[Congressional Record Volume 150, Number 115 (Wednesday, September 22, 2004)]
[Senate]
[Pages S9527-S9530]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN (for himself, Mr. Feingold, Mr. Lieberman, and Mr. 
        Schumer):
  S. 2828. A bill to amend the Federal Election Campaign Act of 1971 to 
define political committee and clarify when organizations described in 
section 527 of the Internal Revenue Code of 1968 must register as 
political committees, and for other purposes; to the Committee on Rules 
and Administration.
  Mr. McCAIN. Mr. President, I am pleased to be joined by my good 
friend and colleague from Wisconsin, Senator Feingold, and our good 
friends who lead the campaign finance reform fight in the House, 
Representatives Shays and Meehan, in introducing a bill to end the 
illegal practice of 527 groups spending soft money on ads and other 
activities to influence Federal elections.
  As my colleagues know, a number of 527 groups have been raising and 
spending substantial amounts of soft money in a blatant effort to 
influence the outcome of this year's Presidential election. These 
activities are illegal under existing laws, and yet once again, the 
Federal Election Commission (FEC) has failed to do its job and has 
refused to do anything to stop these illegal activities. Therefore, we 
must pursue all possible steps to overturn the FEC's misinterpretation 
of the campaign finance laws, which is improperly allowing 527 groups 
whose purpose is to influence Federal elections to spend soft money on 
these efforts.
  Last week, we filed a lawsuit to overturn the FEC's failure to issue 
regulations to stop these illegal practices by 527 groups. President 
Bush and his campaign filed a similar lawsuit against the FEC last week 
as well, and I also appreciate President Bush's support for the 
legislative effort we begin today on 527s. We are introducing 
legislation that will accomplish the same result. We are going to 
follow every possible avenue to stop 527 groups from effectively 
breaking the law, and doing what they are already prohibited from doing 
by longstanding laws.
  The bill we introduce today is simply. It would require that all 527s 
register as political committees and comply with Federal campaign 
finance laws, including Federal limits on the contributions they 
receive, unless the money they raise and spend is only in connection 
with non-Federal candidate elections, State or local ballot 
initiatives, or the nomination or confirmation of individuals to non-
elected offices.
  Additionally, this legislation would set new rules for Federal 
political committees that spend funds on voter mobilization efforts 
effecting both federal and local races and, therefore, use both a 
federal and a non-Federal account under FEC regulations. The new rules 
would prevent unlimited soft money from being channeled into Federal 
election activities by these Federal political committees.
  Under the new rules, at least half of the funds spent on these voter 
mobilization activities by Federal political committees would have to 
be hard money from their Federal account. More importantly, the funds 
raised for their non-federal account would have to come from 
individuals and would be limited to no more than $25,000 per year per 
donor. Corporations and labor unions could not contribute to these non-
federal accounts. To put it in simple terms, a George Soros could give 
$25,000 per year as opposed to $10 million to finance these activities.
  Let me be perfectly clear on one point here. Our proposal will not 
shut down 527s, it will simply require them to abide by the same 
Federal regulations every other Federal political committee must abide 
by in spending money to influence Federal elections.
  It is unfortunate that we even need to be here introducing this bill 
today. This legislation would not be necessary if it weren't for the 
abject failure of the FEC to enforce existing laws. As my colleagues 
well know, some organizations, registered under section 527 of the 
Internal Revenue Code, have had a major impact on this year's 
presidential election by raising and spending illegal soft money to run 
ads attacking both President Bush and Senator Kerry. The use of soft 
money to finance these activities is clearly illegal under current 
statute, and the fact that they have been allowed to continue unchecked 
is unconscionable.
  The blame for this lack of enforcement does not lie with the 
Congress, nor with the Administration. The blame for this continuing 
illegal activity lies squarely with the FEC. This agency has a duty to 
issue regulations to properly implement and enforce the nation's 
campaign laws--and the FEC has failed, and it has failed miserably to 
carry out that responsibility. The Supreme Court found that to be the 
case in its McConnell decision and Judge Kollar-Kotelly found that to 
be the case in her recent decision overturning 15 regulations 
incorrectly adopted by the FEC to implement the new BCRA law. That is 
why a Los Angeles Times editorial today stated that, ``her decision 
would make a fitting obituary for an agency that deserves to die.''
  It should be clear by now why we have introduced legislation to 
abolish the FEC and replace it with a new enforcement agency. And we 
will be conducting a major effort starting at the beginning of next 
year to enact our bill to get a new, true enforcement agency and to 
pass the 527 reform act we are introducing today. We are not going to 
allow the destructive FEC to continue to undermine the nation's 
campaign finance laws as it has been consistently doing for the past 
two decades. In the mean time, given the unmitigated failure of this 
agency, I believe that its Chair, Bradley Smith and its Vice Chair, 
Ellen Weintraub, should resign and recognize that they have failed to 
carry out their responsibilities as public officials.
  Opponents of campaign reform like to point out that the activities of 
these 527s serve as proof that the Bipartisan Campaign Reform Act of 
2002 (BCRA) has failed in its stated purpose to eliminate the 
corrupting influence of soft money in our political campaigns. Let me 
be perfectly clear on this. The 527 issue has nothing to do with BCRA, 
it has everything to do with the 194 law and the failure of the FEC to 
do its job and properly regulate the activities of these groups.
  As further evidence of the FEC's lack of capability, let me quote 
from a couple of recent court decisions which highlight this agency's 
shortcomings. First, in its decision upholding the constitutionality of 
BCRA in McConnell v. FEC, the U.S. Supreme Court stated that the FEC 
had ``subverted'' the law, issued regulations that ``permitted more 
than Congress had ever intended,'' and ``invited widespread 
circumvention'' of FECA's limited on contributions. Additionally, just 
this past Saturday, a federal district court judge threw out 15 of the 
FEC's regulations implementing BCRA. Among the reasons for her actions 
were that one provision ``severely undermines FECA'' and would ``foster 
corruption'', another ``runs completely afoul'' of current law, another 
would ``render the statute largely meaningless'' and, finally, that 
another had ``no rational basis.''

  The track record of the FEC is clear, and by their continued 
stonewalling, the Commission has proven itself to be nothing more than 
a bureaucratic nightmare, and the time has come to put an end to its 
destructive tactics. The FEC has had ample, and well documented, 
opportunities to address the issue of the 527s illegal activities, and 
each time they have taken a pass, choosing instead to delay, postpone, 
and refuse to act.
  Enough is enough. It is time to stop wasting taxpayer's dollars on an 
agency that runs roughshod over the will of the Congress, the Supreme 
Court, the American people, and the Constitution. We've fought too long 
and too hard to sit back and allow this worthless agency to undermine 
the law.
  So, here is the bottom line: if the FEC won't do its job, and its 
commissioners have proven time and time again that they won't, then 
we'll do it for them. The bill Senator Feingold and I introduce today 
will put an end to the abusive, illegal practices of these 527s. And we 
will fight beginning next year to replace this rogue agency with a real 
enforcement agency.
  I urge my colleagues to support swift passage of these bills and put 
an end to this problem once and for all.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2828

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

[[Page S9528]]

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``527 Reform Act of 2004''.

     SEC. 2. TREATMENT OF SECTION 527 ORGANIZATIONS.

       (a) Definition of Political Committee.--Section 301(4)(A) 
     of the Federal Election Campaign Act of 1971 (2 U.S.C. 
     431(4)(A)) is amended to read as follows:
       ``(A) any committee, club, association, or other group of 
     persons that--
       ``(i) during one calendar year, receives contributions 
     aggregating in excess of $1,000 or makes expenditures 
     aggregating in excess of $1,000; and
       ``(ii) has as its major purpose the nomination or election 
     of one or more candidates;''.
       (b) Definition of Major Purpose for Section 527 
     Organizations.--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 new section:

     ``SEC. 325. DEFINITIONS AND RULES FOR DETERMINING 
                   ORGANIZATIONS AND DISBURSEMENTS INFLUENCING 
                   FEDERAL ELECTIONS.

       ``(a) Major Purpose of Section 527 Organizations.--For 
     purposes of section 301(4)(A)--
       ``(1) In general.--A committee, club, association, or group 
     of persons that--
       ``(A) is an organization described in section 527 of the 
     Internal Revenue Code of 1986, and
       ``(B) is not described in paragraph (2),

     has as its major purpose the nomination or election of one or 
     more candidates.
       ``(2) Excepted organizations.--Subject to paragraph (3), a 
     committee, club, association, or other group of persons 
     described in this paragraph is--
       ``(A) an organization described in section 527(i)(5) of the 
     Internal Revenue Code of 1986, or
       ``(B) any other organization which is one of the following:
       ``(i) A committee, club, association, or other group of 
     persons whose election or nomination activities relate 
     exclusively to elections where no candidate for Federal 
     office appears on the ballot.
       ``(ii) A committee, club, association, or other group of 
     persons that is organized, operated, and makes disbursements 
     exclusively for 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 State or local ballot 
     initiatives, State or local referenda, State or local 
     constitutional amendments, State or local bond issues, or 
     other State or local ballot issues.
       ``(III) Influencing the selection, appointment, nomination, 
     or confirmation of one or more individuals to non-elected 
     offices.
       ``(IV) 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.

       ``(3) Section 527 organizations making certain 
     disbursements.--A committee, club, association, or other 
     group of persons described in paragraph (2)(B) shall not be 
     considered to be described in such paragraph for purposes of 
     paragraph (1)(B) if it makes disbursements for a public 
     communication that promotes, supports, attacks, or opposes a 
     clearly identified candidate for Federal office during the 
     period beginning on the first day of the calendar year 
     preceding the calendar year in which the general election for 
     the office sought by the clearly identified candidate occurs 
     and ending on the date of the general election.''.

     SEC. 3. CERTAIN EXPENSES BY MAJOR PURPOSE ORGANIZATIONS 
                   TREATED AS EXPENDITURES.

       (a) In General.--Section 301(9)(A)(i) of the Federal 
     Election Campaign Act of 1971 (2 U.S.C. 431(9)(A)(i)) is 
     amended by inserting ``, including any amount described in 
     section 325(b)'' after ``office''.
       (b) Applicable Communications.--Section 325 of the Federal 
     Election Campaign Act of 1971 (as added by section 2(b)) is 
     amended by adding at the end the following new subsection:
       ``(b) Certain Expenditures for Major Purpose 
     Organizations.--
       ``(1) In general.--Subject to paragraph (2), a purchase, 
     payment, distribution, loan, advance, deposit, or gift of 
     money or anything of value for--
       ``(A) a public communication that refers to a clearly 
     identified candidate for Federal office or to a political 
     party (regardless of whether a candidate for State or local 
     office is also mentioned or identified) and that promotes, 
     supports, attacks, or opposes a candidate for that office or 
     a political party (regardless of whether the communication 
     expressly advocates a vote for or against a candidate), or
       ``(B) voter registration activity, voter identification, 
     get-out-the-vote activity, or generic campaign activity 
     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),

     shall be an expenditure under section 301(9)(A)(i) if made 
     by, or on behalf of, a political committee (as defined in 
     section 301(4)) or a committee, club, association, or other 
     group of persons for which the nomination or election of one 
     or more candidates is its major purpose.
       ``(2) Exception.--Any funds used for purposes described in 
     paragraph (1) that, in accordance with allocation rules set 
     forth in section 325(c), are disbursed from a non-Federal 
     account shall not be treated as expenditures.''.

     SEC. 4. RULES FOR ALLOCATION OF EXPENSES BETWEEN FEDERAL AND 
                   NON-FEDERAL ACTIVITIES.

       Section 325 of the Federal Election Campaign Act of 1971 
     (as added by section 2(b) and amended by section 3) is 
     amended by adding at the end the following:
       ``(c) Allocation and Funding Rules for Expenses of Separate 
     Segregated Funds and Nonconnected Committees Relating to 
     Federal and Non-Federal Activities.--
       ``(1) In general.--In the case of any disbursements by any 
     separate segregated fund or nonconnected committee for which 
     allocation rules are provided under paragraph (2)--
       ``(A) the disbursements shall be allocated between Federal 
     and non-Federal accounts in accordance with this subsection 
     and regulations prescribed by the Commission, and
       ``(B) in the case of disbursements allocated to non-Federal 
     accounts, may be paid only from a qualified non-Federal 
     account.
       ``(2) Costs to be allocated and allocation rules.--
     Disbursements by any separate segregated fund or nonconnected 
     committee in connection with Federal and non-Federal 
     elections for any of the following categories of activity 
     shall be allocated as follows:
       ``(A) 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.
       ``(B) At least 50 percent 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.
       ``(C) At least 50 percent 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.
       ``(D) 100 percent of the expenses for public communications 
     or voter drive activities that refer to a political party, 
     and 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.
       ``(E) At least 50 percent 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 subparagraph shall not 
     apply to communications or activities that relate exclusively 
     to elections where no candidate for Federal office appears on 
     the ballot.
       ``(F) At least 50 percent 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 defined non-Federal candidates, without 
     regard to whether the communication refers to a political 
     party, shall be paid with funds from a Federal account.
       ``(3) Qualified non-federal account.--For purposes of this 
     subsection--
       ``(A) In general.--The term `qualified non-Federal account' 
     means an account which consists solely of amounts--
       ``(i) that, subject to the limitations of subparagraphs (B) 
     and (C), are raised by the separate segregated fund or 
     nonconnected committee only from individuals, and
       ``(ii) with respect to which all other requirements of 
     Federal, State, or local law are met.
       ``(B) Limitation on individual donations.--
       ``(i) 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.
       ``(ii) Affiliation.--For purposes of this subparagraph, 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.
       ``(C) Fundraising limitation.--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.
       ``(4) Voter drive activity and federal account defined.--
     For purposes of this subsection--
       ``(A) 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):
       ``(i) Voter registration activity.
       ``(ii) Voter identification.
       ``(iii) Get-out-the-vote activity.
       ``(iv) Generic campaign activity.
       ``(B) Federal account.--The term `Federal account' means an 
     account which consists

[[Page S9529]]

     solely of contributions subject to the limitations, 
     prohibitions, and reporting requirements of this Act. Nothing 
     in this subsection 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.''.

     SEC. 5. 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, or
       (2) as establishing, modifying, or otherwise affecting the 
     definition of political organization for purposes of the 
     Internal Revenue Code of 1986.

     SEC. 6. EFFECTIVE DATE.

       The amendments made by this Act shall take effect on 
     January 1, 2005.

  Mr. FEINGOLD. Mr. President, I am pleased to once again be working 
with my partner in reform, the Senator from Arizona, Senator McCain, 
and also with the Senator from Connecticut, Senator Lieberman, who was 
so instrumental in getting the 527 disclosure bill passed in 2000. We 
are introducing today the 527 Reform Act of 2004. This bill will do 
what the FEC could and should do under current law, but, once again, 
has failed to do.
  It sometimes seems like our mission in life is to clean up the mess 
that the FEC has made. We had to do that with BCRA, the Bipartisan 
Campaign Reform Act, which passed in 2002, closing the soft money 
loophole that the FEC created in the late '70s and expanded in the 
'90s. We are doing it again with the regulations that the FEC put in 
place after BCRA passed. Just this past weekend an extraordinary court 
decision came down that threw out 15 of the 19 FEC regulations 
challenged by Representatives Shays and Meehan in a lawsuit under the 
Administrative Procedures Act. That decision was an extraordinary 
rebuke to a Federal agency.
  And now we are here to introduce a bill that will make absolutely 
clear that the Federal election laws apply to 527 organizations. Let me 
emphasize one thing. We believe that current Federal election law 
requires these groups to register as political committees and stop 
raising and spending soft money. But the FEC has failed to enforce the 
law, saying it is too complicated or that it is too late in the 
election cycle to take action. Those excuses are unacceptable, so we 
must act in the Congress.
  This bill will require all 527s to register as political committees 
unless they fall into a number of narrow exceptions. The exceptions are 
basically for groups that Congress exempted from disclosure 
requirements because they are so small or for groups that are involved 
exclusively in State election activity.
  Once a group registers as a political committee, certain activities 
such as ads that mention only Federal candidates will have to be paid 
for solely with hard money. But the FEC permits Federal political 
committees to maintain a non-Federal account to pay a portion of the 
expenses of activities that affect both Federal and non-Federal 
elections. Our bill sets new allocation rules that will make sure that 
these allocable activities are paid for with at least 50 percent hard 
money.
  Finally, the bill makes an important change with respect to the non-
Federal portion of the allocable activities. We put a limit of $25,000 
per year on the contributions that can be accepted for that non-Federal 
account. And we prohibit corporate or union funds from being given to 
those non-Federal accounts. So no more will million dollar soft money 
contributions be used to pay for get-out-the-vote efforts in the 
Presidential campaign.
  Nothing in this bill will affect 501(c) advocacy groups. The bill 
only applies to groups that claim a tax exemption under section 527. 
And it would be effective in the next election cycle, not this one.
  The soft money loophole was opened by FEC rulings in the late '70s. 
By the time we started work on BCRA, the problem had mushroomed and led 
to the scandals we saw in the 1996 campaign. When we passed BCRA, I 
said we would have to be vigilant to make sure that the FEC enforced 
the law and that similar loopholes did not develop. That is what we 
have been doing for the past 2 years, and what are again doing today.
  I have no doubt that if we don't act on this 527 problem now, we will 
see the problem explode into scandals over the next few election 
cycles. This time we're not going to wait.
  I ask unanimous consent that the text of our bill and a section-by-
section analysis be printed in the Record.
  There being no objection, the analysis was ordered to be printed in 
the Record, as follows:

           527 Reform Act of 2004 Section-by-Section Analysis

       Section 1. Short Title. The bill may be cited as the ``527 
     Reform Act of 2004.''
       Section 2. Treatment of Section 527 Organizations. This 
     section revises the definition of ``political committee'' in 
     the Federal Election Campaign Act (``FECA'') to add the 
     requirement that an organization ``has as its major purpose 
     the nomination or election of one or more candidates.'' This 
     language is taken from the Supreme Court's decision in 
     Buckley v. Valeo, which added this ``major purpose'' test to 
     the existing statutory definition that a ``political 
     committee'' is a group that raises or spends $1,000 or more 
     in a year in contributions or expenditures to influence 
     federal elections. The ``major purpose'' test has not 
     previously been codified.
       This section also provides that 527 organizations have the 
     ``major purpose'' of nominating or electing candidates, and 
     thus satisfy that portion of the test for political committee 
     status, unless they meet one of the following exceptions:
       (1) has annual receipts of less than $25,000;
       (2) is the campaign committee of a non-Federal candidate;
       (3) is a state or local party committee;
       (4) is devoted exclusively to election activities relating 
     to an election where no candidate for federal office appears 
     on the ballot;
       (5) raises and spends money exclusively for the selection, 
     nomination, election or appointment of non-Federal 
     candidates;
       (6) raises and spends money exclusively to influence state 
     or local ballot initiatives, referenda, constitutional 
     amendments, bond issues, or other ballot measures;
       (7) raises and spends money exclusively to influence the 
     selection, appointment, nomination, or confirmation of 
     individuals to non-elected offices.
       An organization that makes a disbursement for a public 
     communication that promotes, supports, attacks or opposes a 
     clearly identified candidate for Federal office during the 
     two-year election cycle of that candidate cannot qualify for 
     exceptions (2)-(7) above.
       Section 3. Certain Expenses by Major Purpose Organizations 
     Treated as Expenditures. This section supplements the 
     definition of ``expenditure'' for any organization whose 
     ``major purpose'' is the nomination or election of one or 
     more candidates. (This goes to the other portion of the test 
     for ``political committee'' status: whether a group with a 
     ``major purpose'' to influence federal elections spends 
     $1,000 in ``expenditures'' in a year.)
       Payments for the following activities by ``major purpose'' 
     organizations, which under Section 2 include 527 
     organizations involved in Federal elections, will be 
     considered expenditures:
       (1) public communications that promote, support, attack, or 
     oppose a clearly identified Federal candidate or a political 
     party;
       (2) voter registration activity, voter identification, get-
     out the vote activity, or generic campaign activity conducted 
     in connection with an election where a Federal candidate 
     appears on the ballot.
       Section 4. Rules for Allocation of Expenses Between Federal 
     and Non-Federal Candidates. This section provides allocation 
     rules for political committees (other than candidate 
     committees or political party committees) that engage in both 
     Federal and non-Federal election activities. If a political 
     committee engages in activities that mention a clearly 
     identified Federal candidate or candidates, or a political 
     party generally, it must fund at least 50% of those 
     activities from a Federal account that contains only hard 
     money, even if such activities also mention, or are for the 
     benefit of, non-Federal candidates. The other portion may be 
     funded from a ``qualified non-Federal account.'' An activity 
     that mentions both Federal candidates and a political party 
     generally must be paid for entirely with hard money. These 
     allocation rules apply to administrative expenses, the costs 
     of fundraising programs or events, public communications, and 
     voter drive activities, which are defined in this section as 
     voter registration, voter identification, get out the vote, 
     and generic campaign activities.
       The section also provides that contributions to ``qualified 
     non-Federal accounts'' used to pay the non-Federal portion of 
     expenses that are allocated under this section must come only 
     from individuals and may not exceed $25,000 per donor per 
     year. ($25,000 per year is the same contribution limit that 
     applies to contributions by individuals to national party 
     committees.) Individuals can contribute $5,000 per donor per 
     year to the Federal account of political committees.
       Section 5. Construction. This section provides that the 527 
     Reform Act shall not be construed as approving, ratifying, or 
     endorsing any regulation issued by the FEC. It therefore will 
     have no effect on pending litigation concerning regulations 
     issued by the FEC to implement the Bipartisan Campaign Reform 
     Act of 2002. The Act also shall not be construed to 
     establish, modify, or otherwise affect the definition of 
     political organization for purposes of the Internal Revenue 
     Code.
       Section 6. Effective Date. The amendments made by the 527 
     Reform Act shall take effect

[[Page S9530]]

     on January 1, 2005. They will have no effect on the 2004 
     elections.

  Mr. LIEBERMAN. Mr. President, I rise today as a cosponsor of the 
legislative efforts of my friends and colleagues Senators McCain and 
Feingold to close the ``527'' loophole that threatens the health of our 
Federal elections by allowing unlimited amounts of soft money to 
dictate the terms of debate in defiance of the letter and spirit of the 
McCain-Feingold Bipartisan Campaign Reform Act.
  These 527 groups have become nothing more than multi-million dollar 
megaphones advocating the special interests of wealthy individuals and 
groups. And it will only get worse in years to come.
  527 groups have been growing since the mid-1990s thanks to loopholes 
resulting in part from puzzling decisions by the Internal Revenue 
Service and the Federal Election Commission.
  The 527 groups would get tax-exempt status from the IRS by claiming 
they existed to influence elections. But then they would avoid election 
disclosure laws by denying to the Federal Election Commission they were 
trying to influence elections because they did not use the magic words 
like ``vote for'' or ``vote against.''
  The result was a tax exemption for groups influencing Federal 
campaigns, but a lack of disclosure so voters did not know who the 
groups were, who they gave their money to and where they got their 
money from.
  Congress partially closed this loophole in June 2000, by passing the 
first significant campaign finance reform measure in a quarter century. 
This legislation was passed out of the Government Affairs Committee, of 
which I was chairman at the time, and signed into law later that year 
by President Clinton.
  The new law required 527 groups to give notice of their intent to 
claim tax-exempt status; to disclose information about their large 
contributors and expenditures; and to file annual informational returns 
along the lines of those filed by virtually all other tax-exempt 
organizations.
  But this only partially closed this loophole. Despite the McCain-
Feingold campaign finance reforms, 527s can still raise unlimited 
amounts of cash from just a few wealthy individuals or groups whose 
interests and motivations are likely unknown to the American public. 
The Federal Election Commission could have closed this loophole but has 
failed to act despite massive evidence that 527s are skirting Federal 
election law.
  This is both an end-run around our campaign finance laws as well as a 
direct assault on our democracy. Elections should be determined by 
millions of individual voters who cast their ballots uninfluenced by 
the millions of dollars of advertising paid for a by a few individuals 
or groups with special interests.
  Reform of the 527 loophole does not mean silencing these groups or 
taking away their right to put their message on the air. All this 
reform would require from 527s is to follow the same rules as other 
political advocacy groups when it comes to raising and spending money 
on federal elections. The money must come from individuals in amounts 
no larger than $5,000, with no contributions from corporations or 
unions allowed.
  If the 527 groups' support is as widespread as they claim, they will 
have no problem getting their message out.
  We started the job in 2000. We knew it was not enough. Now it's time 
to finish the job and get unlimited soft money out of the system.
  The voices of millions of average Americans should not be reduced to 
a whisper because they can't afford the price of the pulpit.
  And the voices of a few should not shout like thunder because they 
have the money to command the air waves.
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