[House Report 109-181]
[From the U.S. Government Publishing Office]



109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    109-181

======================================================================



 
                         527 REFORM ACT OF 2005

                                _______
                                

 July 22, 2005.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Ney, from the Committee on House Administration, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 513]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on House Administration, to whom was referred 
the bill (H.R. 513) 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, having considered the same, 
report thereon with an amendment and without recommendation.
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``527 Reform Act of 2005''.

SEC. 2. TREATMENT OF SECTION 527 ORGANIZATIONS.

  (a) Definition of Political Committee.--Section 301(4) of the Federal 
Election Campaign Act of 1971 (2 U.S.C. 431(4)) is amended--
          (1) by striking the period at the end of subparagraph (C) and 
        inserting ``; or''; and
          (2) by adding at the end the following:
          ``(D) any applicable 527 organization.''.
  (b) Definition of Applicable 527 Organization.--Section 301 of such 
Act (2 U.S.C. 431) is amended by adding at the end the following new 
paragraph:
  ``(27) Applicable 527 organization.--
          ``(A) In general.--For purposes of paragraph (4)(D), the term 
        `applicable 527 organization' means a committee, club, 
        association, or group of persons that--
                  ``(i) has given notice to the Secretary of the 
                Treasury under section 527(i) of the Internal Revenue 
                Code of 1986 that it is to be treated as an 
                organization described in section 527 of such Code; and
                  ``(ii) is not described in subparagraph (B).
          ``(B) Excepted organizations.--A committee, club, 
        association, or other group of persons described in this 
        subparagraph is--
                  ``(i) an organization described in section 527(i)(5) 
                of the Internal Revenue Code of 1986;
                  ``(ii) an organization which is a committee, club, 
                association or other group of persons that is 
                organized, operated, and makes disbursements 
                exclusively for paying expenses described in the last 
                sentence of section 527(e)(2) of the Internal Revenue 
                Code of 1986 or expenses of a newsletter fund described 
                in section 527(g) of such Code;
                  ``(iii) an organization which is a committee, club, 
                association, or other group that consists solely of 
                candidates for State or local office, individuals 
                holding State or local office, or any combination of 
                either, but only if the organization refers only to one 
                or more non-Federal candidates or applicable State or 
                local issues in all of its voter drive activities and 
                does not refer to a Federal candidate or a political 
                party in any of its voter drive activities; or
                  ``(iv) an organization described in subparagraph (C).
          ``(C) Applicable organization.--For purposes of subparagraph 
        (B)(iv), an organization described in this subparagraph is a 
        committee, club, association, or other group of persons whose 
        election or nomination activities relate exclusively to--
                  ``(i) elections where no candidate for Federal office 
                appears on the ballot; or
                  ``(ii) one or more of the following purposes:
                          ``(I) Influencing the selection, nomination, 
                        election, or appointment of one or more 
                        candidates to non-Federal offices.
                          ``(II) Influencing one or more applicable 
                        State or local issues.
                          ``(III) Influencing the selection, 
                        appointment, nomination, or confirmation of one 
                        or more individuals to non-elected offices.
          ``(D) Exclusivity test.--A committee, club, association, or 
        other group of persons shall not be treated as meeting the 
        exclusivity requirement of subparagraph (C) if it makes 
        disbursements aggregating more than $1,000 for any of the 
        following:
                  ``(i) A public communication that promotes, supports, 
                attacks, or opposes a clearly identified candidate for 
                Federal office during the 1-year period ending on the 
                date of the general election for the office sought by 
                the clearly identified candidate (or, if a runoff 
                election is held with respect to such general election, 
                on the date of the runoff election).
                  ``(ii) Any voter drive activity during a calendar 
                year, except that no disbursements for any voter drive 
                activity shall be taken into account under this 
                subparagraph if the committee, club, association, or 
                other group of persons during such calendar year--
                          ``(I) makes disbursements for voter drive 
                        activities with respect to elections in only 1 
                        State and complies with all applicable election 
                        laws of that State, including laws related to 
                        registration and reporting requirements and 
                        contribution limitations;
                          ``(II) refers to one or more non-Federal 
                        candidates or applicable State or local issues 
                        in all of its voter drive activities and does 
                        not refer to any Federal candidate or any 
                        political party in any of its voter drive 
                        activities;
                          ``(III) does not have a candidate for Federal 
                        office, an individual who holds any Federal 
                        office, a national political party, or an agent 
                        of any of the foregoing, control or materially 
                        participate in the direction of the 
                        organization, solicit contributions to the 
                        organization (other than funds which are 
                        described under clauses (i) and (ii) of section 
                        323(e)(1)(B)), or direct disbursements, in 
                        whole or in part, by the organization; and
                          ``(IV) makes no contributions to Federal 
                        candidates.
          ``(E) Certain references to federal candidates not taken into 
        account.--For purposes of subparagraphs (B)(iii) and 
        (D)(ii)(II), a voter drive activity shall not be treated as 
        referring to a clearly identified Federal candidate if the only 
        reference to the candidate in the activity is--
                  ``(i) a reference in connection with an election for 
                a non-Federal office in which such Federal candidate is 
                also a candidate for such non-Federal office; or
                  ``(ii) a reference to the fact that the candidate has 
                endorsed a non-Federal candidate or has taken a 
                position on an applicable State or local issue, 
                including a reference that constitutes the endorsement 
                or position itself.
          ``(F) Certain references to political parties not taken into 
        account.--For purposes of subparagraphs (B)(iii) and 
        (D)(ii)(II), a voter drive activity shall not be treated as 
        referring to a political party if the only reference to the 
        party in the activity is--
                  ``(i) a reference for the purpose of identifying a 
                non-Federal candidate;
                  ``(ii) a reference for the purpose of identifying the 
                entity making the public communication or carrying out 
                the voter drive activity; or
                  ``(iii) a reference in a manner or context that does 
                not reflect support for or opposition to a Federal 
                candidate or candidates and does reflect support for or 
                opposition to a State or local candidate or candidates 
                or an applicable State or local issue.
          ``(G) Applicable state or local issue.--For purposes of this 
        paragraph, the term `applicable State or local issue' means any 
        State or local ballot initiative, State or local referendum, 
        State or local constitutional amendment, State or local bond 
        issue, or other State or local ballot issue.''.
  (c) Definition of Voter Drive Activity.--Section 301 of such Act (2 
U.S.C. 431), as amended by subsection (b), is further amended by adding 
at the end the following new paragraph:
  ``(28) Voter drive activity.--The term `voter drive activity' means 
any of the following activities conducted in connection with an 
election in which a candidate for Federal office appears on the ballot 
(regardless of whether a candidate for State or local office also 
appears on the ballot):
          ``(A) Voter registration activity.
          ``(B) Voter identification.
          ``(C) Get-out-the-vote activity.
          ``(D) Generic campaign activity.
          ``(E) Any public communication related to activities 
        described in subparagraphs (A) through (D).
Such term shall not include any activity described in subparagraph (A) 
or (B) of section 316(b)(2).''.
  (d) Regulations.--The Federal Election Commission shall promulgate 
regulations to implement this section not later than 60 days after the 
date of enactment of this Act.
  (e) Effective Date.--The amendments made by this section shall take 
effect on the date which is 60 days after the date of enactment of this 
Act.

SEC. 3. RULES FOR ALLOCATION OF EXPENSES BETWEEN FEDERAL AND NON-
                    FEDERAL ACTIVITIES.

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

``SEC. 325. ALLOCATION AND FUNDING RULES FOR CERTAIN EXPENSES RELATING 
                    TO FEDERAL AND NON-FEDERAL ACTIVITIES.

  ``(a) In General.--In the case of any disbursements by any political 
committee that is a separate segregated fund or nonconnected committee 
for which allocation rules are provided under subsection (b)--
          ``(1) the disbursements shall be allocated between Federal 
        and non-Federal accounts in accordance with this section and 
        regulations prescribed by the Commission; and
          ``(2) in the case of disbursements allocated to non-Federal 
        accounts, may be paid only from a qualified non-Federal 
        account.
  ``(b) Costs to Be Allocated and Allocation Rules.--
          ``(1) In general.--Disbursements by any separate segregated 
        fund or nonconnected committee, other than an organization 
        described in section 323(b)(1), for any of the following 
        categories of activity shall be allocated as follows:
                  ``(A) 100 percent of the expenses for public 
                communications or voter drive activities that refer to 
                one or more clearly identified Federal candidates, but 
                do not refer to any clearly identified non-Federal 
                candidates, shall be paid with funds from a Federal 
                account, without regard to whether the communication 
                refers to a political party.
                  ``(B) At least 50 percent, or a greater percentage if 
                the Commission so determines by regulation, of the 
                expenses for public communications and voter drive 
                activities that refer to one or more clearly identified 
                candidates for Federal office and one or more clearly 
                identified non-Federal candidates shall be paid with 
                funds from a Federal account, without regard to whether 
                the communication refers to a political party.
                  ``(C) At least 50 percent, or a greater percentage if 
                the Commission so determines by regulation, of the 
                expenses for public communications or voter drive 
                activities that refer to a political party, but do not 
                refer to any clearly identified Federal or non-Federal 
                candidate, shall be paid with funds from a Federal 
                account, except that this paragraph shall not apply to 
                communications or activities that relate exclusively to 
                elections where no candidate for Federal office appears 
                on the ballot.
                  ``(D) At least 50 percent, or a greater percentage if 
                the Commission so determines by regulation, of the 
                expenses for public communications or voter drive 
                activities that refer to a political party and refer to 
                one or more clearly identified non-Federal candidates, 
                but do not refer to any clearly identified Federal 
                candidates, shall be paid with funds from a Federal 
                account, except that this paragraph shall not apply to 
                communications or activities that relate exclusively to 
                elections where no candidate for Federal office appears 
                on the ballot.
                  ``(E) Unless otherwise determined by the Commission 
                in its regulations, at least 50 percent of any 
                administrative expenses, including rent, utilities, 
                office supplies, and salaries not attributable to a 
                clearly identified candidate, shall be paid with funds 
                from a Federal account, except that for a separate 
                segregated fund such expenses may be paid instead by 
                its connected organization.
                  ``(F) At least 50 percent, or a greater percentage if 
                the Commission so determines by regulation, of the 
                direct costs of a fundraising program or event, 
                including disbursements for solicitation of funds and 
                for planning and administration of actual fundraising 
                events, where Federal and non-Federal funds are 
                collected through such program or event shall be paid 
                with funds from a Federal account, except that for a 
                separate segregated fund such costs may be paid instead 
                by its connected organization. This paragraph shall not 
                apply to any fundraising solicitations or any other 
                activity that constitutes a public communication.
          ``(2) Certain references to federal candidates not taken into 
        account.--For purposes of paragraph (1), a public communication 
        or voter drive activity shall not be treated as referring to a 
        clearly identified Federal candidate if the only reference to 
        the candidate in the communication or activity is--
                  ``(A) a reference in connection with an election for 
                a non-Federal office in which such Federal candidate is 
                also a candidate for such non-Federal office; or
                  ``(B) a reference to the fact that the candidate has 
                endorsed a non-Federal candidate or has taken a 
                position on an applicable State or local issue (as 
                defined in section 301(27)(G)), including a reference 
                that constitutes the endorsement or position itself.
          ``(3) Certain references to political parties not taken into 
        account.--For purposes of paragraph (1), a public communication 
        or voter drive activity shall not be treated as referring to a 
        political party if the only reference to the party in the 
        communication or activity is--
                  ``(A) a reference for the purpose of identifying a 
                non-Federal candidate;
                  ``(B) a reference for the purpose of identifying the 
                entity making the public communication or carrying out 
                the voter drive activity; or
                  ``(C) a reference in a manner or context that does 
                not reflect support for or opposition to a Federal 
                candidate or candidates and does reflect support for or 
                opposition to a State or local candidate or candidates 
                or an applicable State or local issue.
  ``(c) Qualified Non-Federal Account.--
          ``(1) In general.--For purposes of this section, the term 
        `qualified non-Federal account' means an account which consists 
        solely of amounts--
                  ``(A) that, subject to the limitations of paragraphs 
                (2) and (3), are raised by the separate segregated fund 
                or nonconnected committee only from individuals, and
                  ``(B) with respect to which all requirements of 
                Federal, State, or local law (including any law 
                relating to contribution limits) are met.
          ``(2) Limitation on individual donations.--
                  ``(A) In general.--A separate segregated fund or 
                nonconnected committee may not accept more than $25,000 
                in funds for its qualified non-Federal account from any 
                one individual in any calendar year.
                  ``(B) Affiliation.--For purposes of this paragraph, 
                all qualified non-Federal accounts of separate 
                segregated funds or nonconnected committees which are 
                directly or indirectly established, financed, 
                maintained, or controlled by the same person or persons 
                shall be treated as one account.
          ``(3) Fundraising limitation.--
                  ``(A) In general.--No donation to a qualified non-
                Federal account may be solicited, received, directed, 
                transferred, or spent by or in the name of any person 
                described in subsection (a) or (e) of section 323.
                  ``(B) Funds not treated as subject to act.--Except as 
                provided in subsection (a)(2) and this subsection, any 
                funds raised for a qualified non-Federal account in 
                accordance with the requirements of this section shall 
                not be considered funds subject to the limitations, 
                prohibitions, and reporting requirements of this Act 
                for any purpose (including for purposes of subsection 
                (a) or (e) of section 323 or subsection (d)(1) of this 
                section).
  ``(d) Definitions.--
          ``(1) Federal account.--The term `Federal account' means an 
        account which consists solely of contributions subject to the 
        limitations, prohibitions, and reporting requirements of this 
        Act. Nothing in this section or in section 323(b)(2)(B)(iii) 
        shall be construed to infer that a limit other than the limit 
        under section 315(a)(1)(C) applies to contributions to the 
        account.
          ``(2) Nonconnected committee.--The term `nonconnected 
        committee' shall not include a political committee of a 
        political party.
          ``(3) Voter drive activity.--The term `voter drive activity' 
        has the meaning given such term in section 301(28).''.
  (b) Reporting Requirements.--Section 304(e) of the Federal Election 
Campaign Act of 1971 (2 U.S.C. 434(e)) is amended--
          (1) by redesignating paragraphs (3) and (4) as paragraphs (4) 
        and (5); and
          (2) by inserting after paragraph (2) the following new 
        paragraph:
          ``(3) Receipts and disbursements from qualified non-federal 
        accounts.--In addition to any other reporting requirement 
        applicable under this Act, a political committee to which 
        section 325(a) applies shall report all receipts and 
        disbursements from a qualified non-Federal account (as defined 
        in section 325(c)).''.
  (c) Regulations.--The Federal Election Commission shall promulgate 
regulations to implement the amendments made by this section not later 
than 180 days after the date of enactment of this Act.
  (d) Effective Date.--The amendments made by this section shall take 
effect on the date which is 180 days after the date of enactment of 
this Act.

SEC. 4. CONSTRUCTION.

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

SEC. 5. JUDICIAL REVIEW.

  (a) Special Rules for Actions Brought on Constitutional Grounds.--If 
any action is brought for declaratory or injunctive relief to challenge 
the constitutionality of any provision of this Act or any amendment 
made by this Act, the following rules shall apply:
          (1) The action shall be filed in the United States District 
        Court for the District of Columbia and shall be heard by a 3-
        judge court convened pursuant to section 2284 of title 28, 
        United States Code.
          (2) A copy of the complaint shall be delivered promptly to 
        the Clerk of the House of Representatives and the Secretary of 
        the Senate.
          (3) A final decision in the action shall be reviewable only 
        by appeal directly to the Supreme Court of the United States. 
        Such appeal shall be taken by the filing of a notice of appeal 
        within 10 days, and the filing of a jurisdictional statement 
        within 30 days, of the entry of the final decision.
          (4) It shall be the duty of the United States District Court 
        for the District of Columbia and the Supreme Court of the 
        United States to advance on the docket and to expedite to the 
        greatest possible extent the disposition of the action and 
        appeal.
  (b) Intervention by Members of Congress.--In any action in which the 
constitutionality of any provision of this Act or any amendment made by 
this Act is raised (including but not limited to an action described in 
subsection (a)), any Member of the House of Representatives (including 
a Delegate or Resident Commissioner to Congress) or Senate shall have 
the right to intervene either in support of or opposition to the 
position of a party to the case regarding the constitutionality of the 
provision or amendment. To avoid duplication of efforts and reduce the 
burdens placed on the parties to the action, the court in any such 
action may make such orders as it considers necessary, including orders 
to require intervenors taking similar positions to file joint papers or 
to be represented by a single attorney at oral argument.
  (c) Challenge by Members of Congress.--Any Member of Congress may 
bring an action, subject to the special rules described in subsection 
(a), for declaratory or injunctive relief to challenge the 
constitutionality of any provision of this Act or any amendment made by 
this Act.
  (d) Applicability.--
          (1) Initial claims.--With respect to any action initially 
        filed on or before December 31, 2008, the provisions of 
        subsection (a) shall apply with respect to each action 
        described in such subsection.
          (2) Subsequent actions.--With respect to any action initially 
        filed after December 31, 2008, the provisions of subsection (a) 
        shall not apply to any action described in such subsection 
        unless the person filing such action elects such provisions to 
        apply to the action.

    H.R. 513, the ``527 Reform Act of 2005'' (``the Act''), was 
introduced on February 2, 2005 and referred to the Committee on 
House Administration. H.R. 513 amends the Federal Election 
Campaign Act (``FECA'') of 1971 to clarify when organizations 
described in section 527 of the Internal Revenue Code of 1986 
must register as political committees. The committee, having 
considered the Act, voted to report it without recommendation 
5-3.

                       Purpose of the Legislation

    The stated purpose of the Bipartisan Campaign Reform Act of 
2002 (``BCRA'') was to ``sever the link'' between federal 
office holders and large ``soft money'' donors. The minority 
members of the committee, all of whom voted for BCRA, assert 
that it has accomplished this goal. The current state of 
federal campaigns and election activities, however, belie this 
assertion. Although BCRA prohibits federal officeholders and 
candidates from directly soliciting soft money, the link 
between soft money organizations established under section 527 
of the Internal Revenue Code (``527s'') and federal 
officeholders, candidates, and top party officials has clearly 
not been severed.\1\ In fact, the record set forth below 
demonstrates that ``independent'' 527 groups are often 
intertwined with federal office holders and national parties, 
and that soft money continues to play a role in federal 
elections. H.R. 513 seeks to remedy this situation by adding 
527 groups to the definition of ``political committee'' under 
FECA, thus subjecting them to the full panoply of federal 
election law regulations.
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    \1\ The fundraising restrictions in BCRA, of course, extend not 
only to federal officeholders themselves, but also to their agents and 
to the national party committees.
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    After the passage of BCRA, many groups began to organize 
under section 527 to avoid the restrictions it imposed. Some 
groups organized to benefit Republicans, some to benefit 
Democrats. Though ostensibly ``independent'', there were 
numerous connections between top party officials and major 527 
groups during the 2004 election cycle. In some cases, there was 
steady movement of individuals between political campaigns and 
527 organizations. A case in point is MoveOn.org. Although 
MoveOn.org describes itself as an ``independent'' organization, 
a closer review reveals its close ties to the official party 
structure.
    MoveOn.org is organized into three separate organizations: 
MoveOn.org Civic Action, a 501(c)(4) organization that focuses 
on issue advocacy; MoveOn.org Political Action \2\, a political 
action committee registered with the FEC that works directly to 
elect ``progressive'' candidates; and MoveOn.org Voter Fund, an 
organization constituted under section 527 of the tax code. It 
is this final organization, MoveOn.org Voter Fund, that, as a 
527 organization, can accept unlimited contributions from 
individual donors. During the 2004 election cycle alone, 
MoveOn.org Voter Fund raised over $12 million in such funds, 
the majority of which came from three individual donors who 
gave at least $2.5 million each: George Soros, Peter Lewis, and 
Herbert Sandler.\3\ These multi-million dollar soft money 
contributions made by wealthy individuals are not subject to 
the type of limits BCRA imposes on other political committees.
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    \2\ MoveOn.org Political Action was formerly known as MoveOn PAC. 
As a political action committee registered with the FEC, contributions 
to MoveOn.org Political Action must conform to FEC rules regulating 
political committees.
    \3\ MoveOn.org Voter Fund: Liberal Advocacy Group, The Center for 
Public Integrity, available at http://www.publicintegrity.org/527/
search.aspx?act=com&orgid=682 (Jan. 31, 2005). This summary will be 
included in the appendix to this report.
---------------------------------------------------------------------------
    While circumventing BCRA's regulatory scheme, officials at 
MoveOn interacted with officeholders and federal campaign 
officials. For example, during the 2004 presidential campaign, 
top officials for MoveOn worked simultaneously for the John 
Kerry presidential campaign.\4\ This interaction between MoveOn 
and Democratic lawmakers did not end with the conclusion of the 
presidential campaign. Instead, it has grown considerably. 
Members of Congress are now openly working with MoveOn.org. The 
House Minority Leader or her staff has ``calls and meetings `on 
a weekly basis' with representatives of MoveOn.'' \5\ Many 
prominent members of Congress have spoken at MoveOn rallies.\6\ 
MoveOn's Executive Director was recently invited by Senate 
Democrats to address them at a retreat.\7\ He described 
MoveOn's role in working with elected leaders: ``We're acting 
as kind of an external whip, making sure there are rewards for 
people who are helping move the message and penalties when 
people go off message.'' \8\ MoveOn's interaction with 
Democratic party officials also continues. The Democratic 
National Committee has praised MoveOn for its efforts, stating 
that ``[o]bviously they [MoveOn] are relaying the Democratic 
Party message.'' \9\
---------------------------------------------------------------------------
    \4\ For example, Zach Exley transitioned from being the Director of 
Special Projects for MoveOn.org to become the Director of Online 
Communications and Organization for John Kerry's presidential campaign. 
Exley also helped Howard Dean set up his web-based organization during 
the Democratic presidential primary. Campaigns, National Journal, Apr. 
8, 2004. The entire article will be included in the appendix to this 
report. Tom Matzzie helped run Kerry's Internet campaign and now works 
as MoveOn.org's Washington Director. Ronald Brownstein, The Internet 
and Democrats, The National Journal, Vol. 37, No. 27, July 2, 2005. The 
entire article will be included in the appendix to this report.
    \5\ According to Rep. Nancy Pelosi's spokeswoman Jennifer Crider. 
Chris Cillizza, MoveOn Goes Mainstream, Roll Call, Apr. 13, 2005. The 
entire article will be included in the appendix to this report.
    \6\ Id.
    \7\ Ronald Brownstein, The Internet and Democrats, The National 
Journal, Vol. 37, No. 27, July 2, 2005. Brownstein, supra note 4.
    \8\ Adam Smith, Unshaven, Unbowed and in Our Face, St. Petersburg 
Times, Feb. 18, 2005. The entire article will be included in the 
appendix to this report.
    \9\ Cillizza, supra note 5.
---------------------------------------------------------------------------
    Interaction with lawmakers and party officials is only one 
aspect of MoveOn's influence on federal election activity. 
MoveOn.org has also participated in massive fundraising and 
campaign efforts to support or oppose elected officials. The 
group has organized several fundraising campaigns to benefit 
federal officeholders,\10\ as well as become involved in the 
Vermont Senate race nominee selection.\11\ MoveOn admits it 
plans on ``rewarding'' politicians who ``say and do the right 
thing'' with fundraising efforts.\12\ To that end, MoveOn's 
website is accepting donations for several ``hot'' 2006 
Congressional races against high-profile members of 
Congress.\13\ MoveOn's fundraising efforts are obviously 
appreciated by lawmakers. The Senate Assistant Minority Leader 
has said that MoveOn is ``one of our most important'' 
fundraising avenues.\14\
---------------------------------------------------------------------------
    \10\ For example, through MoveOn.org, a U.S. Senator was able to 
raise $823,000 in 72 hours for a colleague. MoveOn Goes Mainstream, 
Roll Call, Apr. 13, 2005. The entire article will be included in the 
appendix to this report.
    \11\ In April 2005, MoveOn asked Vermont voters if they would 
support Rep. Bernie Sanders, an independent, if he ran for the Senate. 
Rep. Sanders' candidacy is strongly supported by Democratic leaders. 
MoveOn Wants Sanders to Move Up to Senate, Roll Call, Apr. 27, 2005. 
The entire article will be included in the appendix to this report.
    \12\ Brownstein, supra note 7.
    \13\ MoveOn.org's website is currently soliciting contributions for 
Bill Nelson, Bob Casey, and Nick Lampson, who are all candidates for 
federal office. At https://www.moveonpac.org/give/05.html.
    \14\ Quoting Sen. Richard Durbin. Chris Cillizza and Paul Kane, GOP 
Sees MoveOn as Wedge, Roll Call, July 11, 2005. The entire article will 
be included in the appendix to this report.
---------------------------------------------------------------------------
    Further evidence of MoveOn's influence on federal election 
activity is the statements of its own members. Officials in the 
organization have claimed to control the Democratic Party. An 
e-mail sent out earlier this year to MoveOn supporters 
announced that the Democratic Party is now ``[O]ur party: We 
bought it, we own it and we're going to take it back.'' \15\ 
MoveOn's potential influence on the 2006 Florida governor's 
race has been touted by MoveOn representatives, ``MoveOn will 
be able to ask our members to contribute to the Florida 
governor's race faster than any organization in the United 
States; literally millions of dollars can come into the Florida 
governor's race overnight.'' \16\
---------------------------------------------------------------------------
    \15\ Smith, supra note 8.
    \16\ According to Tom Matzzie, MoveOn.org's Washington Director. 
Id.
---------------------------------------------------------------------------
    Unfortunately, the connection between 527 organizations and 
federal candidates does not end with MoveOn. During the mark-up 
of this legislation, the majority members of this committee 
presented evidence showing that other individuals have played 
dual roles, that is, participating in 527 organizations 
unconstrained by BCRA's contribution limitations while also 
working in federal campaigns or for a national party 
committee.\17\ Reference to these individuals and organizations 
is not meant to suggest that they have been engaged in illegal 
coordination in violation of BCRA. Indeed, if BCRA had 
prohibited these activities, no change to the law would be 
necessary. It is precisely because the existing law allows for 
and cannot prevent this sort of shell game that the majority 
believes changes are necessary. The current law allows for 
ostensibly ``independent'' groups that only employ individuals 
and support candidates of one political party, and exist to 
support the agenda and candidates of that same political party, 
to evade the limits BCRA imposes on other organizations that 
are similarly engaged in federal election activities.
---------------------------------------------------------------------------
    \17\ Jim Drinkard, Outside' Political Groups Full Of Party 
Insiders, USA Today, June, 28, 2004; Lisa Getter, Kerry Aided By 
`Illegal' Soft Money, GOP Claims, Los Angeles Times, Apr. 1, 2004. 
Articles will be included in the appendix to this report.
---------------------------------------------------------------------------
    Had the campaigns these organizations were supporting been 
successful, individuals directly linked to soft money 
organizations would have been rewarded with official positions. 
This clearly would frustrate the purpose of BCRA, which deemed 
such links between soft money and federal election activities 
inherently corrupt and meant to sever them. By treating 527 
organizations like other political committees, H.R. 513 will 
force these organizations to comply with the source limits, 
prohibitions and disclosure requirements of BCRA.
    Clearly, BCRA has failed to get soft money out of politics, 
and has succeeded only in diverting it to other groups. 
Recognizing this failure, the majority of the committee 
believes the law needs to be changed. It previously reported 
H.R. 1316, not to expand the scope of BCRA, but instead to 
relieve the party committees of some of the regulatory 
constraints that hinder their ability to compete with groups 
operating outside the law.
    It reports H.R. 513 so that the full House may have the 
opportunity to consider alternative solutions to the obvious 
problems in our current system.

                       Summary of the Legislation


Section 1.-Short Title: The ``527 Reform Act of 2005''

Section 2.-Treatment of Section 527 Organizations

     Requires an organization described in Section 527 
of the Internal Revenue Code of 1986 (``IRC'') to register and 
report with the Federal Election Commission (``FEC'') as a 
political committee, unless the organization:
          Has annual gross receipts of less than $25,000;
          Is a political committee of a state and/or local 
        party or candidate;
          Exists solely to pay certain administrative expenses 
        of a qualified newsletter;
          Is composed exclusively of state and/or local elected 
        officials and does not reference federal candidates in 
        its voter drive activities; or
          Is exclusively devoted to elections where no federal 
        candidate is on the ballot, to ballot initiatives and 
        referenda, or to the appointment, nomination, or 
        confirmation of individuals to non-elected offices.
     The exceptions (listed above) will not apply if 
such organization:
          Transmits a public communication that promotes, 
        supports, attacks, or opposes a federal candidate in 
        the year prior to a federal election;
          Conducts voter drive activities in more than one 
        state;
          Refers to a federal candidate in its voter drive 
        activities,
          Is controlled by a federal candidate or a national 
        political party; or
          Makes contributions to federal candidates.
     Makes the amendments made by this section 
effective 60 days after their enactment.

Section 3.--Rules for Allocation of Expenses Between Federal and Non-
        Federal Activities

     Establishes the following allocation rules:
          100 percent of expenses for public communications or 
        voter drive activities that refer to a federal 
        candidate but do not refer to a non-federal candidate 
        must be paid for with hard money;
          At least 50 percent, or a greater percentage if the 
        FEC so determines by regulation, of expenses for public 
        communications or voter drive activities that refer to 
        a federal candidate and to a state candidate must be 
        paid for with hard money;
          At least 50 percent, or a greater percentage if the 
        FEC so determines by regulation, of expenses for public 
        communications or voter drive activities that refer to 
        a political party but not to a federal candidate must 
        be paid for with hard money;
          At least 50 percent, or a greater percentage if the 
        FEC so determines by regulation, of expenses for public 
        communications or voter drive activities that refer to 
        a political party and to a non-federal candidate but 
        not to a federal candidate must be paid for with hard 
        money;
          At least 50 percent, or a greater percentage if the 
        FEC so determines by regulation, of administrative 
        overhead expenses must be paid for with hard money; and
          At least 50 percent, or a greater percentage if the 
        FEC so determines by regulation, of direct costs of 
        fundraising program that collects both federal and non-
        federal funds must be paid for with hard money.

     Permits ``qualified'' non-federal accounts to 
allocate spending with federal accounts, provided the following 
requirements are observed:
          Such qualified non-federal accounts may not accept 
        more than $25,000 from any one individual during a 
        calendar year; and
          National political parties and federal candidates are 
        prohibited from soliciting funds for non-federal 
        accounts.
     Exempts funds raised for a qualified non-federal 
account from the limitations, prohibitions, and reporting 
requirements of the Federal Election Campaign Act (``FECA'').
     Requires the reporting of all receipts and 
disbursements from a qualified non-federal account.
     Requires the FEC to promulgate implementing 
regulations.

Section 4.--Construction

     States that the bill shall not be construed as (i) 
approving, ratifying, or endorsing a regulation promulgated by 
the FEC, (ii) affecting the definition of political 
organizations in the IRC, or (iii) affecting whether a 501(c) 
organization under the IRC is a political committee under the 
FECA.

Section 5.--Judicial Review

     Establishes a special procedure governing any 
constitutional challenges to H.R. 513, which is as follows:
          The action shall be filed in the United States 
        District Court for the District of Columbia and shall 
        be heard by a 3-judge panel; and
          Any appeal shall be reviewed only by the United 
        States Supreme Court.
     Allows Members of Congress to intervene in any 
action brought against H.R. 513.
     Allows Members of Congress to bring an action 
challenging the constitutionality of H.R. 513.
     Limits the special procedure governing 
constitutional challenges to action filed on or before December 
31, 2008.

               Committee Consideration of the Legislation


                       INTRODUCTION AND REFERRAL

    On February 2, 2005, Mr. Shays and Mr. Meehan introduced 
H.R. 513, the ``527 Reform Act of 2005,'' which was referred to 
the Committee on House Administration.

                                HEARINGS

    The Committee on House Administration held a hearing on 
H.R. 513 on April 20, 2005.
    Members present: Mr. Ney, Mr. Ehlers, Mr. Doolittle, Mr. 
Reynolds, Ms. Miller, Ms. Millender-McDonald, Mr. Brady, and 
Ms. Lofgren.
    Witnesses: The Honorable Christopher Shays, Member of 
Congress; The Honorable Martin Meehan, Member of Congress; The 
Honorable Mike Pence, Member of Congress; The Honorable Albert 
Wynn, Member of Congress; Cleta Mitchell, Partner, Foley & 
Lardner LLP; Robert Bauer, Partner, Perkins Coie LLP; and 
Laurence E. Gold, Associate General Counsel, AFL-CIO.

                                 Markup

    On June 29, 2005, the Committee met to mark up H.R. 513. 
The Committee reported H.R. 513 without recommendation by a 
record vote (5-3), a quorum being present.

             Matters Required Under the Rules of the House


                         COMMITTEE RECORD VOTES

    Clause 3(b) of House rule XIII requires the results of each 
record vote on an amendment or motion to report, together with 
the names of those voting for and against, to be printed in the 
committee report.

Amendment in the nature of a substitute

    Offered by Mr. Ney. The first vote during the markup came 
on the amendment in the nature of a substitute offered by Mr. 
Ney.
    The amendment sets forth requirements for when 
organizations described in Section 527 of the Internal Revenue 
Code of 1986 must register as political committees, and for 
other purposes.
    The vote on the amendment was 5-3 and the amendment was 
agreed to.

------------------------------------------------------------------------
                 Member                     Yes         No      Present
------------------------------------------------------------------------
Mr. Ney................................         X          -          -
Mr. Ehlers.............................         X          -          -
Mr. Mica...............................         -          -          -
Mr. Doolittle..........................         X          -          -
Mr. Reynolds...........................         X          -          -
Ms. Miller.............................         X          -          -
Ms. Millender-McDonald.................         -          X          -
Mr. Brady..............................         -          X          -
Ms. Lofgren............................         -          X          -
                                        --------------------------------
      Total............................         5          3          -
------------------------------------------------------------------------

    The Committee then voted on H.R. 513, as amended. The vote 
on the bill was 5-3 and the bill was agreed to.

------------------------------------------------------------------------
                 Member                     Yes         No      Present
------------------------------------------------------------------------
Mr. Ney................................         X          -          -
Mr. Ehlers.............................         X          -          -
Mr. Mica...............................         -          -          -
Mr. Doolittle..........................         X          -          -
Mr. Reynolds...........................         X          -          -
Ms. Miller.............................         X          -          -
Ms. Millender-McDonald.................         -          X          -
Mr. Brady..............................         -          X          -
Ms. Lofgren............................         -          X          -
                                        --------------------------------
      Total............................         5          3          -
------------------------------------------------------------------------

    The Committee then voted to favorably report H.R. 513, as 
amended. The vote to report favorably was approved by a 
recorded vote (5-3).

------------------------------------------------------------------------
                 Member                     Yes         No      Present
------------------------------------------------------------------------
Mr. Ney................................         X          -          -
Mr. Ehlers.............................         X          -          -
Mr. Mica...............................         -          -          -
Mr. Doolittle..........................         X          -          -
Mr. Reynolds...........................         X          -          -
Ms. Miller.............................         X          -          -
Ms. Millender-McDonald.................         -          X          -
Mr. Brady..............................         -          X          -
Ms. Lofgren............................         -          X          -
                                        --------------------------------
      Total............................         5          3          -
------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) rule XIII of the Rules of 
the House of Representatives, the Committee states that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                General Performance Goals and Objectives

    The Committee states, with respect to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, that 
the goal and objective of H.R. 1316 is to restore fairness and 
balance to the federal campaign finance system.

                        Constitutional Authority

    In compliance with clause 3(d)(1) of rule XIII, the 
Committee states that Article 1, Section 4 of the U.S. 
Constitution grants Congress the authority to make laws 
governing the time, place and manner of holding Federal 
elections.

                            Federal Mandates

    The Committee states, with respect to section 423 of the 
Congressional Budget Act of 1974, that the bill does not 
include any significant Federal mandate.

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any committee on a bill or joint 
resolution to include a committee statement on the extent to 
which the bill or joint resolution is intended to preempt state 
or local law. The Committee states that H.R. 1316 is not 
intended to preempt any state or local law.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act of 1974:

H.R. 513-527 Reform Act of 2005

    Summary: H.R. 513 would amend the Federal Election Campaign 
Act of 1971. The legislation would require certain political 
organizations, as defined by section 527 of the tax code, 
involved in federal election activities to register with the 
Federal Election Commission (FEC).
    CBO estimates that implementing H.R. 513 would cost about 
$1 million in fiscal year 2006, subject to the availability of 
appropriated funds. In future years, we estimate that the 
increased costs would not be significant. Enacting the bill 
also could affect federal revenues by increasing collections of 
fines and penalties for violating campaign finance laws, but 
CBO estimates that any such increase would not be significant.
    H.R. 513 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA). The bill would 
specifically exclude state and local elections; therefore, it 
would impose no costs on state, local, or tribal governments.
    H.R. 513 would impose private-sector mandates, as defined 
in UMRA, on certain political organizations. CBO estimates that 
the direct cost of the mandate would be minimal and fall well 
below the annual threshold established in UMRA ($123 million in 
2005, adjusted annually for inflation).
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of H.R. 513 is shown in the following table. 
The costs of this legislation fall within budget function 800 
(general government).

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                               -------------------------------------------------
                                                                  2006      2007      2008      2009      2010
----------------------------------------------------------------------------------------------------------------
                                 CHANGES IN SPENDING SUBJECT TO APPROPRIATION a

Estimated Authorization Level.................................         1         *         *         *         *
Estimated Outlays.............................................         1         *         *         *         *
----------------------------------------------------------------------------------------------------------------
a Enacting the bill could also increase revenues, but CBO estimates any such effects would be less than $500,000
  a year.
Note: * = less than $500,000.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the start of fiscal year 2006 and 
that spending will follow historical patterns for similar 
programs.
    Based on information from the FEC and subject to the 
availability of appropriated funds, CBO estimates that 
implementing H.R. 513 would cost the FEC about $1 million in 
fiscal year 2006. This cost covers the one-time computer-
related expenses as well as writing new regulations to 
implement the new provisions of the legislation. In future 
years, the legislation would increase general administrative 
and maintenance costs to the FEC, but we estimate that those 
additional costs would not be significant.
    Enacting H.R. 513 would likely increase collections of 
fines and penalties for violations of campaign finance law. 
Such collections are recorded in the budget as revenues. CBO 
estimates that the additional collections of penalties and 
fines would not be significant.
    Estimated Impact on State, local, and tribal governments: 
H.R. 513 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act. The bill would specifically 
exclude state and local elections; therefore, it would impose 
no costs on state, local, or tribal governments.
    Estimated impact on the private sector: H.R. 513 would 
impose private-sector mandates, as defined in UMRA, on certain 
political organizations. CBO estimates that the direct cost of 
the mandate would be minimal and fall well below the annual 
threshold established in UMRA ($123 million in 2005, adjusted 
annually for inflation).
    The bill would change the definition of a political 
committee to include certain 527 organizations, as defined by 
section 527 of the Internal Revenue Code. Those 527 
organizations would be required to register as political 
committees with the FEC and comply with current regulations on 
federal campaign finance including certain limits on 
contributions and reporting and disclosure requirements. Based 
on information from the FEC, CBO estimates that the direct 
costs associated with those requirements would be minimal.
    Previous CBO Estimate: On July 6, 2005, CBO transmitted a 
cost estimate for S. 1053, the 527 Reform Act of 2005, as 
ordered reported by the Senate Committee on Rules and 
Administration on April 27, 2005. On June 17, 2005, CBO 
transmitted a cost estimate for H.R. 1316, the 527 Fairness Act 
of 2005, as ordered reported by the House Committee on House 
Administration on June 8, 2005. The three pieces of legislation 
are similar and would all amend the Federal Election Campaign 
Act of 1971. The estimated federal costs are identical. In 
addition, all of the bills would impose private-sector mandates 
on certain political organizations with minimal direct cost. S. 
1053 would require the television broadcast industry to charge 
the lowest unit rate to federal candidates and to the national 
committee of a political party with rates based on comparison 
to the preceding year. H.R. 513 and H.R. 1316 do not contain 
any mandates on the television broadcast industry.
    Estimate prepared by: Federal costs: Matthew Pickford; 
Impact on State, local, and tribal governments: Sarah Puro; 
Impact on the private-sector: Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

FEDERAL ELECTION CAMPAIGN ACT OF 1971

           *       *       *       *       *       *       *



            TITLE III--DISCLOSURE OF FEDERAL CAMPAIGN FUNDS


                              DEFINITIONS

  Sec. 301. When used in this Act:
  (1) * * *

           *       *       *       *       *       *       *

  (4) The term ``political committee'' means--
          (A) * * *

           *       *       *       *       *       *       *

          (C) any local committee of a political party which 
        receives contributions aggregating in excess of $5,000 
        during a calendar year, or makes payments exempted from 
        the definition of contribution or expenditure as 
        defined in section 301 (8) and (9) aggregating in 
        excess of $5,000 during a calendar year, or makes 
        contributions aggregating in excess of $1,000 during a 
        calendar year or makes expenditures aggregating in 
        excess of $1,000 during a calendar year[.]; or
          (D) any applicable 527 organization.

           *       *       *       *       *       *       *

  (27) Applicable 527 organization.--
          (A) In general.--For purposes of paragraph (4)(D), 
        the term ``applicable 527 organization'' means a 
        committee, club, association, or group of persons 
        that--
                  (i) has given notice to the Secretary of the 
                Treasury under section 527(i) of the Internal 
                Revenue Code of 1986 that it is to be treated 
                as an organization described in section 527 of 
                such Code; and
                  (ii) is not described in subparagraph (B).
          (B) Excepted organizations.--A committee, club, 
        association, or other group of persons described in 
        this subparagraph is--
                  (i) an organization described in section 
                527(i)(5) of the Internal Revenue Code of 1986;
                  (ii) an organization which is a committee, 
                club, association or other group of persons 
                that is organized, operated, and makes 
                disbursements exclusively for paying expenses 
                described in the last sentence of section 
                527(e)(2) of the Internal Revenue Code of 1986 
                or expenses of a newsletter fund described in 
                section 527(g) of such Code;
                  (iii) an organization which is a committee, 
                club, association, or other group that consists 
                solely of candidates for State or local office, 
                individuals holding State or local office, or 
                any combination of either, but only if the 
                organization refers only to one or more non-
                Federal candidates or applicable State or local 
                issues in all of its voter drive activities and 
                does not refer to a Federal candidate or a 
                political party in any of its voter drive 
                activities; or
                  (iv) an organization described in 
                subparagraph (C).
          (C) Applicable organization.--For purposes of 
        subparagraph (B)(iv), an organization described in this 
        subparagraph is a committee, club, association, or 
        other group of persons whose election or nomination 
        activities relate exclusively to--
                  (i) elections where no candidate for Federal 
                office appears on the ballot; or
                  (ii) one or more of the following purposes:
                          (I) Influencing the selection, 
                        nomination, election, or appointment of 
                        one or more candidates to non-Federal 
                        offices.
                          (II) Influencing one or more 
                        applicable State or local issues.
                          (III) Influencing the selection, 
                        appointment, nomination, or 
                        confirmation of one or more individuals 
                        to non-elected offices.
          (D) Exclusivity test.--A committee, club, 
        association, or other group of persons shall not be 
        treated as meeting the exclusivity requirement of 
        subparagraph (C) if it makes disbursements aggregating 
        more than $1,000 for any of the following:
                  (i) A public communication that promotes, 
                supports, attacks, or opposes a clearly 
                identified candidate for Federal office during 
                the 1-year period ending on the date of the 
                general election for the office sought by the 
                clearly identified candidate (or, if a runoff 
                election is held with respect to such general 
                election, on the date of the runoff election).
                  (ii) Any voter drive activity during a 
                calendar year, except that no disbursements for 
                any voter drive activity shall be taken into 
                account under this subparagraph if the 
                committee, club, association, or other group of 
                persons during such calendar year--
                          (I) makes disbursements for voter 
                        drive activities with respect to 
                        elections in only 1 State and complies 
                        with all applicable election laws of 
                        that State, including laws related to 
                        registration and reporting requirements 
                        and contribution limitations;
                          (II) refers to one or more non-
                        Federal candidates or applicable State 
                        or local issues in all of its voter 
                        drive activities and does not refer to 
                        any Federal candidate or any political 
                        party in any of its voter drive 
                        activities;
                          (III) does not have a candidate for 
                        Federal office, an individual who holds 
                        any Federal office, a national 
                        political party, or an agent of any of 
                        the foregoing, control or materially 
                        participate in the direction of the 
                        organization, solicit contributions to 
                        the organization (other than funds 
                        which are described under clauses (i) 
                        and (ii) of section 323(e)(1)(B)), or 
                        direct disbursements, in whole or in 
                        part, by the organization; and
                          (IV) makes no contributions to 
                        Federal candidates.
          (E) Certain references to federal candidates not 
        taken into account.--For purposes of subparagraphs 
        (B)(iii) and (D)(ii)(II), a voter drive activity shall 
        not be treated as referring to a clearly identified 
        Federal candidate if the only reference to the 
        candidate in the activity is--
                  (i) a reference in connection with an 
                election for a non-Federal office in which such 
                Federal candidate is also a candidate for such 
                non-Federal office; or
                  (ii) a reference to the fact that the 
                candidate has endorsed a non-Federal candidate 
                or has taken a position on an applicable State 
                or local issue, including a reference that 
                constitutes the endorsement or position itself.
          (F) Certain references to political parties not taken 
        into account.--For purposes of subparagraphs (B)(iii) 
        and (D)(ii)(II), a voter drive activity shall not be 
        treated as referring to a political party if the only 
        reference to the party in the activity is--
                  (i) a reference for the purpose of 
                identifying a non-Federal candidate;
                  (ii) a reference for the purpose of 
                identifying the entity making the public 
                communication or carrying out the voter drive 
                activity; or
                  (iii) a reference in a manner or context that 
                does not reflect support for or opposition to a 
                Federal candidate or candidates and does 
                reflect support for or opposition to a State or 
                local candidate or candidates or an applicable 
                State or local issue.
          (G) Applicable state or local issue.--For purposes of 
        this paragraph, the term ``applicable State or local 
        issue'' means any State or local ballot initiative, 
        State or local referendum, State or local 
        constitutional amendment, State or local bond issue, or 
        other State or local ballot issue.
  (28) Voter drive activity.--The term ``voter drive activity'' 
means any of the following activities conducted in connection 
with an election in which a candidate for Federal office 
appears on the ballot (regardless of whether a candidate for 
State or local office also appears on the ballot):
          (A) Voter registration activity.
          (B) Voter identification.
          (C) Get-out-the-vote activity.
          (D) Generic campaign activity.
          (E) Any public communication related to activities 
        described in subparagraphs (A) through (D).
Such term shall not include any activity described in 
subparagraph (A) or (B) of section 316(b)(2).

           *       *       *       *       *       *       *


                                REPORTS

  Sec. 304. (a) * * *

           *       *       *       *       *       *       *

  (e) Political Committees.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Receipts and disbursements from qualified non-
        federal accounts.--In addition to any other reporting 
        requirement applicable under this Act, a political 
        committee to which section 325(a) applies shall report 
        all receipts and disbursements from a qualified non-
        Federal account (as defined in section 325(c)).
          [(3)] (4) Itemization.--If a political committee has 
        receipts or disbursements to which this subsection 
        applies from or to any person aggregating in excess of 
        $200 for any calendar year, the political committee 
        shall separately itemize its reporting for such person 
        in the same manner as required in paragraphs (3)(A), 
        (5), and (6) of subsection (b).
          [(4)] (5) Reporting periods.--Reports required to be 
        filed under this subsection shall be filed for the same 
        time periods required for political committees under 
        subsection (a)(4)(B).

           *       *       *       *       *       *       *


SEC. 325. ALLOCATION AND FUNDING RULES FOR CERTAIN EXPENSES RELATING TO 
                    FEDERAL AND NON-FEDERAL ACTIVITIES.

  (a) In General.--In the case of any disbursements by any 
political committee that is a separate segregated fund or 
nonconnected committee for which allocation rules are provided 
under subsection (b)--
          (1) the disbursements shall be allocated between 
        Federal and non-Federal accounts in accordance with 
        this section and regulations prescribed by the 
        Commission; and
          (2) in the case of disbursements allocated to non-
        Federal accounts, may be paid only from a qualified 
        non-Federal account.
  (b) Costs to Be Allocated and Allocation Rules.--
          (1) In general.--Disbursements by any separate 
        segregated fund or nonconnected committee, other than 
        an organization described in section 323(b)(1), for any 
        of the following categories of activity shall be 
        allocated as follows:
                  (A) 100 percent of the expenses for public 
                communications or voter drive activities that 
                refer to one or more clearly identified Federal 
                candidates, but do not refer to any clearly 
                identified non-Federal candidates, shall be 
                paid with funds from a Federal account, without 
                regard to whether the communication refers to a 
                political party.
                  (B) At least 50 percent, or a greater 
                percentage if the Commission so determines by 
                regulation, of the expenses for public 
                communications and voter drive activities that 
                refer to one or more clearly identified 
                candidates for Federal office and one or more 
                clearly identified non-Federal candidates shall 
                be paid with funds from a Federal account, 
                without regard to whether the communication 
                refers to a political party.
                  (C) At least 50 percent, or a greater 
                percentage if the Commission so determines by 
                regulation, of the expenses for public 
                communications or voter drive activities that 
                refer to a political party, but do not refer to 
                any clearly identified Federal or non-Federal 
                candidate, shall be paid with funds from a 
                Federal account, except that this paragraph 
                shall not apply to communications or activities 
                that relate exclusively to elections where no 
                candidate for Federal office appears on the 
                ballot.
                  (D) At least 50 percent, or a greater 
                percentage if the Commission so determines by 
                regulation, of the expenses for public 
                communications or voter drive activities that 
                refer to a political party and refer to one or 
                more clearly identified non-Federal candidates, 
                but do not refer to any clearly identified 
                Federal candidates, shall be paid with funds 
                from a Federal account, except that this 
                paragraph shall not apply to communications or 
                activities that relate exclusively to elections 
                where no candidate for Federal office appears 
                on the ballot.
                  (E) Unless otherwise determined by the 
                Commission in its regulations, at least 50 
                percent of any administrative expenses, 
                including rent, utilities, office supplies, and 
                salaries not attributable to a clearly 
                identified candidate, shall be paid with funds 
                from a Federal account, except that for a 
                separate segregated fund such expenses may be 
                paid instead by its connected organization.
                  (F) At least 50 percent, or a greater 
                percentage if the Commission so determines by 
                regulation, of the direct costs of a 
                fundraising program or event, including 
                disbursements for solicitation of funds and for 
                planning and administration of actual 
                fundraising events, where Federal and non-
                Federal funds are collected through such 
                program or event shall be paid with funds from 
                a Federal account, except that for a separate 
                segregated fund such costs may be paid instead 
                by its connected organization. This paragraph 
                shall not apply to any fundraising 
                solicitations or any other activity that 
                constitutes a public communication.
          (2) Certain references to federal candidates not 
        taken into account.--For purposes of paragraph (1), a 
        public communication or voter drive activity shall not 
        be treated as referring to a clearly identified Federal 
        candidate if the only reference to the candidate in the 
        communication or activity is--
                  (A) a reference in connection with an 
                election for a non-Federal office in which such 
                Federal candidate is also a candidate for such 
                non-Federal office; or
                  (B) a reference to the fact that the 
                candidate has endorsed a non-Federal candidate 
                or has taken a position on an applicable State 
                or local issue (as defined in section 
                301(27)(G)), including a reference that 
                constitutes the endorsement or position itself.
          (3) Certain references to political parties not taken 
        into account.--For purposes of paragraph (1), a public 
        communication or voter drive activity shall not be 
        treated as referring to a political party if the only 
        reference to the party in the communication or activity 
        is--
                  (A) a reference for the purpose of 
                identifying a non-Federal candidate;
                  (B) a reference for the purpose of 
                identifying the entity making the public 
                communication or carrying out the voter drive 
                activity; or
                  (C) a reference in a manner or context that 
                does not reflect support for or opposition to a 
                Federal candidate or candidates and does 
                reflect support for or opposition to a State or 
                local candidate or candidates or an applicable 
                State or local issue.
  (c) Qualified Non-Federal Account.--
          (1) In general.--For purposes of this section, the 
        term ``qualified non-Federal account'' means an account 
        which consists solely of amounts--
                  (A) that, subject to the limitations of 
                paragraphs (2) and (3), are raised by the 
                separate segregated fund or nonconnected 
                committee only from individuals, and
                  (B) with respect to which all requirements of 
                Federal, State, or local law (including any law 
                relating to contribution limits) are met.
          (2) Limitation on individual donations.--
                  (A) In general.--A separate segregated fund 
                or nonconnected committee may not accept more 
                than $25,000 in funds for its qualified non-
                Federal account from any one individual in any 
                calendar year.
                  (B) Affiliation.--For purposes of this 
                paragraph, all qualified non-Federal accounts 
                of separate segregated funds or nonconnected 
                committees which are directly or indirectly 
                established, financed, maintained, or 
                controlled by the same person or persons shall 
                be treated as one account.
          (3) Fundraising limitation.--
                  (A) In general.--No donation to a qualified 
                non-Federal account may be solicited, received, 
                directed, transferred, or spent by or in the 
                name of any person described in subsection (a) 
                or (e) of section 323.
                  (B) Funds not treated as subject to act.--
                Except as provided in subsection (a)(2) and 
                this subsection, any funds raised for a 
                qualified non-Federal account in accordance 
                with the requirements of this section shall not 
                be considered funds subject to the limitations, 
                prohibitions, and reporting requirements of 
                this Act for any purpose (including for 
                purposes of subsection (a) or (e) of section 
                323 or subsection (d)(1) of this section).
  (d) Definitions.--
          (1) Federal account.--The term ``Federal account'' 
        means an account which consists solely of contributions 
        subject to the limitations, prohibitions, and reporting 
        requirements of this Act. Nothing in this section or in 
        section 323(b)(2)(B)(iii) shall be construed to infer 
        that a limit other than the limit under section 
        315(a)(1)(C) applies to contributions to the account.
          (2) Nonconnected committee.--The term ``nonconnected 
        committee'' shall not include a political committee of 
        a political party.
          (3) Voter drive activity.--The term ``voter drive 
        activity'' has the meaning given such term in section 
        301(28).

           *       *       *       *       *       *       *




                               APPENDIX B

                              ----------                              


      [From the National Journal's Technology Daily; Apr. 8, 2004]

                               Campaigns

    John Kerry's presidential campaign has hired Zach Exley, 
MoveOn.org's director of special projects, to become the 
campaign's new director of online communications and 
organizing. The move prompted an angry response from the 
Republican National Committee (RNC), which again raised the 
question of whether the Kerry campaign was coordinating its 
activities with advocacy groups, illegal under current campaign 
finance laws. The RNC issued an alert calling Exley a 
``negative campaigner,'' noting that during the 2000 campaign 
Exley created a satirical anti-Bush Web site. It also mentioned 
a Web ad posted on MoveOn.org's Web site comparing President 
Bush to Adolf Hitler, and questioned whether Exley would keep 
his distance from MoveOn during the campaign. Exley, who worked 
as an adviser to Vermont Gov. Howard Dean during the primary 
election season, had no comment by press time.

                               APPENDIX C

                              ----------                              


               [From the National Journal; July 2, 2005]

                     The Internet and the Democrats

                         (By Ronald Brownstein)

    In retrospect, the day in September 1998 when two wealthy 
software developers in Berkeley, Calif., posted an online 
petition opposing the impeachment of Bill Clinton may stand as 
the day his vision for the Democratic Party began to be 
eclipsed.
    That petition from Wes Boyd and Joan Blades led to the 
formation of MoveOn.org, which has metamorphosed into the 
nation's largest and most effective Internet advocacy group. 
And MoveOn, an unstintingly liberal voice, has become the 
cutting edge of an online revolution that is reshaping the 
Democratic Party amid the intense political polarization of 
George W. Bush's presidency.
    The rise of a mass Democratic Internet fundraising and 
activist base--a trend that includes not only the 3.1 million-
member MoveOn, but the political organization founded by Howard 
Dean, the Internet contributors to the Democratic National 
Committee and the John Kerry presidential campaign, and the 
thousands of partisans venting daily on left-leaning Web logs 
like Daily Kos and MyDD.com--is beginning to shift the balance 
of power in the Democratic Party away from the ``Third Way'' 
moderation that Clinton and his ``New Democrat'' movement 
promoted.
    Centrist organizations such as the Democratic Leadership 
Council have produced nothing like the massive lists of 
activists and donors that liberals have assembled through the 
Internet. And that mass liberal base is pushing the party 
partly toward more-liberal positions, but even more so toward 
greater confrontation with Bush--and increasing pressure on 
Democrats who consider cooperating with him in any way.
    The Internet base, for the first time, has provided 
Democrats with a tool for raising money, recruiting volunteers, 
and directing messages to their partisans that is comparable to 
the capacity that direct mail and talk radio have long provided 
Republicans. But just as those tools have mostly strengthened 
the Right in the GOP, the Internet has mostly strengthened the 
wing of the Democratic Party that feeds on polarization and 
conflict.
    Indeed, the Internet is fast becoming the confrontation 
caucus in the Democratic Party. Defiance of Bush is almost 
instantly rewarded with a torrent of praise on liberal blogs 
and often with fundraising or other assistance from the blogs 
and groups like MoveOn; the group's PAC, for instance, raised a 
breathtaking $800,000 from its members in less than three days 
this spring for venerable Sen. Robert Byrd, D-W.Va., a vocal 
opponent of Republican threats to block filibusters of judicial 
nominations.
    Just as surely, almost all gestures toward collaboration 
with Bush provoke condemnation and outrage. Most often, the 
criticism amounts to angry denunciations on liberal blogs that 
can generate e-mails or unfavorable stories in the mainstream 
media. Pushing further, liberal bloggers have been openly 
trolling for a Democrat to challenge Sen. Joe Lieberman, D-
Conn., in a primary next year on the grounds that he has 
supported Bush too often. And MoveOn recently targeted House 
Minority Whip Steny Hoyer, D-Md., with negative radio ads 
because he voted for the Bush-backed bill making it more 
difficult for consumers to declare bankruptcy.
    The rapidly growing Democratic Internet activist base ``is 
more partisan than ideological,'' says Howard Wolfson, the 
former executive director of the Democratic Congressional 
Campaign Committee. ``And it stems from a feeling in the 
grassroots that Democrats in Washington were not fighting back 
hard enough against Bush.''
    In effect, the rise of the Internet base is now subjecting 
Democrats to a mass experiment in conditioning behavior--a 
political equivalent of Pavlov's dogs. ``We are actually 
starting to build the kind of noise machine, to reward or beat 
up on people, that the Right has had for a long time,'' says 
Markos Moulitsas Zuniga, 33, the pugnacious founder of the 
popular blog Daily Kos. ``We are training these politicians 
that they don't have to be afraid of taking courageous stands--
and that they will be rewarded or punished based on their 
behavior.''
    In all of these ways, the Internet base is playing the same 
role in the Democratic Party that conservative economic and 
social groups (like the Club for Growth or Focus on the Family) 
play in the GOP. Both are increasing demands for ideological 
consistency and partisan loyalty. And both are becoming more 
influential as the country grows more deeply polarized over 
Bush's aggressively conservative agenda, and over the fervent 
Democratic opposition to almost all of it. On each side, 
polarization is feeding on itself, as the widening gulf between 
the parties strengthens those who argue that compromise on 
almost any issue has become impossible.
    ``The leadership of both sides has a gun to their head from 
the activist base,'' said Dan Gerstein, the former 
communications director for Lieberman. ``If they don't hold the 
line, the trigger is going to be pulled against them.''
    The Democratic Internet base cradling that trigger does not 
speak with one voice. But the emerging generation of online 
Democratic activists, many of them young and shaped by the 
bruising partisan conflicts of the past decade, seems united 
most by the belief that the quickest way for Democrats to 
regain power is to confront Bush more forcefully and to draw 
brighter lines of division between the Democratic Party and the 
GOP.
    In strikingly similar language, Internet-generation 
Democratic activists from Moulitsas to Eli Pariser, the 24-
year-old executive director of MoveOn's giant PAC, describe 
Clinton's effort to reorient the party toward capturing 
centrist voters as ``obsolete'' in a highly partisan era that 
demands, above all, united opposition against the GOP. 
Moulitsas and Pariser, like most other voices in the Internet 
activist base, want a Democratic Party focused more on 
increasing turnout among its partisans than on persuading 
moderate swing voters. Both, in other words, want a party that 
emulates Bush's political strategy more than Clinton's.
    ``It may be in the 1990s, there was a middle; there isn't a 
middle now,'' Pariser says. ``You have a Republican Party that 
is willing to break all the rules and accept no compromises to 
get what they want. In the face of that, saying `I'll meet you 
halfway' is as sure a recipe for disaster as I know. You have 
to fight fire with fire.''
    Virtually all Democrats, even the most moderate, are 
growing more partisan as the battles with Bush escalate. But 
many Democratic moderates still fear that, both in substance 
and style, the politics that the Internet base is demanding may 
be leading the party away from the swing voters, especially in 
the culturally conservative red states it needs to regain 
Congress and the White House.
    ``The Internet is certainly a generator of some very 
positive factors for Democrats. But it's also a very small 
slice of our party, and if that slice dominates the entire pie, 
we're in serious trouble,'' says former Rep. Tim Roemer, D-
Ind., a centrist whose bid earlier this year for the party 
chairmanship stalled at the starting gate after intense 
opposition from the Left.
    Yet even while some centrist groups such as the DLC are 
warning Democrats to distance themselves from liberal Internet-
based voices like Daily Kos and MoveOn, the party is more 
overtly pursuing their help in the widening confrontations with 
Bush. On struggles like the fight over judicial nominations, 
party leaders such as Senate Minority Leader Harry Reid of 
Nevada are now appearing at MoveOn rallies and holding 
conference calls with liberal bloggers.
    Tellingly, even some traditionally centrist Democratic 
voices are wooing the Internet base. Simon Rosenberg, the 
founder of the New Democrat Network, a political action 
committee for Clintonesque New Democrats, courted the Internet 
activists in his unsuccessful bid for the DNC chairmanship 
earlier this year. Reversing Roemer, Rosenberg believes that 
party moderates must learn from the Internet activists' 
critique of Clinton's strategy.
    ``The core thing this new Internet culture is looking for 
is recognition that the highest order of our politics today is 
stopping Bush,'' Rosenberg says. ``Circumstances have changed 
[since Clinton's presidency]. I do believe the New Democrats 
have been too slow to recognize * * * that [the Republicans] 
must be stopped at all costs.''

             THEY DON'T NEED THE INTERNET AS MUCH AS WE DO

    In the 2004 presidential campaign, the Internet was more 
visible and consequential in American politics than ever 
before. It became a mass medium for obtaining political news. 
The most comprehensive study [PDF] on the subject, by the 
nonpartisan Pew Internet & American Life Project, found that 
during the campaign about 63 million people acquired political 
news online, nearly double the number who did just four years 
earlier.
    In the physical world and online, the number of people who 
participate in political activities is much smaller than those 
who read about them. But on the Internet, participation is 
growing substantially. The Pew study, based on a national post-
election survey, estimates that last year 7 million people 
signed up to receive e-mails from the presidential campaigns; 4 
million volunteered online for the campaigns; and 4 million 
contributed money to political efforts through the Internet. In 
2000, only half as many donated online, Pew found.
    About the same proportion of Republicans, Democrats, and 
independents used the Internet to acquire political information 
in 2004. But Pew's research found that Democrats and liberals 
pursued political activities over the Internet more frequently 
than Republicans and conservatives did. Democrats were more 
than twice as likely as Republicans to volunteer online, and 
nearly five times as likely to contribute money, according to 
unpublished data from the study.
    The disparity reflects the relative importance of the 
Internet in each party's political infrastructure. Republicans 
have also aggressively increased their capacity on the 
Internet. The Republican National Committee has a 7.5 million-
name activist e-mail list it mobilizes to support 
administration initiatives. The Bush campaign used the Internet 
to help organize volunteers for its successful get-out-the-vote 
campaign. And conservative blogs have developed large 
followings--as they demonstrated by generating such a rapid 
backlash against recent comments by Sen. Richard Durbin, D-
Ill., about Guantanamo Bay.
    But the Internet is exerting less influence over the 
direction of the Republican Party than that of the Democratic 
Party, because it plays a much smaller role in the overall GOP 
political machine. Internet fundraising hasn't been as crucial 
for Republicans, because they have both a bigger base of 
financial support in the business community and a more 
developed small-donor direct-mail program dating back to the 
1970s. Blogs aren't as important for Republicans as they are 
for Democrats, because talk radio, dominated by conservative 
hosts, already provides the GOP an effective channel outside 
the mainstream media to distribute its message. ``They don't 
need the Internet as much as we do,'' says Wolfson, a top 
adviser to Sen. Hillary Rodham Clinton, D-N.Y.
    Indeed, Democrats are increasingly relying on the Internet 
to match the roles that both talk radio and direct mail play 
for Republicans.
    In the same way conservatives court talk radio, Reid, for 
instance, held a conference call with liberal bloggers in late 
April to press the party message in the battle to preserve the 
filibuster for judicial nominations. Shortly thereafter, 
MoveOn, by far the largest online group in either party, turned 
out scores of volunteers for 192 rallies on the issue across 
the country on the same day. Earlier, the group generated 
40,000 phone calls in a single day by dispatching volunteers 
with cellphones to ask neighbors to urge their senators to 
oppose the filibuster ban.
    The Internet's most dramatic contribution to the Democratic 
Party has come on the bottom line. In the Democratic primaries 
last year, the Internet ignited Dean's insurgent bid by 
generating a flood of small online donations that ultimately 
provided about half of all his money. In the general election, 
John Kerry stunned the political establishment by remaining 
competitive with Bush in fundraising, largely because the 
Democrat raised $80 million in Internet donations for his 
campaign and another $40 million from his online list for the 
Democratic National Committee. Meanwhile, MoveOn says that 
along with its PAC and its voter fund, it collected another $50 
million in online contributions (as well as $10 million more 
from large donors such as liberal financier George Soros).
    In all, Democrats and their allied groups probably raised 
about $300 million online in 2004, estimates Tom Matzzie, who 
helped run Kerry's Internet campaign and now works as MoveOn's 
Washington director. That means the Internet accounted for 
about 15 percent of the $2 billion that the Center for 
Responsive Politics estimates the Democrats and their allied 
groups spent in the 2004 campaign. (Republicans raised about as 
much overall, but relied on the Internet much less; although a 
comparable estimate for the entire party isn't available, the 
Bush campaign raised less than one-fifth as much online as 
Kerry did, which may give a sense of scale.)
    Whatever the exact figure, the amount of political money 
and activity generated on the Internet in 2004 represented a 
quantum leap over the levels of 2000 or 2002. (MoveOn's PAC 
alone increased its online fundraising tenfold from 2000 to 
2004.) The audience for blogs, though still small compared with 
mass media like talk radio or daily newspapers, is steadily 
growing.
    Almost all analysts expect the political use of the 
Internet to expand at least as much over the next four years. 
``It is going to just explode between now and 2008,'' says Joe 
Trippi, Dean's 2004 campaign manager. Matzzie said recently 
that Democratic candidates and groups would likely collect as 
much as $1 billion on the Internet for the 2008 election. 
Veteran Democratic strategist Tad Devine predicts that the next 
Democratic presidential nominee will reject the public 
financing system, not only for the primary, as Kerry and Bush 
did, but also for the general election (which no candidate has 
ever done) to preserve the freedom to raise unlimited money 
over the Internet.
    These projections are encouraging Democrats about their 
ability to compete financially and organizationally with the 
GOP. But one of the most profound truths in politics is that no 
money, or any other form of support, is free; it all arrives 
with some kind of price tag. Few Democrats have thought 
seriously about what that price tag may be for the lifeline the 
Internet base is now offering them. The Internet activists 
believe they are liberating the Democrats from the demands of 
``special interests'' by creating an alternative source of 
grassroots money. But the Internet support, financial and 
otherwise, comes with its own strong demands, as recent visits 
to two of the movement's leading figures demonstrated.

                    ELI PARISER AND MARKOS MOULITSAS

    It speaks volumes about the Internet's tendency to diffuse 
power that two of the most influential figures in online 
liberal politics work alone, in their homes, in neighborhoods 
that have hosted far more rent parties than black-tie dinners.
    Eli Pariser, the executive director of MoveOn's giant 
political action committee, and Markos Moulitsas, the founder 
and ringmaster of the popular Daily Kos Web site, have emerged 
as two of the principal strategists shaping liberal use of the 
Internet.
    Pariser, working with Boyd and Blades and MoveOn's small 
group of 13 other employees, runs a vastly larger institution 
than Moulitsas does. MoveOn has become perhaps the largest 
source of funds, volunteers, and activism (such as e-mail and 
grassroots lobbying campaigns) for Democrats outside of 
organized labor. MoveOn officials believe that their 
membership, now growing by 75,000 per month, could reach 5 
million by 2006 and perhaps 10 million by 2008.
    Moulitsas is more like a guerrilla force compared with 
MoveOn's teeming infantry. He says his site receives 500,000 
visits a day, more than any other political Web log (although 
many say figures on blog audiences are notoriously fuzzy, and 
Moulitsas acknowledges no one knows how much of that traffic 
represents repeat visits from the same readers). He estimates 
that his site raised about $700,000 for candidates in the 2004 
election. That's not bad for someone armed with only a laptop, 
but MoveOn occasionally takes in that much in a single day.
    Daily Kos's real influence is more indirect; it comes from 
the site's ability to launch ideas through the Democratic 
universe and to some extent the mainstream media, too. 
Moulitsas thinks of himself not as a journalist, but an 
activist. His principal goal, he says, is to provide ``talking 
points'' that Democrats around the country can use to persuade 
friends and neighbors, much the way conservative talk radio 
equips millions of Republican listeners every day with a common 
set of arguments and outrages for water-cooler conversation. 
``I look at this as armies,'' Moulitsas says. ``It's training 
our troops how to fight rhetorically.''
    Both men emphatically keep their distance from the 
Democratic power structure in Washington. Pariser works out of 
the apartment he shares with his girlfriend on an ungentrified 
block south of Brooklyn's fashionable Park Slope; within a 
block of his building are shops selling off-price jeans, 
Mexican and Ecuadoran restaurants, and a pizza place where the 
crowd of teens hanging out one recent sunny afternoon included 
a young man with a fresh shiner under his right eye. Pariser is 
arguably one of the 50 most powerful people in the Democratic 
Party, and he doesn't own a car. He opens his apartment door 
wearing a T-shirt that reads, ``I [heart] Social Security.''
    Moulitsas is a bit more settled. He owns a car (a beat-up 
Subaru) and writes from the house he shares with his wife and 
infant son in a weathered Berkeley neighborhood known as the 
flats. When he moved in, there were crack houses on his street. 
Often he'll file his first daily posts via his laptop while 
he's still in bed.
    The two men share little in personal style. The e-mails 
from Pariser to MoveOn members usually have the earnest and 
friendly tone of a chat at the corner store. The biting 
exchanges between ``Kos'' and the ``kossacks,'' who post 
responses to him and to one another on the site, sound more 
like arguments at the corner bar.
    Pariser almost always considers his words carefully, as if 
imagining how they would look in print. In person, Moulitsas is 
soft-spoken, ingratiating, and quick to laugh. But online, he 
is confrontational, impulsive, and unequivocal; the other day, 
he sweepingly dismissed the Democratic Leadership Council, Joe 
Lieberman, and The New Republic magazine as ``tools of the 
GOP.'' In 2004, Kerry's campaign cut its link to Moulitsas's 
Web site after he wrote that he felt ``nothing'' when four 
American contractors were killed in Falluja, because ``they are 
there to wage war for profit.''
    Neither are Pariser and Moulitsas ideological twins. 
Pariser and MoveOn fall in the party mainstream on most 
domestic issues (the group, for instance, has stressed fiscal 
discipline). But they define the Democrats' left flank on 
foreign policy. MoveOn as an institution, and especially 
Pariser as an individual, not only opposed the war in Iraq, but 
resisted military action in Afghanistan. MoveOn now is pushing 
Democrats to demand a deadline for removing American troops 
from Iraq.
    Moulitsas is more eclectic. He served a three-year stint in 
the Army, and although he opposed the Iraq war, he supported 
the invasion of Afghanistan and calls himself a ``military 
hawk.'' His favorite Democrats aren't Eastern cultural liberals 
like Kerry, but Westerners who combine economic populism with 
libertarian views on social issues like gun control. For the 
2008 Democratic presidential nomination, Kos is currently 
touting Montana's new governor, Brian Schweitzer, a favorite of 
both the National Rifle Association and Democrats who yearn for 
an unabashed populist message.
    The careers of Pariser and Moulitsas have unfolded in 
contrasting styles as well. Pariser has been a political 
prodigy, the equivalent of a baseball player who makes the 
major leagues without ever stopping in the minors. The son of 
1960s activists who founded an alternative high school in 
Maine, he was a recent college graduate working for a nonprofit 
in Boston when the terrorist attacks of September 11, 2001, 
shook America. Pariser quickly launched a Web site that 
promoted a petition resisting a military response to the attack 
(he urged ``moderation and restraint''). Even though polls 
showed that most Americans supported the attack on Afghanistan, 
within two weeks Pariser had collected an astonishing 500,000 
names for the petition. Soon he was receiving calls from media 
outlets as far away as the BBC. ``They said, `We've been 
hearing a lot about this. Who are you?' '' Pariser later 
recalled. ``[I said] `I'm 20 years old; I don't know who I am.' 
''
    Later that fall, Pariser brought his names to MoveOn 
(doubling the e-mail list the group had assembled during 
Clinton's impeachment) and joined the group as an organizer. 
Eventually, he directed MoveOn's campaign against the Iraq war 
(which virtually doubled the size of its e-mail list again). 
Now, with founders Wes Boyd and Joan Blades preferring a less 
public role, he's emerged as the group's most visible figure 
(at a recent MoveOn rally, he was introduced as ``the man whose 
second home is your in-box''), and an architect of its efforts 
to expand beyond cyberspace into on-the-ground organizing. A 
few months ago, Senate Democrats invited him to address them 
during a retreat.
    Moulitsas took a more circuitous route to his identity as 
the fierce Kos. He split his youth between Chicago and El 
Salvador (his mother's native country), where he lived amid a 
brutal civil war. After returning to the Chicago suburbs for a 
rocky adolescence, he enlisted in the Army at 17 and spent two 
and a half years with an artillery unit in Germany. College and 
law school followed, as Moulitsas contemplated careers as 
diverse as journalism and composing film scores. He was working 
as a project manager for a Web-designing company in San 
Francisco when he started his blog in May 2002, angered by 
Bush's direction and inspired by the example of the liberal 
MyDD Web site.
    After years of uncertainty, he had discovered his niche. 
Kos quickly found an audience by expressing the unmediated 
anger of the Democratic base toward Bush, and even more so 
toward Democrats who cooperated with him, especially over the 
war in Iraq. Moulitsas shrewdly built a community by providing 
readers unusual freedom to post their own thoughts, and rose to 
the forefront of political blogs on the same wave of grassroots 
liberal discontent with the Democratic leadership that 
initially propelled Dean's presidential campaign. (Kos was one 
of Dean's first promoters and consulted for his campaign on 
Internet strategy.) Moulitsas's site has been so successful 
(Daily Kos has continued to gain readers even since the 2004 
election) that it has not only become a full-time job but also 
allowed him to edge into a new role as a media entrepreneur by 
launching a series of sports blogs.

                      IN SEARCH OF A WARRIOR PARTY

    For all their differences in style, temperament, and 
experience, Pariser and Moulitsas, in conversations three days 
apart, demonstrated a series of shared political assumptions 
that reflect the solidifying consensus in the online Democratic 
community. Each man believes that the Democratic Party must 
change in the same way and that the rise of the Internet 
activist base is the critical lever to force that change. In 
Washington, many Democratic consultants consider the Internet a 
new source of funding for the party's familiar approaches and 
strategies. But Pariser and Moulitsas made clear that they, and 
those they represent, are looking for something very different.
    Both men believe that the small-donor base developing on 
the Internet will allow Democrats to reduce their reliance on 
business for campaign financing. That, they argue, would allow 
the party to pursue a much more economically populist anti-
corporate message that they believe could win back blue-collar 
voters who have trended Republican over the past generation 
primarily on issues relating to values, taxes, and national 
security.
    Both say they recognize that Democrats cannot hold together 
for a scorched-earth opposition to Bush on every issue. Neither 
Moulitsas nor MoveOn, for instance, was enthusiastic about the 
recent Gang of 14 deal on judicial nominations, but both 
accepted it as a necessary tactical retreat that could allow 
Senate Democrats to fight the filibuster issue again, against 
the backdrop of a Supreme Court nomination.
    But both men want a party of warriors who will link arms to 
resist Bush's principal initiatives, especially the 
restructuring of Social Security. ``When our core values are 
being attacked,'' Moulitsas argues, ``the party needs to stand 
together.'' In the long run, both want Democrats to move away 
from the Clinton model of courting swing voters through ``Third 
Way'' moderation and turn instead toward a Bush approach that 
tries to build a majority mostly by inspiring a large turnout 
from its base with an unapologetically polarizing agenda.
    To Moulitsas, the key lesson from 2004 is that Bush won re-
election while losing moderates badly and independents narrowly 
to Kerry, according to exit polls. ``We won the center and it 
wasn't enough,'' he insists. ``So, clearly, we have to reach 
out more to our base.''
    Pariser, similarly, argues that Bush's re-election victory 
demonstrated that the ``passion'' of hard-core followers was 
``the most powerful political asset around. It was more than 
money, more than message--it's that [Bush] harnessed that 
energy. To dismiss the energy on our side would be a tremendous 
mistake.''
    The two differ somewhat on the tactical question of how to 
tilt the party in this direction. But the difference is of 
degree, not kind. Moulitsas is heavier on sticks than carrots. 
His Web site crackles with attacks on the Democratic Leadership 
Council and other party centrists, and it actively supports the 
liberals searching for a candidate to mount a primary challenge 
next year against Lieberman.
    Moulitsas says he's not promoting civil war between 
Democratic liberals and moderates. Some Democrats representing 
conservative states, like Nebraska's Sen. Ben Nelson, need to 
vote with Bush at times, he acknowledges. But, he says, the 
party shouldn't tolerate defection on its core priorities, 
Democrats who consistently criticize other Democrats, or those 
from blue states who vote with Bush.
    Those latter two points explain why he's so eager to 
challenge Lieberman, who has become a target of the Internet 
activists for defending the Iraq war and at times criticizing 
the Left. A primary against Lieberman, says Moulitsas, ``will 
send a message that behavior that harms the party is going to 
have repercussions.''
    Moulitsas speaks with the abandon of someone who 
understands he is speaking only for himself. Pariser, as the 
voice of an organization whose size makes it a target both for 
other Democrats and for Republicans like Karl Rove, who 
denounced it in June, is more cautious, but still ultimately 
eager to push the party in the same direction that Kos is 
pushing it.
    In contrast to its earlier emphasis on Iraq, MoveOn this 
year has focused primarily on domestic issues that unify 
Democrats, like Social Security or the battle against Bush's 
judicial appointments. Rather than intimidating Democrats who 
support Bush, Pariser says, MoveOn hopes to reward those who 
confront him, with initiatives like the massive fundraising 
drive for Byrd. ``We believe it's the role of the progressive 
movement to create the political space where politicians say 
and do the right thing,'' Pariser says.
    But MoveOn hasn't ruled out more-coercive efforts to compel 
party discipline. It turned heads recently when it ran its ads 
criticizing Rep. Hoyer for supporting the Bush-backed bill 
toughening bankruptcy laws. And while MoveOn, with an eye on 
2006, is focusing mostly on strengthening its volunteer 
organization in congressional districts held by Republicans, 
Pariser says that it's maintaining the option of building 
grassroots organizations to pressure Democrats who vote with 
Bush too often.
    During a several-hour conversation, Pariser frequently said 
that the group had not yet decided to take such pressure to the 
next, far more explosive, step by supporting liberal 
challengers to Democratic incumbents. But he also repeatedly 
made clear that the group wasn't closing off the idea. ``That's 
a question we are talking about now,'' he said.
    In all of this, Pariser and Moulitsas, like many of those 
they represent on the Internet, appear very much the product of 
the Democrats' fall from power. Almost everyone in the party's 
Washington hierarchy can remember a time when Democrats thought 
of themselves as the nation's natural majority party. Pariser 
and Moulitsas are children of the minority. For Democrats, they 
believe, the first step toward recovery is to acknowledge that 
revival requires more than tinkering. In their eyes, it will 
require Democrats to think of themselves not as a governing, 
but an opposition, party that bloodies the majority Republicans 
by any means necessary--much as Republicans did under Newt 
Gingrich in the final years of their assault against the 
decades-old Democratic majority in the House of 
Representatives. ``D.C. is still trapped in 1970s thinking,'' 
sighs Moulitsas. ``It is hard for them to realize we really are 
a minority party. What they have to understand is that 
Republicans became a majority party only by being a really 
effective opposition party.''

                      DEMISE OF THE ``THIRD WAY''

    One theory of international relations holds that wars most 
often start when a new force emerges to disrupt an established 
power structure, the way, say, Germany did in the early 20th 
century. Much the same dynamic is under way in the Democratic 
Party today. Through Clinton's two terms, centrists dominated 
the party. Now, largely because of the rise of the Internet 
activist base, the Left is resurgent. And that is heightening 
tensions.
    For liberals who chafed under Clinton's reign, the 
emergence of MoveOn, Dean's Democracy for America, and the 
blogs is like the arrival of the cavalry. Robert Borosage, co-
director of the liberal Campaign for America's Future, has been 
pulling in the tug-of-war between Democratic liberals and 
centrists for more than two decades. He sees the development of 
the Internet as a decisive tilt in that struggle.
    ``I think this means, certainly at a presidential level and 
probably at a senatorial level and maybe at a congressional 
level, candidates will always know there is a slot on the 
progressive side of the dial that can be competitive 
financially * * * and they don't have to bow to the large-money 
interests in the Democratic Party in order to be financially 
competitive,'' he says. ``Someone will always compete for that 
slot, and that, I think, transforms elections and transforms 
the opportunity to create the politics that many of us have 
thought is necessary to re-create a progressive majority for 
change--one that has a clear economic message for working 
people.''
    Although liberals like Borosage unreservedly embrace the 
new Internet forces, Democratic centrists have divided over how 
to respond. The most vehement camp views the Internet Left as a 
danger. These activists argue that for all of the 
organizational and technological capacity of the Internet 
activists, they are pushing the party toward policies, 
especially in foreign affairs, that will fatally narrow the 
Democrats' support.
    Peter Beinart, the editor of The New Republic, developed 
this case extensively in a controversial cover story last 
winter when he called on Democrats to ``take back'' the party 
from MoveOn and the Internet Left--what he called ``the 
softs''--much the way liberals after World War II rejected 
alliance with domestic Communists. Beinart was especially 
impassioned, but he is hardly alone. The DLC promoted his 
conclusions. And several other centrist party strategists worry 
that the hyperpartisan turn-out-the-base strategy that many 
online activists demand won't work for Democrats, because polls 
consistently show that more Americans consider themselves 
conservative than liberal.
    ``We are more of a coalition party than they are,'' says Ed 
Kilgore, the policy director for the DLC. ``If we put a gun to 
everybody's head in the country and make them pick sides, we're 
not likely to win.''
    Simon Rosenberg defines the other pole of the debate among 
centrists. In May, Rosenberg appointed Moulitsas as a founding 
adviser to a new think tank, the New Democratic Network, 
established to craft fresh political strategies for Democrats. 
Rosenberg has not only welcomed the Internet activists, but 
also argued that New Democrats need to learn from their call 
for a more partisan resistance to Bush.
    Strikingly, Rosenberg accepts the Internet Left's 
fundamental argument that Democrats should move away from 
Clinton's efforts to court the middle by finding a Third Way 
between traditional Democratic and Republican approaches. Such 
efforts to find compromises between the parties, Rosenberg 
says, have become ``obsolete'' in the face of Bush's crusading 
conservatism.
    ``As powerful as the Third Way formulation was in the 
1990s, it is an antiquated way of looking at the world * * * 
and it is not a viable position in the United States right 
now,'' Rosenberg says. ``What people [in the Democratic Party] 
are looking for is not a Third Way; they are looking for a 
modern progressive movement that can fight the conservative 
movement. [The choice] has become binary, and that is what has 
changed.''
    In this dispute, each side can already point to examples of 
Internet-base influence that support its case. Many give the 
online activists credit for helping to solidify Democratic 
opposition to Bush's plan to restructure Social Security--in no 
small part by so openly threatening primary challenges against 
Democrats, like Lieberman, who have considered supporting him. 
``It has helped stiffen spines, and I think that's a good 
thing,'' said Wolfson.
    Conversely, many centrists believe that the demands of the 
Internet Left influenced John Kerry's decision in 2003 to vote 
against Bush's $87 billion request to fund the war in Iraq. 
That vote became an albatross for Kerry in the general election 
when Bush used it as his prime example to accuse the Democrat, 
who had voted to authorize the war, of flip-flopping on issues. 
MoveOn had urged Democrats to oppose the funding, and Kerry 
cast his vote at a moment when Dean's presidential campaign, 
fueled largely by the torrent of online donations, was at its 
zenith.
    Pariser and Moulitsas both say that the problem wasn't 
Kerry's vote, but his failure to effectively defend it. But to 
those who are uneasy about the party's direction, Kerry's 
stance against the funding dramatized the potential cost with 
swing voters for pursuing policies meant to energize the 
Internet base.
    Like many other Democrats who have avoided extreme 
positions in this debate, Wolfson says that the challenge for 
Democrats is to maximize the tangible benefits the Internet 
provides without losing sight of a larger electorate whose 
views aren't nearly so fervent.
    ``It's wonderful to have a network of donors through the 
Internet that is the equal of the Republican direct-mail donor 
base, * * * and it is obviously important for Democrats to have 
a way to talk to Democrats,'' he says. ``The downside is if we 
have a conversation [only] with ourselves. And at this moment, 
the center of gravity in the U.S. is not on the left; it may 
not even be on the center-left, so a conversation geared to the 
left is, by definition, exclusionary.''
    At a time when Internet activists are agitating for 
challenges to party centrists, and liberal blogs are crackling 
with denunciations of legislators who vote with Bush, though, 
it seems unlikely that the party can reap the benefits of the 
online activists and donors without bending toward the 
confrontational politics they are demanding. ``I don't think a 
Democratic politician anymore can poke the base in the eye,'' 
says Matzzie, MoveOn's D.C. director. ``They can, but only if 
they are willing to walk away from everything the Internet can 
give them.''

                           THE ULTIMATE TEST

    This isn't the first time that technological change has 
triggered ideological turmoil. In 1972, the emergence of 
direct-mail fundraising helped George McGovern overwhelm the 
party establishment and seize the Democratic presidential 
nomination on an insurgent anti-war platform. Later in the 
decade, those same direct-mail techniques, adapted by 
conservatives, powered the rise of Jesse Helms, the ``New 
Right'' advocacy groups, and then Ronald Reagan. The spread of 
talk radio provided a comparable boost for the next great wave 
of conservative advance, the Republican takeover of Congress in 
1994.
    The common thread is that each of these new tools proved 
more effective at mobilizing ardent activists than moderate 
voters. All provided new means to concentrate and harvest the 
emotion of an ideological vanguard that cared enough about 
politics to respond to requests for contributions or volunteers 
or calls to Capitol Hill. In that way, each technological 
advance strengthened the ideological edge of the parties 
against the center, just as the Internet is doing in the 
Democratic Party today.
    But that history also shows that it's wrong to assume 
technology is destiny in determining a party's direction. 
Conservatives, aided by the new technologies of direct mail and 
talk radio, have consolidated their control of the Republican 
Party over the past three decades. Liberals, until recently, 
have lost ground in the Democratic Party for roughly the same 
period. The difference is that the Right has elected far more 
of its true believers to office than has the Left. McGovern, 
remember, lost 49 states in the 1972 presidential race; Reagan 
won 49 in 1984. Even today, the share of Republican senators 
and House members who qualify as hard-core conservatives 
exceeds the share of Democrats who could be identified as die-
hard liberals.
    This history frames both the opportunity and challenge for 
the reinvigorated Left that is now organizing online. The 
Internet's tremendous power to transmute ideological passion 
into money and activism is increasing the Left's stature inside 
the Democratic Party for the first time since at least Reagan's 
1984 landslide over Walter Mondale, and perhaps since the 
McGovern campaign itself. But the Left's position inevitably 
will erode again unless the strategy it is promoting wins 
elections. After all, Dean failed to win a single Democratic 
primary and Kerry lost the general election, despite the 
unprecedented energy that each man unleashed on the Internet. 
The ultimate test of political success isn't inspiring passion 
or even generating volunteers and contributions; it's 
attracting more votes than the other side.
    Moulitsas, for one, understands that as the influence of 
the online Democratic activists grows, so does the pressure on 
them to produce results. ``The centrists' strategy [in the 
1990s] didn't turn things around, and the decline for Democrats 
just kept going,'' he says. ``If we get our way, and we have a 
more partisan Democrat [as the presidential nominee] and the 
money is there, and in eight years we haven't made any headway, 
I'm willing to say we should try something else.''

                               APPENDIX D

                              ----------                              


                    [From Roll Call; Apr. 13, 2005]

                         MoveOn Goes Mainstream

                          (By Chris Cillizza)

    Once regarded warily by much of the Democratic 
establishment, the liberal grass-roots group MoveOn.org is 
being increasingly courted by Democratic officeholders for its 
3 million members--and their deep pockets.
    The Web-based advocacy organization, by far the left's most 
potent fundraising operation outside of the Democratic Party 
itself, has raised its profile considerably on Capitol Hill in 
recent months.
    ``It's been an interesting experience for us,'' said Eli 
Pariser, the executive director of MoveOn.org's political 
action committee. ``I don't know to what degree it's a 
political move and to what degree Democrats understand now it 
is important to court our constituency.''
    Republicans have pounced on the increased cooperation, 
seeking to paint Democrats as beholden to their party's liberal 
wing.
    The National Republican Senatorial Committee recently 
released a six-page research document titled ``How Much is that 
Donkey in the Window,'' filled with positive comments made by 
Democratic leaders regarding MoveOn and highlighting the 
group's issue positions.
    Most controversial among them are the organization's 
opposition to the use of force in Afghanistan following the 
Sept. 11, 2001, terrorist attacks, and to the war in Iraq.
    ``The Democrat Party at an unprecedented level has become 
best friends withMoveOn.org,'' said NRSC spokesman Brian Nick. 
``On the major issues, we are [seeing] MoveOn.org is moving in 
lock step'' with the Democratic Party, he added.
    The most high-profile event illustrating the new synergy 
between MoveOn and Democrats came March 16 with a rally on 
Capitol Hill.
    It drew Senate Minority Leader Harry Reid (Nev.) and Senate 
Minority Whip Dick Durbin (Ill.) as well as Sens. Charles 
Schumer (N.Y.), Robert Byrd (W.Va.), Edward Kennedy (Mass.) and 
Barbara Boxer (Calif.).
    MoveOn followed that event with an e-mailed fundraising 
plea on Byrd's behalf from Illinois Sen. Barack Obama (D). The 
message raised more than $800,000 for the West Virginia Senator 
in just 72 hours.
    (Last October, Obama wrote two fundraising e-mails for 
MoveOn that netted $1.2 million for seven Senate candidates 
around the country.)
    Behind the scenes, the organization has gained considerable 
entree as well.
    House Minority Leader Nancy Pelosi (Calif.) has worked with 
MoveOn since being elected the top Democrat in the House 
leadership in late 2002, but the relationship between the two 
grew closer during the fight over adding a prescription drug 
benefit to Medicare, said spokeswoman Jennifer Crider.
    Crider added that Pelosi or her staff have calls and 
meetings ``on a weekly basis'' with representatives of MoveOn.
    The Senate Steering and Outreach Committee holds a Monday 
telephone call with roughly 20 outside advocacy organizations 
whenever Congress is in session. MoveOn has been a participant, 
though infrequently, sources said.
    Susan McCue, Reid's chief of staff, said that MoveOn 
``effectively represents an important part of our 
constituency.''
    Laura Gross, a spokeswoman for the Democratic National 
Committee, also praised MoveOn's efforts.
    ``Obviously they are relaying the Democratic Party message, 
which is in line with what the DNC is doing and what the Hill 
is doing as well,'' said Gross.
    She added that DNC Chairman Howard Dean participated in a 
March 10 conference call with members of the MoveOn PAC.
    Pariser said that while MoveOn's interests have paralleled 
those of the Democratic Party of late, that will not always be 
the case.
    ``We are not the party, and on issues where we diverge from 
some in the party we are going to'' make it clear, Pariser 
promised.
    On Monday, for example, MoveOn sent an e-mail designed to 
raise money for radio ads hitting House Members who support the 
stiffening of bankruptcy regulations--a bill that will be voted 
on this week.
    Its most recent effort notwithstanding, Pariser 
acknowledged that MoveOn's members recognize that ``we are at a 
time when the Democrats are the only thing standing between 
Republicans and disaster'' on such issues as Social Security 
and judicial nominations.
    In recent weeks, MoveOn has aired ads on both issues in 
targeted districts and on national cable.
    That connection has not gone unnoticed by Republicans who 
believe that MoveOn's donations to Democrats--estimated to be 
in the hundreds of millions of dollars--during the 2004 cycle 
bought them a seat at the table with the party.
    Nick and Republican National Committee Deputy 
Communications Director Tracey Schmitt made reference to an e-
mail to MoveOn members sent earlier this year by Pariser, in 
which he wrote: ``Now it's our party: We bought it, we own it 
and we're going to take it back.''
    Schmitt said such a statement ``should trouble the party.''
    ``After spending millions of dollars to defeat President 
Bush, they are now going after his agenda,'' Schmitt added. 
``They are completely out of touch with mainstream America.''
    Pariser dismissed such criticisms as a sign of Republicans' 
anxiety over his organization's activities.
    ``Republicans are trying very consistently to wedge between 
this big group of middle-class Americans and the Democratic 
leadership,'' he said. ``It's not working because the charge is 
baseless.''
    Privately, Democratic insiders admit that publicly 
associating with MoveOn does carry potential pitfalls for the 
party, but they argue that the money and grass-roots energy the 
group can deliver make such risks worthwhile.
    Among elected Democratic leaders, there is a ``recognition 
that MoveOn can excite the troops and till the ground to grow 
more Democratic activists in a way that makes any risks 
associated with their activities or their views less important 
than the rewards we can gain,'' one party strategist said.
    MoveOn ``can be embraced when they need to be embraced and 
you can distance yourself from them when you need to,'' the 
source added.

                               APPENDIX E

                              ----------                              


             [From the St. Petersburg Times; Feb. 18, 2005]

                   Unshaven, Unbowed and in Our Face

                           (By Adam C. Smith)

    Tom Matzzie describes himself as a pacifist techno geek. 
Maybe so, but MoveOn.org's man in Washington sounds like one 
cocky computer nerd.
    Between bites of sushi, Matzzie noted how senior Democratic 
senators eagerly rearrange their schedules to meet with MoveOn. 
And how MoveOn would be comfortable helping defeat Democratic 
Rep. Allen Boyd if the Panhandle congressman continues 
embracing private accounts for Social Security.
    What's more, ``We're going to have to have some discussions 
with Bill Nelson,'' because Florida's senior senator appears 
reluctant to block President Bush's controversial judicial 
nominations. And the centrist Democratic Leadership Council 
that helped guide Bill Clinton into the White House? So 1990s.
    ``The candidates want nothing to do with the DLC, it's so 
out of vogue,'' the 29-year-old scoffed. ``If the DLC 
disappeared from the Democratic Party tomorrow, no one would 
notice. If MoveOn weren't part of the party, people would 
notice and care.''
    Most of the leaders in this new powerhouse in the 
Democratic party establishment are younger than 40, which 
MoveOn suggests makes them better equipped to re-invent 
politics. They're known to millions of donors by their first 
names--Tom, Eli, Adam--and tend to go for facial hair.
    ``A bunch of us have beards,'' Matzzie chuckled, ``because 
we're all self-conscious about the whole age thing.''
    Having helped revolutionize online organizing and 
fundraising, MoveOn isn't about to let the Democratic Party 
forget it. The organization and its legions of Internet-savvy 
activists are determined to have their say, as have labor 
unions, trial lawyers and other longtime Democratic 
fundraisers.
    ``In the last year, grass-roots contributors like us gave 
more than $300-million to the Kerry campaign and the DNC, and 
proved that the Party doesn't need corporate cash to be 
competitive,'' MoveOn's 24-year-old executive director said in 
a recent e-mail urging members to back an outsider for chairman 
of the Democratic National Committee.
    ``Now it's our Party: we bought it, we own it, and we're 
going to take it back.''
    A lot of Democrats are terrified at the prospect.
    Michael Moore shaved and donned a suit to visit with Jay 
Leno after the November election. America Coming Together 
packed up its Palm Pilots and sent its armies of Democratic 
door-knockers back to conventional jobs. Bruce Springsteen and 
the rest of the rockers against Bush stepped off the political 
stage.
    But MoveOn, after catching its breath, is roaring back into 
action.
    It launched TV ads blasting Bush's Social Security 
proposal. It mobilized members to help elect Howard Dean DNC 
chairman. It's hiring 50 organizers to launch a full-time field 
organizing program in 1,000 communities.
    ``MoveOn has always been about building up momentum on 
issue after issue. Now, after admittedly losing a major battle, 
we're stronger than ever before,'' said Eli Pariser, executive 
director of the 3.1-million member group.
    The presidential election loss that so devastated countless 
Democratic activists, Pariser said, only motivated more people 
to get active. An additional 250,000 people have since joined 
MoveOn, tens of thousands of them apparently in response to the 
president's call to revamp Social Security.
    In 2004, MoveOn fielded canvassers across Florida and 
flooded the airwaves with anti-Bush TV ads. But after spending 
$60-million on the last election cycle, its influence could 
increase dramatically in 2006, an off-year election where 
energizing the party's base is all the more important.
    ``MoveOn will be able to ask our members to contribute to 
the Florida governor's race faster than any organization in the 
United States,'' Matzzie said. ``Literally millions of dollars 
can come into the Florida governor's race overnight.''
    MoveOn is at the forefront of a seismic shift in politics, 
or at least Democratic politics. Only a few years ago, the 
party depended mostly on unlimited ``soft money'' donations 
from corporations and interest groups; many activists saw it 
disconnected from its grass roots base.
    Hokey as it sounds, forces like MoveOn and Howard Deaniacs 
are replacing corporate and soft money-dominated politics with 
real-people politics.
    That might sound like great news for Democrats, but many 
party insiders are groaning over MoveOn's rising profile. After 
an election when most of middle America backed Bush, the 
thinking goes, do Democrats really want to emphasize the livid, 
lefty, antiwar wing of the party?
    Peter Beinart, editor of the Democratic-leaning New 
Republic magazine declared MoveOn and Moore the two greatest 
obstacles preventing Democrats from winning majorities. He said 
they make the party seem weak on national security.
    Critics see a massive left-wing Ponzi scheme: MoveOn's e-
mail list keeps growing, its fundraising and spending keep 
soaring, and little ultimately gets accomplished.
    ``MoveOn's building up their own brand and they're building 
own fundraising base--possibly at the expense of the Democratic 
Party,'' said Marcus Jadotte, a senior Kerry-Edwards campaign 
adviser.
    ``Their involvement with the 2004 election was more focused 
on building affinity with activist Democrats than defeating 
George Bush. They didn't speak to the middle. They didn't focus 
on enhancing the base, they focused on riling up the base.''
    The wild-eyed liberal tag really bugs MoveOn's leaders. If 
they only spoke for people on the fringe, they couldn't raise 
so much money and wean the Democrats off corporate 
contributions.
    ``MoveOn has taken only positions that have very broad 
appeal, and that's because our goal is unifying a loyal 
opposition to the Bush administration, which we find very 
extremist,'' said Wes Boyd, 44, one of MoveOn's founders. 
``Opposition to the Iraq war is a very mainstream position.''
    MoveOn was created in the late 1990s by Boyd and Joan 
Blades, 48, a couple from Berkeley, Calif., formerly best known 
for the flying toaster screen savers and online game ``You 
Don't Know Jack,'' created by their company, Berkeley Systems.
    MoveOn began as a petition to leaders in Washington--as in, 
censure Clinton and move on to more pressing issues--but its e-
mail list exploded over opposition to the war in Iraq.
    Now it's a Democratic institution whose leaders and members 
are unchastened by their loss in November. It wasn't MoveOn's 
``liberal'' TV ads decrying the growing federal deficit and 
faulty justifications for war that cost Democrats the election, 
they say. Those ads were market-tested for effectiveness at 
persuading voters, not simply preaching to the choir.
    To MoveOn, the lesson of November is not that in-your-face 
opposition to Bush is damaging to Democrats. Far from it. What 
hurts Democrats most, they say, is lack of coherence and 
reluctance to strong for their beliefs.
    ``A lot of party moderates are stuck in an old way of 
thinking about politics, which doesn't jibe with the power 
hungry, no-holds-barred style Bush has brought to Washington,'' 
said Pariser, who before joining MoveOn had created an online 
petition urging restraint after the Sept. 11 attacks.
    Even some of the most passionate disciples of online 
organizing sometimes wonder about MoveOn's strategy. Take their 
ads targeting Boyd, probably the most vulnerable Democrat in 
Florida's congressional delegation.
    ``They're going after a Democrat?'' asked Joe Trippi, 
Dean's former presidential campaign manager and a pioneer at 
harnessing the Internet for campaigns.
    ``I'm not so sure their members would all agree with that. 
* * * The organized party has to be closer to the grass roots, 
and the grass roots over time is going to come to understand 
that their party has to have a big tent. It's going to be a 
maturing process, and obviously MoveOn is going to be a leader 
in that.''
    Pariser contends that MoveOn's semi-outsider status makes 
it uniquely suited to help elected leaders in the party.
    ``We're acting as kind of an external whip, making sure 
there are rewards for people who are helping move the message 
and penalties when people go off message,'' he said.
    ``We're a team player.''
    As congressional Democrats become increasingly aggressive 
challenging Republicans and MoveOn continues revving up its 
base, though, it's not clear yet who's leading the team.

                               APPENDIX F

                              ----------                              


                    [From Roll Call; Apr. 27, 2005]

               MoveOn Wants Sanders To Move Up to Senate

    As expected, a full 96 percent of MoveOn.org members 
believe the liberal organization should support Rep. Bernie 
Sanders (I) if he decides to seek the Green Mountain State's 
open Senate seat next year.
    ``You're willing to put your time and money where your 
mouth is, too--thousands of you volunteered to help with the 
campaign, and together you said you'd contribute over 
$135,000,'' MoveOn.org Political Action Committee Executive 
Director Eli Pariser said in an e-mail to the organization's 
supporters. He noted that the show of support was just from 
Vermont members.
    ``Since we're in the middle of our emergency campaign on 
judicial nominations, it may be a few weeks before we're able 
to raise money for Sanders from our whole base,'' Pariser said. 
``Together, we'll make sure that Vermont sends a real 
progressive to the Senate in 2006.''
    Sanders has not formally entered the race to succeed 
retiring Sen. Jim Jeffords (I) but has made no secret of his 
desire to ascend to the Senate.
    Jeffords decided to retire just last week so no one has 
entered the race yet, save Republican Greg Parke, who was 
already planning to challenge Jeffords next year.
    Parke was the GOP candidate against Sanders last year in 
the state's lone House race, and he lost badly.

                               APPENDIX G

                              ----------                              


                    [From Roll Call; July 11, 2005]

                        Gop Sees MoveOn as Wedge

                   (By Chris Cillizza and Paul Kane)

    From top White House operative Karl Rove to two of the 
party campaign committees, Republicans have launched a full-
scale attack on MoveOn.org, questioning the liberal group's 
patriotism and worldview.
    These attacks appear to have two purposes: One is to put 
the group and its Democratic allies on the defensive over 
support for the war on terror. And the second is to drive a 
wedge between Democratic candidates and the millions of dollars 
that MoveOn's supporters have pumped into their campaigns.
    With MoveOn fast becoming one of the Democratic Party's 
most important fundraising sources, the second goal may end up 
being the more important one.The 2006 Pennsylvania Senate race 
provides a window into the developing battle over MoveOn.org.
    State Treasurer Bob Casey Jr. (D) was featured recently in 
a MoveOn e-mail designed to drive donors to support his 
challenge to Sen. Rick Santorum (R). Within the first 24 hours, 
the appeal brought in $150,000 for the Casey campaign.
    But the National Republican Senatorial Committee 
immediately went on the offensive with a release titled, 
``Casey Moves In With MoveOn,'' alleging that the group's e-
mail on behalf of Casey shows how closely he is aligned with 
the ``ultra-liberal left.'' John Brabender, Santorum's media 
consultant, predicted that if Casey continues to accept MoveOn 
money, he will have to answer for the group's controversial 
policies, which include opposing military intervention in 
Afghanistan.
    ``You can tell a lot about a person by the company they 
keep,'' Brabender said. A group like MoveOn ``will have a lot 
of trouble in Pennsylvania, particularly in the middle part of 
the state. The group will be hung around Bobby Casey's neck.''
    The rhetoric from Brabender and the NRSC is aimed at 
forcing Casey into a no-win choice: He could pass up a generous 
source of campaign cash, or he could accept MoveOn's ample 
resources, yet face an assault over the group's issue stances.
    Refusing MoveOn money is no small financial decision. In 
less than 48 hours, the group raised $800,000 for the re-
election campaign of West Virginia Sen. Robert Byrd (D)--almost 
single-handedly quieting rumors that the octogenarian would 
retire his seat in 2006.
    Eli Pariser, executive director of the MoveOn.org political 
action committee, called the Republican tactics ``smart.''
    ``This is a very pure, very stable source of funds,'' said 
Pariser about his organization. ``It is totally unlike the 
rubber chicken model of fundraising.''
    Leading Senate Democrats agree. ``They are trying to 
discredit and smear MoveOn because it's so successful,'' said 
Minority Whip Dick Durbin (D-Ill.), who added that the group is 
``one of our most important'' fundraising avenues.
    Democratic Senatorial Campaign Committee Chairman Charles 
Schumer (N.Y.) said MoveOn has grown to be so important because 
the group, through the use of e-mails, has turned grass-roots 
fundraising upside down.
    Long a bastion of conservatives, direct mail used to be the 
most costly form of fundraising, barely yielding $1 raised for 
every $1 spent but generally bringing in lots of cash and 
spreading a sharply worded, partisan message in the missives.
    But the costs of MoveOn's e-mails are negligible, and their 
haul is often astounding, as Byrd discovered at the end of 
March.
    ``Now MoveOn and others have caught up to [conservative 
direct mailers] and surpassed them, and they're not happy about 
it,'' Schumer said.
    The campaign against MoveOn moved to a new level with 
Rove's June 22 speech in midtown Manhattan, not far from the 
site of the World Trade Center attacks.
    Rove accused MoveOn and other liberals of wanting to 
``offer therapy and understanding for our attackers.'' 
Democrats pounced on the remarks and demanded an apology from 
Rove, noting that Durbin just the previous day had apologized 
for likening treatment of prisoners at Guantanamo Bay to those 
in Nazi Germany or in Soviet gulags.
    But rather than issuing an emotional apology--as Durbin 
did--the White House and Republicans went into full attack mode 
on MoveOn and other liberals, including Democratic National 
Committee Chairman Howard Dean.
    The Republican National Committee issued reams and reams of 
documentation on the positions of MoveOn and Dean regarding the 
war in Afghanistan. The White House refused to offer even a 
hint of an apology. And the NRSC sent out a fundraising e-mail 
lambasting MoveOn, beginning with: ``Karl Rove was right.''
    And a few days later, when MoveOn's pitch went out on 
Casey's behalf, the NRSC again pounced on the group and 
attacked the centrist-leaning candidate for allying himself 
with a liberal group--a line of attack that the committee has 
used mercilessly against Byrd ever since the late March 
fundraising pitch on his behalf.
    Rep. Tom Reynolds (N.Y.), chairman of the National 
Republican Congressional Committee, said he did not necessarily 
view the attacks on MoveOn as part of a party-wide effort to 
drain Democratic funding sources. But, he agreed that it has 
become a major financial engine for Democrats.
    ``They certainly have more money there than Howard Dean and 
the DNC,'' Reynolds said, adding, ``Many of their investors 
stand for extremist views.''
    For a campaign expected to cost in the neighborhood of $20 
million, Casey may not be in a position to reject MoveOn's 
dollars even if doing so would save him some political 
heartburn.
    Jay Reiff, campaign manager for Casey, dismissed the idea 
that his candidate would face any sort of choice.
    ``Bob Casey's positions are not going to change based on 
who happens to endorse him,'' said Reiff. ``They endorsed him, 
he didn't endorse them.''
    In their attacks, Republicans are treading a familiar path.
    For decades, Democratic candidates have come under fire 
from Republicans for accepting campaign contributions from 
trial lawyers and labor unions.
    The GOP has also targeted both camps legislatively, 
including curbs on class-action lawsuits and attempts to 
prevent unions from using compelled dues for political 
purposes. Both would effectively limit the ability of trial 
lawyers and unions to aid Democratic causes.
    While such arguments have at times caused Democratic 
candidates some problems, they have rarely if ever driven them 
to not accept donations from these interest groups. (Democrats 
have also attacked Republicans for taking money from social 
conservatives, big corporations and gun-rights groups, but that 
tactic has not usually been as central to the party's campaign 
strategy.)
    Matt Keelen, a former Republican fundraising consultant 
who's now a lobbyist with Valis and Associates, insists that 
MoveOn is a special case.
    ``It is going to take some time, but MoveOn is making it so 
easy with their radical, anti-American stances that, over time, 
people are going to view them as the fringe--to the left of 
Howard Dean,'' said Keelen.
    Not so, say Durbin and other Democrats.
    ``The more they attack them, the more popular they are,'' 
Durbin said of MoveOn.
    The GOP's ability to delegitimize MoveOn, to some degree, 
hinges on how the war in Iraq plays out. In recent weeks, 
support for the war has been sinking.
    Rep. Harold Ford Jr. (D-Tenn.), who's running for the 
Senate in a conservative state by positioning himself as a 
centrist, said he has no problem if MoveOn wants to help him 
raise cash.
    ``MoveOn.org hasn't placed one road-side bomb in Iraq,'' 
Ford said. ``Nor did MoveOn.org fail to plan an exit 
strategy.''
    While the group hasn't yet helped him, Ford said Rove's 
attacks on MoveOn smacked of ``childish instinct.''
    Pariser added that it will be difficult for Republicans to 
attack a candidate for taking contributions from a group 
``funded exclusively or largely by grass-roots people in $25 
amounts.''
    He points out that recent issues MoveOn has highlighted--
opposition to Social Security reform and support of an overhaul 
of the campaign finance system--are in tune with a large 
portion of the citizenry.
    ``There is no position that the organization as a whole has 
taken that is outside of the mainstream,'' said Pariser. ``None 
of those things are something that a candidate needs to fear.''

                               APPENDIX H

                              ----------                              


                    [From USA Today; June 28, 2004]

          ``Outside'' Political Groups Full of Party Insiders

                           (By Jim Drinkard)

    From his seventh-floor office, Jim Jordan can see the 
headquarters of the AFL-CIO across the street. It's a three-
minute stroll from his office to the headquarters of John 
Kerry's presidential campaign, which Jordan ran until last 
November.
    The room Jordan occupies was the office for Democratic 
Party Chairman Terry McAuliffe last year while the party's 
building was being renovated. Before that, it was used by Steve 
Rosenthal, organized labor's former chief political 
strategist-- and now Jordan's colleague in an enterprise often 
described as a ``shadow'' Democratic Party. The shadow party's 
office space is subleased from the AFL-CIO.
    In that office is the Thunder Road Group, a communications 
firm Jordan runs. Its primary clients are two independent 
political groups, America Coming Together and the Media Fund.
    To Republicans, Jordan epitomizes the web of links and 
relationships among the Kerry campaign, the Democratic Party, 
organized labor and a network of allied outside political 
groups. They argue that his presence as a strategist for groups 
that are spending tens of millions of dollars to boost Kerry is 
clear evidence of illegal coordination.
    The law forbids purportedly independent political groups 
from coordinating their plans and strategies with the party or 
candidates they support. That's because the outside groups can 
raise and spend unlimited amounts of money, while campaigns and 
parties are strictly limited in the size of contributions they 
can accept from supporters.
    If coordination were allowed, it would mean large, 
unregulated contributions--known as ``soft money''--could be 
harnessed by a candidate as if they had been given directly to 
the campaign. As the Supreme Court wrote in a campaign-finance 
ruling last year, ``expenditures made after a `wink or nod' 
often will be as useful to the candidate as cash.''

                          APPEARANCE VS. PROOF

    But there's a wide gulf between the appearance of 
coordination and proving it in court, where First Amendment 
rights to free speech provide wide latitude to political 
activists. Besides, Jordan says, there are many legal ways to 
make sure friendly political campaigns complement each other. 
``There aren't many secrets in Washington,'' he says.
    The issue of how much coordination is legal is likely to 
grow along with the proliferation of outside groups. As their 
numbers multiply, so will the amount of money flowing in to 
influence elections for the White House and Congress. That 
threatens to blow a hole in the campaign-finance law that bans 
unregulated money from being used by parties and candidates, 
the law's supporters say.
    ``The people who are conducting these supposedly 
independent campaigns are people who have been intertwined with 
Democratic and Republican campaigns for years,'' says Fred 
Wertheimer, president of the watchdog group Democracy 21.
    Democrats have attracted the most scrutiny because they 
have been the most aggressive in setting up channels for 
outside money to help Kerry or to attack President Bush. The 
network includes more than two dozen outside groups, several of 
them created in the past two years to influence the 2004 
elections.
    Many of the groups have drawn their top personnel from the 
AFL-CIO and the Democratic Party. Rosenthal, the labor 
federation's former political director, joined Ellen Malcolm, 
founder of the fundraising group EMILY's List, to form America 
Coming Together. They get public relations help from Jordan and 
legal advice from Larry Gold, the AFL-CIO's counsel. That 
advice, Gold says, includes an admonition to avoid any 
conversations with operatives in the party or the campaign, 
even if they are longtime friends.
    Harold Ickes, a top campaign and White House adviser to 
Bill Clinton, created the Media Fund to advertise on Kerry's 
behalf. He is raising money jointly with Malcolm and Rosenthal. 
Ickes is a member of the Democratic Party's executive 
committee. Ickes' media consultant, Bill Knapp, left the Media 
Fund last month to go to work for Kerry.
    Pollster John Marttila, who does work for the Brady 
Campaign, a gun-control group, and is an adviser to the Kerry 
campaign, also made a presentation on May 20 to America Votes, 
a forum where pro-Democratic groups coordinate their campaign 
activities.
    Zack Exley joined the Kerry campaign last month as its 
director of online organizing after working in a similar job 
for the online organization MoveOn.org, which has aired 
millions of dollars in anti-Bush ads. He turned in his laptop 
computer when he made the move, but Republican Party Chairman 
Ed Gillespie complained that Exley couldn't forget what he had 
learned. ``It's virtually impossible for him not to violate the 
law unless he has a lobotomy,'' Gillespie says.

                    REPUBLICANS BUILDING OWN NETWORK

    The Republicans could be subject to similar complaints, 
particularly as they seek to form their own network of outside 
groups.
    Last October, Bush's campaign manager, Ken Mehlman, gave a 
pep talk to donors of Progress for America, a Republican group 
seeking to match the Democratic efforts. Gillespie also was 
there. The group was founded by Tony Feather, political 
director of Bush's 2000 campaign, and is closely linked to the 
DCI Group, a voter-contact firm that has contracts with the 
Bush re-election campaign and the Republican Party.
    Another group, the Leadership Forum, recently recruited a 
stable of 35 well-connected Republicans to raise money to help 
Bush. Most of them are Washington lobbyists, and one--former 
Senate GOP aide David Hoppe--now runs Gillespie's lobbying 
firm.
    When the Federal Election Commission decided May 13 not to 
regulate outside political groups in this election, senior 
Republican leaders sent strong signals that they expected their 
party to counter the offensive by Democratic-linked groups.
    Gillespie and Bush campaign chairman Marc Racicot issued a 
statement designating Progress for America, the Leadership 
Forum and two other groups as good places for conservative 
soft-money donors to send their checks. The Leadership Forum is 
run by Susan Hirschmann, a former chief of staff to House 
Majority Leader Tom DeLay of Texas. House Speaker Dennis 
Hastert of Illinois and House GOP campaign chairman Tom 
Reynolds issued a statement saying ``it would not be 
surprising'' if new groups sprang up.
    Regulators have long struggled with how to define illegal 
coordination and how to enforce prohibitions against it. In the 
1980s and 1990s, the Federal Election Commission brought few 
enforcement actions over illegal coordination and won fewer. 
Coordination, particularly as defined by the courts, became 
virtually impossible to prove.
    When Congress rewrote campaign-finance law in 2002, it 
directed the FEC to write less-permissive regulations. The 
result was a rule that covers the dissemination of any 
television, radio, mail or telephone message conveyed during a 
campaign season by an outside group--if it mentions a federal 
candidate, and if its content, timing or targeting has been 
shaped by inside knowledge of the candidate's ``projects, needs 
and strategies.'' The value of a message coordinated in such a 
way becomes an illegal contribution to the campaign.
    The next frontier for the Democrats is setting up an 
independent arm of the national party to buy TV ads supporting 
Kerry and perhaps hire field organizers in key states. The 
party is allowed to spend $16.2 million to help Kerry in 
coordination with his campaign. But if it creates an operation 
that isn't coordinated, it can spend as much money as it can 
raise; early estimates run to $25 million or more. The 
Republicans are considering a similar arrangement to help Bush.
    Ellen Moran is organizing the independent effort from an 
office in the Democrats' headquarters. Her resume includes a 
stint at EMILY's List, which raises campaign money for 
Democratic women who support abortion rights; political work at 
the AFL-CIO; and strategy work for the Democratic Party.
    Party lawyers have built a legal firewall to avoid 
substantive contact between Moran and other party workers. Only 
McAuliffe, chief operating officer Josh Wachs and chief 
financial officer Brad Marshall are allowed access to the 
operation. Other workers at the DNC don't even know Moran's 
phone extension. Wachs says, ``The person I talk the most to 
every day is Joe Sandler''--the party's lawyer.
    But if history is a guide, he doesn't have much to worry 
about.
    ``It is clearly difficult to prove coordination,'' says 
Trevor Potter, a former Republican chairman of the FEC. ``It 
has always been one of the hardest things to prove under 
election law.''

                               APPENDIX I

                              ----------                              


               [From the Los Angeles Times; Apr. 1, 2004]

           Kerry Aided by ``Illegal'' Soft Money, GOP Claims

                            (By Lisa Getter)

    In a complaint to be filed today with the Federal Election 
Commission, the Bush campaign and the GOP will charge that Sen. 
John F. Kerry is benefiting from ``the largest illegal infusion 
of soft money from wealthy individuals, unions, corporations 
and other special interests'' since Watergate.
    The GOP alleged Wednesday that Kerry, the presumptive 
Democratic presidential nominee, was part of an ``unprecedented 
illegal conspiracy'' to coordinate ads with well-funded liberal 
groups in violation of campaign finance laws--a claim Kerry's 
campaign denied.
    At issue is the role of several well-funded liberal groups 
whose stated goal is to raise $300 million to help oust 
President Bush in November. Known as 527s because of the tax 
code that governs them, organizations such as the Media Fund 
and MoveOn.org have been spending millions of dollars on anti-
Bush TV ads in key battleground states.
    In an unusual move, the Bush campaign's national counsel, 
Ben Ginsberg, will ask the FEC to immediately dismiss the 
complaint without hearing its merits, so Republicans can then 
seek relief in federal court.
    The Kerry campaign called the complaint frivolous. ``John 
Kerry and his campaign have nothing to do with these ads or the 
groups that run them,'' said Michael Meehan, Kerry's senior 
campaign advisor.
    FEC commissioners say they are banned from speaking about 
enforcement actions, so it is unclear what the panel will do. 
The FEC usually takes at least several months to decide 
complaints, which Republicans contend is too long to have any 
meaningful effect on this year's presidential election.
    The FEC is already in the middle of a lengthy process to 
impose new rules that may affect how the 527s raise and spend 
their money.
    The complaint names six 527s--the Media Fund, America 
Coming Together, America Votes, Voices for Working Families, 
MoveOn.org and Partnership for America's Families, as well as 
some of their wealthy donors. Among the donors are 
philanthropist George Soros, who has contributed $5 million; 
Hollywood producer Steven Bing, who has given $2 million; and 
Cleveland insurance billionaire Peter Lewis, who has donated $3 
million.
    Campaign finance reform laws have banned such large 
donations, which are known as soft money, to political parties. 
But the 527s are not governed by the same restrictions; the GOP 
says they should be. In their complaint, Republicans contend 
that because the 527s appear to be working with the Kerry 
campaign, the donations to them are tantamount to illegal soft 
money contributions to Kerry.
    The Bush campaign has a $108-million cash advantage over 
Kerry in collecting so-called hard dollars, according to the 
latest financial disclosures. But Republicans worry that the 
influx of advertising money from the 527s may close that gap in 
a hurry.
    From March 3 through Saturday, the Media Fund spent an 
estimated $7.3 million and MoveOn.org an additional $3 million 
on TV ads attacking Bush, according to TNSMI/Campaign Media 
Analysis Group, an independent monitor based in Virginia. Its 
figures are derived from analysis of ads on broadcast 
television in 100 major markets and on several national cable 
outlets.
    Kerry, during that same period, spent about $3 million, 
according to the ad monitor. That brought the anti-Bush 
spending to within range of the Bush campaign, which spent an 
estimated $16.9 million.
    The spending patterns show the high stakes involved in the 
FEC dispute. ``Simply put, the Kerry campaign and the 
Democratic Party have been unable to fundraise to a level of 
hard dollars that they think is necessary for their campaign 
efforts,'' the complaint states. ``Instead, they have chosen to 
rely on an illegal conspiracy of donors and shadowy groups to 
defeat President Bush.''
    ``These are vintage Republican intimidation tactics,'' said 
Sarah Leonard, a spokeswoman for America Coming Together, the 
Media Fund and America Votes. ``As usual, this has nothing to 
do with the law, this has nothing to do with the facts, and 
everything to do with political desperation.''
    Wes Boyd, president of the MoveOn.org Voter Fund, said the 
complaint was without merit. ``We do not coordinate with the 
Kerry campaign. These charges are baseless and irresponsible,'' 
he said.
    Ginsberg contends that the groups are illegally 
coordinating with Kerry because some of the people working with 
the 527s have links to the Democratic National Committee or the 
candidate's campaign.
    Among those he mentions: Harold Ickes, who runs the Media 
Fund, also serves on the DNC's executive committee; Jim Jordan, 
who also works at the Media Fund, was Kerry's campaign manager 
until November; Minyon Moore, a member of America Coming 
Together's executive committee, is also a Kerry campaign 
consultant; and Bill Richardson, an officer in Voices for 
Working Families, is chairman of the Democratic National 
Convention.
    As proof of coordination, Ginsberg also cited an ad 
produced by the Media Fund on Kerry's economic policies that 
arrived at television stations before the candidate had made 
his plan public. The Media Fund said the ad was based on 
information that had already been made public.
    Ginsberg also cited a MoveOn.org party in San Francisco 
that was attended by Kerry's wife, Teresa Heinz Kerry. The 
candidate called the party as she was speaking. The account, 
Ginsberg said, was posted on Kerry's campaign website.
    But Bob Bauer, a lawyer for America Coming Together, said 
Ginsberg was misinterpreting the law. He said there was nothing 
in the laws that barred Kerry from socializing with any members 
of the 527s. The question is whether Kerry and his campaign are 
coordinating their strategy with the independent groups, Bauer 
said.
    ``Coordination occurs when a candidate provides material 
information to an organization, the effect of which is to shape 
the organization's creation, product or distribution of 
advertising,'' he said.
    Bauer dismissed Ginsberg's contention that a federal 
``former employee rule'' banned Jordan from doing anything for 
a 527 unless he ``put his brain on hold and ran the Xerox 
machine.''
    The 527s say that although some of their staff and 
volunteers have links to the Democratic Party and the Kerry 
campaign, that is not proof of coordination.

                             MINORITY VIEWS

    The House Administration Committee ordered H.R. 513 
reported without recommendation on a 5-3 vote. In our view, 
H.R. 513 is a poorly considered response to a problem that is 
inadequately identified. It is so broad in its application that 
it stands to severely hamper voter registration and get-out-
the-vote activities of civic minded non-partisan organizations. 
It casts such a wide net that it will ensnare groups whose 
activities Congress should be promoting, not impeding. By 
failing to distinguish between groups whose activities are 
designed to influence the election of clearly identified 
Federal candidates and those whose sole purpose is to enhance 
participation, H.R. 513 imposes too high a price on election 
activity. This is particularly true in light of the fact that 
the candidate advertising that the bill seeks to curb will 
continue. The only difference will be that the organizations 
that place the ads will transform themselves into organizations 
which will be less transparent and accountable than the 
committees that they supplant. Voter participation in 2004 was 
at its highest level since 1968. H.R. 513 stands to reverse 
that gain in voter participation, and for that reason and 
others we outline in these views, we cannot support it.

                                Preface

    Congress in the last five years has increased the 
regulation of independent political committees organized under 
section 527 of the Internal Revenue Code. In 2000, Congress 
passed legislation requiring that all 527s that expect to have 
gross receipts of over $25,000 during a taxable year, register 
with the Internal Revenue Service (IRS) within 24 hours of 
their formation, unless they are already reporting to the 
Federal Election Commission (FEC). These organizations are 
consequently subject to extensive public disclosure and review 
requirements. If such an organization seeks to directly 
influence Federal elections, it is subject to all the 
limitations of the Federal Election Campaign Act (FECA).
    In 2002, Congress passed the Bipartisan Campaign Reform Act 
(BCRA), which was intended to sever the connection between 
Federal officeholders and the raising of unlimited and 
unregulated political contributions, often referred to as 
``soft money''. Under BCRA, federal officeholders may no longer 
solicit or participate in the spending of soft money. BCRA has 
been successful in achieving this end. The link has been broken 
between Federal candidates and the parties they control, and 
the perceived influence of soft money on the creation and 
application of Federal policy.
    After BCRA was challenged, the Supreme Court upheld the 
main provisions of the law, clearly demonstrating that it is 
constitutionally permissible to regulate or limit the money 
which Federal office holders, Federal candidates, and their 
national political parties raise. The Court was hesitant to 
endorse the imposition of the same restrictions on independent 
political organizations.
    The Court addressed independent groups' ability to exercise 
their rights under BCRA in 2003 by holding that:

          * * * BCRA imposes numerous restrictions on the 
        fundraising abilities of political parties, of which 
        the soft-money ban is only the most prominent. Interest 
        groups, however, remain free to raise soft money to 
        fund voter registration, GOTV (Get-Out-The-Vote) 
        activities, mailings, and broadcast advertising (other 
        than electioneering communications). McConnell v. 
        Federal Election Commission, 540 U.S. at 80, (bracketed 
        words added).

The Court even weighed in on those who state that these 
independent groups are stronger than the parties:

          * * * Interest groups do not select slates of 
        candidates for elections. Interest groups do not 
        determine who will serve on legislative committees, 
        elect congressional leadership, or organize legislative 
        caucuses. Political parties have influence and power in 
        the legislature that vastly exceeds that of any 
        interest group. Id., at 81.

    To prevent the circumvention of existing law, in January of 
this year, the FEC implemented new rules to ensure that 
organizations that raise and spend money expressly to influence 
federal elections will be required to register and file reports 
with the Commission. Additionally, these organizations must pay 
for activity that is intended to influence federal elections 
with money under the limitations and prohibitions of the BCRA. 
Under the new regulations, funds received in response to a 
communication that indicates any portion of the funds will be 
used to support or oppose the election of a clearly identified 
federal candidate, will be considered contributions to the 
person making the communication. The consequence of this is 
that any organization whose major purpose of which is to 
influence federal elections will be subject to all the 
requirements of FECA once it receives over $1,000 during a 
calendar year.
    Under the new rule, organizations that have established 
political committee status will be required to fund their 
activities in federal elections with specific percentages of 
hard and soft dollars. For example, voter drives that refer to 
both federal and nonfederal candidates must be paid with at 
least 50% hard dollars. In contrast, public communications that 
refer only to federal candidates must be paid for with 100% 
hard dollars. Under the FECA, hard dollars must comply with the 
source prohibitions, and therefore donations to them would be 
limited to $5,000 per individual. Congress should carefully 
measure the effectiveness of these regulations before rushing 
through a bill which is unlikely to achieve its sponsors' 
objectives, but is likely to result in unintended and 
undesirable consequences.
    Some have accused these independent groups as being mere 
``fronts'' for a party. This was the impression given during 
the June 29th, 2005 mark-up of H.R. 513, when several former 
political party employee pictures were displayed without any 
prior notice to the minority side, in what Roll Call newspaper 
termed ``mug-shot'' style on the Committee's large screen 
monitors. If the independent groups for whom they subsequently 
worked are shown to be anything other than independent, these 
groups will face substantial penalties from either or both the 
Internal Revenue Service or the FEC. If anyone has hard 
evidence that office holders have had direct coordination with 
527 groups, it should be presented to the appropriate 
authorities. The majority party should not impugn the integrity 
and honesty of individuals based on raw unfounded speculation.

                            Principal Flaws


RESTRICTS UNIONS AND INDEPENDENT GROUPS FROM ACTIVITIES WHILE ALLOWING 
  CORPORATIONS AND TRADE ASSOCIATIONS TO CONTINUE UNREGULATED SPENDING

    H.R. 513 imposes further regulation of unions and 
independent 527s, and provides an unfair advantage to 
corporations and trade associations. This is done by allowing 
corporations and trade associations to continue spending 
unlimited and undisclosed amounts of money for political 
purposes, skewing the playing field in favor of corporations 
and trade associations, while labor organizations and 
membership groups will be forced to do most of their political 
spending as federal political committees, subject to 
contribution limitations and source restrictions.

    TURNS BACK HIGHEST VOTER PARTICIPATION GAINS OVER LAST 35 YEARS

    H.R. 513 would restrict many 527 organizations that played 
a critical role in increasing civic participation by 
registering, educating, and mobilizing millions of voters for 
the 2004 November general election. Voter turnout reached 
unprecedented highs as nearly 126 million voters participated 
in the 2004 elections. An estimated 15 million additional 
voters participated in the 2004 election over the November, 
2000 election. Many were previously unregistered or disengaged, 
and they have now reengaged in the political process. Congress 
should be encouraging and supporting this kind of increase in 
voter participation, rather than obstructing it.

VIOLATES 1ST AMENDMENT AND FORCES GROUPS TO MORPH INTO LESS ACCOUNTABLE 
                                 FORMS

    H.R. 513 is unduly vague and stands to chill speech not 
directed at any election. Speech criticizing an officeholder's 
position on an issue a year before an election may trigger 
regulation. Once regulation is triggered, an organization will 
have all its activities limited by the prohibitions and 
limitations that are intended only to apply to political 
committees seeking to influence federal elections. It is 
unclear how an organization will be able to free itself from 
these limitations on its speech.
    One choice may be for such an organization to forego 527 
status from the start. If operating as a 527 organization 
limits an organization's ability to publicly debate issues of 
importance, then an organization simply may choose a different 
operating structure and avoid regulation altogether. H.R. 513 
will then have accomplished nothing other than to ensnare the 
unwary, while driving the election activity which it intends to 
regulate into unregulated channels.

                               Conclusion

    We have attached letters from concerned groups on the 
impact this legislation may have on their civic activities. We 
have also included several charts which show the increase in 
voter turnout between 1996-2004, an increase attributable in 
large measure to the efforts of 527 organizations in 
registering and mobilizing voters. Because we are doubtful that 
H.R. 513 has any chance to achieve its objectives, and because 
we believe that it will have a negative impact on voter 
participation, we opposed the bill in committee and expect to 
oppose it on the Floor.
                                   Juanita Millender-McDonald.
                                   Robert A. Brady.
                                   Zoe Lofgren.
                                   
                                   
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