[Congressional Record Volume 151, Number 10 (Thursday, February 3, 2005)]
[Senate]
[Pages S973-S974]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         527 REFORM ACT OF 2005

  Mr. FEINGOLD: Mr. President, I am pleased once again to be working 
with my partner in reform, the Senator from Arizona, Mr. McCain, on the 
527 Reform Act. And it is an honor to again have Senator Lieberman and 
Senator Schumer as original cosponsors of our bill. This year, there is 
a very significant new addition to our effort, the Chairman of the 
Rules Committee, Senator Lott. Senators Snowe and Collins from the 
great State of Maine, who were both exceptional partners in the fight 
for campaign finance reform a few years ago, are original cosponsors as 
well. It is also gratifying to have a new Member of the Senate, the 
junior Senator from Colorado, Mr. Salazar, on board. This is a very 
strong bipartisan group and I look forward to working with all of them.
  Our purpose is simple--to pass legislation that 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 mad. We had to 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.
  I am pleased to announce the introduction of legislation that will 
make absolutely clear that the Federal election laws apply to 527 
organizations. Let me emphasize one thing--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, 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. So no more million dollar soft money contributions to pay for 
get-out-the-vote efforts in the presidential campaign.
  Nothing in this bill will affect legitimate 501(c) advocacy groups. 
The bill only applies to groups that claim a tax exemption under 
section 527.
  In closing, I want to make one final point. 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 
three 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. In the 2004 cycle, Federal-oriented 527s spend $423 million. 
Ten donors gave at least $ million each to 527s involved in the 2004 
Federal elections and two donors each contributed over $20 million. 
This time we cannot afford to wait for a problem to grow into a 
disaster that undermines the scheme of the Federal election laws.
  Mr. President, I ask unanimous consent that a summary of the bill's 
provisions be printed in the Record.

                           The 527 Reform Act

       Under the Internal Revenue Code, a 527 group is defined as 
     an organization ``organized and operated primarily'' to 
     influence elections (or the appointment of individuals to 
     non-elective office). The Federal Election Commission 
     (``FEC''), however, has failed to apply existing Federal 
     campaign finance laws to require that 527 groups spending 
     money to influence federal elections register as federal 
     political committees and comply with federal campaign finance 
     laws, including the limits on the contribution they may 
     receive.
       As a result, both Democratic-leaning and Republican-leaning 
     527 groups spent tens of millions of dollars in soft money to 
     influence the 2004 federal elections. A number of 527 groups 
     did not register as federal political committees and spent 
     soft money on ads attacking and promoting federal candidates. 
     Other 527 groups did register as federal political committees 
     but claimed that under FEC rules they could spend as much as 
     98 percent soft money on partisan voter drive activities for 
     the purpose of influencing the 2004 federal elections.

[[Page S974]]

       The 527 Reform Act is designed to clarify and reaffirm that 
     such 527 groups are required to comply with federal campaign 
     finance laws. The bill would:
       Require 527s groups to register as political committees 
     with the FEC and comply with federal campaign finance laws, 
     unless they raise and spend money exclusively in connection 
     with non-federal candidate elections, or state or local 
     ballot initiatives, or the nomination or confirmation of 
     individuals to non-elected offices, such as judicial 
     positions.
       Under this requirement, 527 groups registered as political 
     committees and subject to federal campaign finance laws can 
     use only federal hard money contributions to finance ads that 
     promote or attack federal candidates, regardless of whether 
     the ads expressly advocate the election or defeat of the 
     candidate.
       Any 527 group with annual receipts of less than $25,000 is 
     exempt from the requirement to register as a political 
     committee and comply with federal campaign finance laws.
       Establish that when a 527 group registered as a federal 
     political committee makes expenditures for voter mobilization 
     activities or public communications that affect both federal 
     and non-federal elections, at least 50 percent of the costs 
     of such activities would have to be paid for with federal 
     hard money contributions.
       Provide that with regard to the non-federal funds that can 
     be used to finance a portion of voter mobilization activities 
     and public communications that affect both federal and non-
     federal elections, such funds must come from individuals only 
     and must be in amounts of not more than $25,000 per year per 
     individual donor.
       This is similar to the provision in the Bipartisan Campaign 
     Reform Act of 2002 that places a limit on the size of a 
     nonfederal contribution that can be spent by state parties on 
     activities affecting both federal and non-federal elections. 
     $25,000 is the same amount that an individual can contribute 
     to a national political party. An individual can give only 
     $5,000 per year to a federal political committee to influence 
     federal elections.
       The 527 Reform Act provides that it applies only to 527 
     groups and that nothing in the Act will have any effect on 
     determining whether 501(c) groups are subject to federal 
     campaign finance laws.

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