[Congressional Record Volume 153, Number 19 (Wednesday, January 31, 2007)]
[Senate]
[Pages S1438-S1441]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN (for himself and Mr. Feingold):
  S. 463. A bill to amend the Federal Election Campaign Act of 1971 to 
clarify when organizations described in section 527 of the Internal 
Revenue Code of 1986 must register as political committees, and for 
other purposes; to the Committee on Rules and Administration.
  Mr. McCAIN. Mr. President, once again I am pleased to be joined by my 
good friend and colleague Senator Feingold from Wisconsin in 
introducing a bill to end the illegal practice of 527 groups spending 
soft money on ads and other activities to influence Federal elections.
  This bill is very simple. 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 Federal Election Commission 
(FEC) regulation. The new rules would prevent unlimited soft money from 
being channeled into Federal election activities by these Federal 
political committees.
  Under the new rules that would be established under this bill, 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.
  It is unfortunate that we even need to be here introducing this bill 
today. This legislation would not be necessary if the FEC would enforce 
existing law. As my colleagues know, a number of 527 groups raised and 
spent a substantial amount of soft money in a blatant effort to 
influence the outcome of the 2004 Presidential election. These 
activities are illegal under existing laws,

[[Page S1441]]

but, unfortunately, the FEC has failed to implement the regulations 
necessary to stop these illegal activities.
  According to an analysis by campaign finance scholar Tony Corrado, 
federally oriented 527s spent $423 million to affect the outcome of the 
2004 elections. The same analysis shows that ten donors gave at least 
$4 million each to 527s involved in the 2004 elections and two donors 
each contributed over $20 million. 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.
  Opponents of campaign finance reform like to point out that the 
activities of these 527s serve as proof that the Bipartisan Campaign 
Reform Act (BCRA) has failed in its stated purpose, which is 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 Federal Election 
Campaign Act of 1974 and the failure of the FEC to properly regulate 
the activities of these groups.
  The bill Senator Feingold and I are introducing today is designed to 
put an end to the abusive, illegal practices of these 527s. I urge my 
colleagues to support swift passage of this bill and put an end to this 
problem once and for all.
  Mr. FEINGOLD. Mr. President, I am pleased to be working once again 
with my partner in reform, the senior Senator from Arizona, Senator 
McCain, to introduce the 527 Reform Act.
  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. Current Federal election law requires these groups to register as 
political committees and to 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 make it absolutely clear that the federal election laws 
apply to 527 organizations.
  We had to something similar 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. That struggle took 
seven years. We have now been seeking to bring 527s within the law for 
four.
  This bill will require all 527s to register as political committees 
unless they fall into a number of narrow categories. 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.
  Under current rules, 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. This means 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.
  Having laid out the central components of the bill, let me discuss 
how this bill has evolved, and the differences between this bill and 
the bill we introduced in 2005. In the last Congress, we made a great 
deal of progress working with the Senator from Mississippi, who at the 
time chaired the Rules Committee. Prior to taking the bill to a markup 
in the spring of 2005, Senator Lott worked with us to clarify the bill 
and address some of the concerns that had been raised about it. The 
bill we are introducing today is identical to the ``Chairman's Mark'' 
that Senator Lott brought before the Rules Committee last year.
  While the original bill exempted 527s engaged exclusively in state 
elections from the registration requirement, it denied the exemption to 
groups that carry out ``voter drive activities''--defined as get-out-
the vote, voter ID, or voter registration--during a federal election 
year. This made the exemption too narrow, so we looked for another way 
to ensure that state 527s that only work on behalf of non-Federal 
officeholders will not have to become Federal PACs.
  The Chairman's Mark, and this year's bill, completely exempt 
organizations of State and local candidates or officeholders. Groups 
such as the Democratic Governors Association, Republican Governors 
Association, or a state legislative caucus would be exempt, as long as 
their voter drive activities only mention state candidates or ballot 
issues. These groups do not qualify for the exemption, however, if they 
mention Federal candidates in their communications.
  Second, the bill provides a slightly narrower exemption for State 
PACs that are active only in State elections. The only additional 
requirements for these PACs to qualify for an exemption are that they 
can only be active in a single State, and they cannot have a candidate 
for Federal office or Federal officeholder controlling or participating 
in the organization or raising money for it.
  Finally, we made a number of changes to ensure that Federal PACs that 
allocate expenditures can use non-Federal money for expenditures 
designed only to assist State candidates even if they make an 
incidental reference to a Federal candidate or political party.
  The changes to the legislation that we made last year working with 
Senator Lott prior to the Rules Committee markup have been carried 
forward in the bill we introduce today. They improved and strengthened 
the bill. Unfortunately, other amendments were added during the Rules 
Committee consideration of the bill that we could not support. So the 
bill that we are introducing today is the same as the bill that went to 
markup in 2005, not the bill that was reported.
  In closing, let me remind my colleagues that the soft money loophole 
was first 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 are trying 
to do here.
  I have no doubt that if we don't act on this 527 problem now, we will 
see more problems explode into scandals over the next few election 
cycles. In the 2004 cycle, Federal-oriented 527s spend $423 million. In 
fact, there were two donors who each contributed over $20 million. We 
cannot afford to wait until another presidential campaign season is in 
full bloom before addressing this problem. This FEC-ordained loophole 
threatens to further undermine the federal election laws. We must close 
it this year.
                                 ______