsophisticated political speakers.
However, the Court also recognized that there are some groups
of speakers--political candidates, political parties, and
political committees--whose major purpose is engaging in
electoral politics. For
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these speakers, there is no danger of trapping the unwary,
and thus, the Court provided them with no special
constitutional protection. The actions of political
candidates, political parties, and political committees are
assumed to be campaign-related, and they are therefore
appropriately subject to federal disclosure laws.
In order to qualify for tax exempt status under Section 527
of the Internal Revenue Code, an organization's primary
purpose must be to influence election outcomes. Because a
Section 527 organization is, by definition, primarily engaged
in political activity, it satisfies the ``major purpose''
test promulgated in Buckley. Thus, there is no constitutional
impediment to subjecting Section 527 Committees to reasonable
disclosure laws. The ``express advocacy'' protections that
the Supreme Court promulgated in order to protect unwary
political speaker, as the Court itself explicitly recognized,
have no applicability in the context of an organization whose
primary purpose is engaging in electoral politics. Senate
Bill 2582, which clarifies that tax exemption under Section
527 is available only to organizations regulated as
``political committees'' under FECA, as well as the more
limited Senate Bill 2583, which simply requires public
disclosure from Section 527 organizations, will both
withstand constitutional scrutiny.
Very truly yours,
E. Joshua Rosenkranz,
President.
Mr. MOYNIHAN. Mr. President, while I support the objectives of this
legislation, I regret that the Senate has chosen to rush ahead with a
vote on this matter without following the customary Senate procedure.
This bill should have been referred to its committee of jurisdiction,
the Committee on Finance, and that committee ought to have had the
opportunity to consider all its implications.
In fact, Chairman Roth and I agreed to schedule a hearing on this
matter for July 12. We contacted election and tax law experts to ask
their opinions regarding fundamental questions surrounding Section 527
organizations.
As we thought, there are constitutional questions, and the
possibility of unintended consequences that might result from this or
similar legislation. The careful examination that Senator Roth and I
had planned is going to be cut short by our actions today. Without that
careful examination, we can only hope that our conduct will withstand
judicial scrutiny and not create additional problems.
Mr. LEVIN. Mr. President, I am pleased to join my colleagues Senators
McCain, Feingold and Lieberman in voting to send to the President H.R.
4762, a bill that hopefully will lead to closing one of the gaping
loopholes in our Federal campaign finance laws. I use the words ``lead
to'' because we aren't closing the so-called 527 loophole here today--
we are forcing the disclosure of the contributors who use the loophole.
Just as the disclosure of soft money hasn't yet ended the soft money
loophole, this disclosure won't automatically close the 527 loophole.
Most of our reform work lies ahead. But, our action today will
hopefully give us momentum toward ending both the Section 527 loophole
and the soft money loophole.
Having been in the Senate over 20 years, now, I've witnessed how slow
and frustrating the legislative process can be, and I've also witnessed
how we as an institution can come together quickly and directly when we
see a compelling need to do so. Senators Lieberman, Daschle, McCain,
Feingold and I introduced legislation in the Senate, similar to H.R.
4762, in April of this year. With the upcoming November elections we
were ever aware of the explosion in sham issue ad campaigns by
anonymous contributors across the country that the public was going to
experience this year without Section 527 reform. We wanted to beat the
clock and get this legislation in place in time to have an effect on
this year's campaigns.
With the leadership of a committed group in the House, and a
significant bipartisan majority supporting such reform in the Senate,
we have been able to do that. I commend the many dedicated House
members and Senators who worked to bring this vote about over the past
few weeks. The reforms we are passing today will have a meaningful
effect on the campaigns being run this year.
The Section 527 loophole allows undisclosed, unlimited contributions.
These are stealth contributions--tens of millions of dollars of stealth
contributions that are off the campaign finance radar screen. How does
that happen--that an organization that claims--on its own--to exist for
the purpose of influencing an election can receive unlimited
contributions and kept them secret? Well, it happens because these
organizations seeking a tax exemption under Section 527 of the Internal
Revenue Service Code say one thing to the IRS to get the tax exemption
and say the opposite to the Federal Election Commission to avoid having
to register as a political committee.
The Internal Revenue Service Code defines an organization subject to
a tax exemption under Section 527 as an organization, ``influencing or
attempting to influence the selection, nomination, election, or
appointment of any individual to any Federal, State or local public
office . . .'' The Federal Election Campaign Act defines a political
committee which is subject to regulation by the FEC and that means
disclosure as an organization that spends or receives money ``for the
purpose of influencing any election for Federal office.'' So people
creating these organizations are claiming, with a straight face, that
they are trying to influence an election in order to get the benefits
of one agency while representing they are not trying to influence an
election in order to avoid the requirements of another. We often say,
``You can't have it both ways,'' but persons forming these
organizations, Mr. President, turn that saying on its head. They are,
so far, having it both ways, and our campaign finance system and the
respect and trust of the American people in our elections and
government are paying the price.
Section 527 was created by Congress in the 1970's to provide a
category of tax exempt organizations for political parties and
political committees. While contributions to a political party or
political committee are not tax deductible, Congress did provide for a
tax exemption for money contributed and spent on political activities
by an organization created for the purpose of influencing elections. At
the time Congress established the tax exemption, it assumed that such
organizations would be filing with the FEC under the campaign finance
laws for the obvious reason that the language for both coverage by the
IRS and coverage by the FEC were the same--``influencing an election.''
Consequently it was assumed that Section 527 didn't need to require
disclosure with the IRS, since the FEC disclosure was considerably more
complete.
The legislation before us would require Section 527 organizations to
file a tax return, something they are not required to do now, and
disclose the basic information about their organization as well as
their contributors over $200.
As good and important as this bill is, however, it does not stop the
unlimited aspect of these secret contributions, nor the unlimited
contributions permitted through the soft money loophole. This victory
today is but one battle in the overall campaign to enact the McCain-
Feingold bill, and I look forward to continuing to work with my
colleagues to make that happen.
Mr. McCAIN. Mr. President, I would like to address an issue of
importance with respect to the 527 disclosure debate, and that is the
constitutionality of H.R. 4762. I assert that the 527 disclosure
legislation is Constitutional.
Among other things, the legislation requires 527 organizations
claiming tax exempt status to disclose their members who make
significant contributions to support the 527's political advocacy. Some
opponents maintain that the legislation runs afoul of the Supreme Court
ruling in NAACP v. Alabama, where as most of you know, the NAACP was
protected from having to disclose its membership list to the Alabama
government
The 527 disclosure legislation complies with the Constitution's
protection of freedom of association upheld in NAACP v. Alabama. It
does not require the disclosure of membership rosters, per se, just the
members who are making politically related donations. More important,
it does not constitute a significant restraint on members' rights to
associate freely.
It is important to note that the circumstances are different here
than those that surrounded the Alabama government's treatment of the
NAACP during the 1950's and 1960's. The Supreme Court recognized that
the members of the NAACP had every right to be concerned for their own
and their families' safety if their identities were
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publicly disclosed. The prospect of public identification would have
significantly discouraged people of color from joining the NAACP. While
political contributors to 527 organizations may prefer to avoid public
scrutiny, they have no need to fear for their lives as a result of that
scrutiny.
That said, public safety is by no means the principal standard by
which the 527 disclosure legislation will be judged. In the NAACP v.
Alabama decision, the Supreme Court acknowledges that a valid
governmental purpose must be weighed against the tendency for the
disclosure requirement to abridge an individual's freedom of
association. The decision emphasized that the governmental purpose for
disclosure--in this case to prevent corruption of the American
political system--must be achieved in the most narrow manner possible.
Like our Congressional leaders, I believe the more disclosure the
better--as long as the associated requirements are constitutional.
Focusing narrowly on 527 organizations is one thing that sets H.R. 4762
apart from the Smith-McConnell legislation, to ensure that the
legislation survives a constitutional test. I would like to submit a
copy of the Smith-McConnell legislation, the Tax-Exempt Political
Disclosure Act, into the record.
The Smith-McConnell legislation sweeps in business and labor
organizations. As I said, disclosing their political activities is a
laudable goal. I have advocated a similar approach, but one that would
include bright line tests to determine precisely when contributions and
expenditures would have to be disclosed. Those bright line tests, such
as limiting the disclosure requirement to a time period close to an
election, are lacking in the Smith-McConnell bill.
Unlike business and labor organizations, which engage in activities
completely unrelated to elections, 527's are clearly political
organizations. 527 organizations by law must have the function of
influencing or attempting to influence elections. The Supreme Court in
the Buckley decision upheld federal disclosure laws for these types of
organizations. When it comes to disclosure laws for business and labor
organizations, concerns about vagueness and overbreadth come into play.
527 organizations proliferated during the primary campaign season.
Many had obscure names that made it hard to guess even the types of
members funding political advocacy on behalf of each 527, much less
their identities. Contrary to the 527's, most labor and business
organizations have established identities, and clear-cut positions and
purposes that go beyond funding issue ads. Since we have no window into
the world of 527's, a disclosure requirement is more valid when
compared with a disclosure requirement affecting labor and business
organizations.
Unlike most, if not all, labor and business organizations, there is
no way to determine how many members there are in a 527. In the example
I often cite, there were only two contributors, each funneling what
appears to be at least one million dollars into the accounts to be used
for campaign advocacy. While we may have no idea how many contributors
there are in a 527, or how much each contributed, you can bet their
favored candidates know.
In a press conference announcing introduction of his bill, Senator
McConnell admits the ``dubious constitutionally'' of his proposal. In
order to regain the American public's trust, it is important that we
support a proposal we feel confident will withstand the Court's
scrutiny. Thank you, Mr. President.
Ms. SNOWE. Mr. President, I rise today in support of the legislation
sent to us by the House concerning disclosure for so-called ``Section
527 organizations''.
I want to thank the efforts of those involved in making this day a
reality, and that includes a bipartisan group from both sides of the
aisle and both sides of the Hill who have taken a leadership role in
working toward restoring Americans' faith in its election system.
Senator McCain's herculean efforts and leadership on this issue have
made today's vote possible. In addition, Senator Feingold's leadership
has been invaluable, and Senators Lieberman and Jeffords and
Congressmen Shays, Meehan, and Castle, have worked very hard to ensure
that this legislation was both considered and passed.
I believe that disclosure of campaign activities is the most
fundamental component of campaign finance reform. On the one hand,
proponents of measures like the McCain-Feingold bill point to greater
disclosure as part and parcel of additional reforms. On the other hand,
opponents have argued that, rather than more comprehensive reforms,
what we really need is simply more disclosure on what we already have.
So disclosure should be common ground where we can all come together, a
point proved by the overwhelming support for disclosure of 527
organizations in the House on a vote of 385-39.
As we know, these organizations have incorporated under the 527
section of the tax code to get tax exempt status to influence federal
elections, but then they argue to the Federal Elections Commission that
for their purposes these organizations aren't influencing federal
elections, simply because they don't expressly advocate for the
election or defeat of a particular candidate.
Right now, they don't have to disclose any of their activity--who
they are, where they get their funding, and where they spend their
money. Under this legislation, they will have to disclose on all their
activities, and because political activities are all they do, that is
as it should be.
It has also been expressed that if we are to target 527's, we should
also have increased disclosure for other organizations that engage in
political activities. And I couldn't agree more. Because the American
people ought to know who these groups are, their major sources of
funding, and where they are spending their money if they are working to
influence a federal election. It's that simple.
Prior to this vote on 527's, we were working on legislation that
would do just that--a bipartisan, bicameral measure that would satisfy
the concerns that have also been raised about the scope of disclosure--
that it not be so broad as to cover all manner of activities that have
nothing to do with elections.
So we crafted a bill that was neither overly broad or vague. We
narrowly and clearly defined political activities as those that mention
a candidate for office, targeted specifically to the candidate's
electorate, within a time frame near an election. And we only targeted
large-scale communications so grassroots organizations will not be
affected.
Our framework for this expanded disclosure drew from an amendment
that Senator Jeffords and I, along with Senators McCain, Feingold,
Lieberman, and others, developed and introduced in early 1998. Based on
a proposal developed and advanced by constitutional scholars, our
measure was designed to withstand constitutional scrutiny, address some
of the most egregious campaign abuses, and focus on areas where we know
the Supreme Court has already allowed us to go--like disclosure.
We've already been to the Senate floor twice with this language, and
I'm proud to say that the constitutional arguments made against our
provision quite simply didn't hold water. And a majority of the Senate
went on record in support of our provision.
In short, the three major provisions of the bill we were working on
could be summed up as follows--disclosure, disclosure, and, finally,
disclosure. That's what we're talking about here--sunlight, not
censorship. Not speech rationing, but information.
I cannot emphasize enough that our effort would not have prevented
anyone from making any kind of communication at any time saying
anything they want. All we said is, if you're attempting to influence a
federal election, we ought to know who you are, your major sources of
funding, and where you're spending your money.
As the Brennan Center for Justice stated to me in a letter I had
included in the Record in our first debate on Snowe-Jeffords, and I
quote, ``As the Supreme Court has observed, disclosure rules do not
restrict speech significantly. For that reason, the Supreme Court has
made clear that rules requiring disclosure are subject to less exacting
constitutional strictures than direct prohibitions on spending.'' So if
the Congress is truly serious about increased disclosure, there is no
reason
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why they should be able to support our approach.
The fact is, we all have to disclose as candidates, and we should. Is
it unreasonable when we know groups running ads or sending out mass
mailings to the public are influencing federal elections to ask them to
disclose as well?
We know, for instance, that in the 1995-1996 election cycle, the
Annenberg Public Policy Center estimates that between $135 to $150
million was spent by outside groups not associated with candidates on
television ads. In the last cycle, that number jumped to between $275
to $350 million--more than double. But what we don't know is how much
is being spent on efforts like mass mailings or phone banks, or who is
funding them, and this legislation is designed to tell us.
As for those so-called issue ads, if any doubt remains about the real
intent of many of the broadcast ads we see, the Brennan Center recently
released a report on television advertising in the 1998 congressional
elections. What did they find? When all the ads were evaluated in terms
of how many within two months of the general election were actually
political ads and how many were simply discussing issues or
legislation, 82 percent were seen as campaign ads. Eighty-two percent.
There's no question what these ads are attempting to do--yet, under
current law, they fly right under the radar screen.
So, in short, our bipartisan approach got at the largest abuses while
answering the critics who say that what's good for the 527
organizations are good for other groups and unions and corporations as
well. Unfortunately, we did not reach agreement with the House on such
an approach this year--but our work generated momentum for
consideration and passage of this 527 bill. And we must look at this as
a significant first step. Hopefully, we will have the opportunity to
build on this legislation with the broader approach of Snowe-Jeffords.
The passage of this bill should also make it that much more difficult
for those who supported it to now go back and say we shouldn't have
greater disclosure for other groups engaging in political activities
when Snowe-Jeffords is introduced next year. In other words, what we
have done with this legislation is to throw a boulder in what has until
this point been the still and brackish pond of the campaign finance
status quo, and the ripple effect will continue expanding ever outward.
Again, I want to thank everyone involved in this great victory and I
hope we will move forward to expand our efforts on campaign finance
reform in the next Congress.
internal revenue service
Mr. MOYNIHAN. I understand that this legislation would allow the
Secretary of the Treasury to partner with other Federal agencies,
principally the Federal Election Commission, in a manner similar to
that contemplated under the bill reported by the Ways and Means
Committee. Is that understanding correct?
Mr. FEINGOLD. That is correct. We want to allow the Internal Revenue
Service to enforce these disclosure rules with the assistance and
cooperation of the Federal Election Commission.
Mr. McCAIN. Mr. President, as sponsor, I would like to make the final
comments.
Mr. McCONNELL. Mr. President, this debate has come a long way from
the days of trying to regulate the speech of politicians and other
major players on the American political scene. Just a few years ago,
folks on the other side of the aisle were trying to get taxpayer
funding for elections, spending limits for campaigns, and regulation of
any group that mentioned a candidate in an ad two months before an
election day. As recently as last year, there were measures being
debated in the Senate that would have devastated the Republican Party
in trying to compete with the Democrats and with well-funded outside
groups who are almost wholly and completely affiliated with the
Democrats--groups such as the labor unions, the plaintiffs' lawyers,
the Sierra Club, and the League of Conservation Voters.
This particular bill before us will not put Republicans at a
disadvantage in this fall election. And, of course, it will not put
Democrats at any disadvantage because it doesn't affect their political
affiliates, the unions and the trial lawyers. In fact, it's hard to
tell exactly who will be put at a disadvantage by this bill because
there are so few groups that will actually be impacted. So, in many
respects, it is a relatively benign and harmless bill.
But, let me be clear, there is an important constitutional principle
at stake here--even though it may only affect a handful of groups in
this country. This bill takes us down the constitutionally dubious path
of disclosure related to issue advocacy, which the Supreme Court has
said, falls outside of the boundaries of government regulation. In
fact, the federal courts following Buckley v. Valeo have routinely
struck down attempts to regulate speech that does not expressly
advocate the election or defeat of a federal candidate. Just two weeks
ago, the Second Circuit Court of Appeals struck down the latest attempt
to regulate issue advocacy as a clear violation of the First Amendment.
Nevertheless, I say to my Republican colleagues, particularly those who
are up for election this year, that is a pretty hard argument to
explain in a political campaign. The constitutional distinction between
issue advocacy and express advocacy is complex and does not get reduced
to a campaign commercial very easily.
So in light of the limited impact of this relatively benign bill, I
recommend to my Republican colleagues that they vote for this bill. I
will not be voting for it because I do think the constitutional law in
this area is rather clear. But, ultimately, this is not a spear worth
falling on 4 months in advance of an election. This vote will insulate
them against absurd charges that they are in favor of secret campaign
contributions or Chinese money or mafia money.
With regard to the few groups who may be in the 527 area, they will
have a choice to make, either to no longer be organized under section
527 or to go to court. And, these groups will have to weigh the costs
and make that choice.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. McCAIN. Mr. President, today, indeed, marks a seminal day in the
battle to reform our electoral system and restore the faith of the
American citizenry that ours is a government of and for the people.
This is a vote for campaign finance reform. If the Senate approves this
legislation, it will be the first campaign finance reform bill to
become law in 21 long years. It will be action that is long overdue.
Whether we want to admit the fact or not, perception has an
unfortunate tendency to become reality. And the American people
perceive the Congress as controlled by the monied special interests. If
we are to ensure the public's faith in its Government, we must
obliterate that perception. This bill, although admittedly a very small
step, is a step towards ending that perception. This is a step we
should be proud to take.
This bill will not solve what is wrong with our campaign finance
system. It will not do away with the millions of soft money dollars
that are polluting our elections. We must yet undertake the task of
doing away with soft money and make our Government more accountable to
the people we represent.
It will give the public information regarding one especially
pernicious weapon that is being used in modern campaigns. It is an
egregious and outrageous insult to the very principles of how
democracies function.
The bill is fair. It affects both parties. It affects interests on
both sides of the aisle. It stifles no speech. It curbs no individual's
rights, and it is clearly constitutional. If the Senate approves it
today, it will become law, and the American people will be well served.
Before I close, I again thank the many who were involved with this
issue. Many in the House courageously fought to pass this legislation.
I thank and note again Congressmen Chris Shays, Marty Meehan, Mike
Castle, Lindsey Graham, and Amo Houghton who all worked tirelessly on
this legislation. If it were not for their courage and tenacity, we
would not have this legislation before the Senate today.
In the Senate, a bipartisan coalition of those who believe in reform
refused to relent on this matter: Senators Snowe and Levin played key
roles in
[[Page S6047]]
ensuring we move forward. Of course, I must pay special note of all the
work done by Senators Lieberman and Feingold. I am proud not only to
call them friends but partners in this crusade to return the Government
to the people. I could be in no better company.
As I noted last night to all those who believe in reform, today is
only the first step, but it is a great first step and it is, indeed, a
great day for democracy and a Government that is accountable to the
governed. I urge my colleagues to support this legislation.
Mr. President, I yield my remaining time to the Senator from
Connecticut.
The PRESIDING OFFICER. The Senator from Connecticut has 25 seconds
remaining.
Mr. McCAIN. I ask unanimous consent that the Senator from Connecticut
be allowed to speak for 2 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered. The
Senator from Connecticut.
Mr. LIEBERMAN. Mr. President, I thank my distinguished colleague from
Arizona whom I have come to call our commanding officer in the war for
campaign finance reform. I am proud to serve under him.
In this long struggle to cleanse our campaign finance system, we are
about to achieve a victory. In a campaign finance system that is wildly
and dangerously out of control today, we are about to draw a line. We
are about to establish some controls based on the best of America's
national principles.
The campaign finance reform adopted after the Watergate scandal had
two fundamental principles: that contributions to political campaigns
be limited, and that they be fully disclosed.
These so-called 527 organizations totally violate and undermine both
of those principles. Individuals, corporations, and associations can
give unlimited amounts to 527 organizations, and those contributions
are absolutely secret, unknown to the public. The contributors then
audaciously enjoy a tax benefit for those contributions. Today, we say
no more of that. Unfortunately, contributions will continue to be
unlimited to 527 organizations, but at least now the public will know.
As Senator McCain indicated, this is not the end of the effort to
reform our campaign finance system. It is only the beginning, but it is
a significant beginning. I urge my colleagues across the aisle to
support it. I thank the Chair.
Mr. McCAIN. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The question is, Shall the bill, H.R. 4762, pass? The clerk will call
the roll.
The legislative clerk called the roll.
Mr. NICKLES. I announce that the Senator from New Hampshire (Mr.
Gregg) is necessarily absent.
Mr. REID. I announce that the Senator from Hawaii (Mr. Inouye) is
necessarily absent.
The PRESIDING OFFICER (Mr. Bunning). Are there any other Senators in
the Chamber desiring to vote?
The result was announced--yeas 92, nays 6, as follows:
[Rollcall Vote No. 160 Leg.]
YEAS--92
Abraham
Akaka
Allard
Ashcroft
Baucus
Bayh
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bryan
Bunning
Burns
Byrd
Campbell
Chafee, L.
Cleland
Cochran
Collins
Conrad
Craig
Crapo
Daschle
DeWine
Dodd
Domenici
Dorgan
Durbin
Edwards
Enzi
Feingold
Feinstein
Fitzgerald
Frist
Gorton
Graham
Gramm
Grams
Grassley
Hagel
Harkin
Hatch
Hollings
Hutchinson
Hutchison
Jeffords
Johnson
Kennedy
Kerrey
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McCain
Mikulski
Moynihan
Murkowski
Murray
Reed
Reid
Robb
Roberts
Rockefeller
Roth
Santorum
Sarbanes
Schumer
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Specter
Stevens
Thomas
Thompson
Thurmond
Torricelli
Voinovich
Warner
Wellstone
Wyden
NAYS--6
Coverdell
Helms
Inhofe
Mack
McConnell
Nickles
NOT VOTING--2
Gregg
Inouye
The bill (H.R. 4762) was passed.
Mr. REED. Mr. President, first, I commend my colleagues on both sides
of the aisle for their persistence in negotiating a Section 527
disclosure bill that has passed both chambers of Congress. The
overwhelming vote in both the House and Senate in support of H.R. 4762,
a bill mirroring a successful amendment we made to the Defense
Authorization bill several weeks ago, is an important step in fixing
our broken campaign finance reform system.
Both parties have now acknowledged that some change in our campaign
finance laws is warranted, the first such legislative consensus on this
issue since technical changes were made in 1979 to the Federal Election
Campaign Act of 1974.
A majority has agreed that Section 527 organizations need to both
follow federal campaign law and to file tax returns. H.R. 4762, like
our amendment to the Defense Authorization bill, requires Section 527s
to disclose any contributors who give more than $200, and report any
expenditures of more than $500. Unlike our original amendment, it
requires a Section 527 organization that fails to disclose
contributions and expenditures to the IRS to pay a penalty tax on the
amounts it failed to disclose. The amendment we made to the Defense
Authorization bill would have removed a Section 527's tax exempt status
for the same violation. Although not as severe a penalty, I believe
that this change in the House version of this legislation does reflect
the spirit of the original Senate amendment.
Although disclosure is only part of the solution, the passage of H.R.
4762 ensures that the public understands what these committees are, who
gives them their money, and how they spend that money to impact
election outcomes. This law, once signed by the President, will close a
major loophole and stop these stealth PACs from skirting campaign
finance requirements, and I was pleased to vote in support of it.
However, we still have much to do.
We cannot, and must not, rest with this vote today. Our campaign
finance system still needs major overhaul if we are going to reduce the
influence of almost unlimited amounts of campaign cash on our electoral
system. Until a majority of our citizens believe again that our
government is ``by and for'' the people, we cannot stop our battle to
reform this process. We need to pass a ban on soft money, reduce
skyrocketing campaign expectations, and return our electoral process to
the people, where it belongs. The power in our country should rest with
the vote, not with the purse.
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