House Passes Section 527 Legislation

Summary of HR 513 The 527 Reform Act (HR 513/ S 271, S 1053) The 527 Fairness Act (HR 1316) FEC Consideration of 527s

Status
The House passed a bill (H.R. 513) on April 5, 2006 that would require Section 527 organizations to register as political committees under federal election law and would limit the amount of money that can be donated to the organization by a single donor to $25,000. The bill also would repeal certain limits on what a political party can spend on behalf of candidates. The measure passed by a 218 to 209 vote. Separate lobbying reform legislation (H.R. 4975) passed by the House on May 3, 2006 contains the same provisions.

FEC Will Provide Explanation of 527 Decision
Meanwhile, in response to a federal court decision, the Federal Election Commission has determined not to issue a new rule with respect to Section 527 organizations and political action committees, but it will issue a more thorough explanation of this decision. In March, a federal district court ordered the FEC to review its decision not to further regulate Section 527 organizations and to either issue new regulations or provide further explanation for its decision. The court found that the FEC failed to make a reasoned explanation for its decision to consider 527 activity on a case-by-case basis rather than by issuing a general rule to regulate such organizations. Read the district court opinion (PDF) issued on March 29, 2006. More on FEC consideration of Section 527 organizations.

Background
In June 2005, the House Administration Committee approved two bills addressing Section 527 political organizations -- HR 513 and HR 1316. One bill is an amended version of the 527 Reform Act (HR 513), introduced by Representatives Christopher Shays (R-CT) and Marty Meehan (D-MA). The bill would require all Section 527 organizations to register as political committees, with exceptions for those involved in state and local elections and ballot initiatives. The bill was cleared for floor consideration without a favorable recommendation from the Committee. The Senate companion measure (S 1053) has cleared the Senate Rules Committee.

On June 8, 2005, the House Administration Committee approved a bill (H.R. 1316) sponsored by Representatives Mike Pence (R-IN) and Albert Wynn (D-MD) that would raise the aggregate limits on campaign contributions from individuals to federal campaign committees and parties in an effort to help political parties more easily compete with 527 groups. It would also repeal the restrictions on some nonprofit use of "electioneering communications" that were enacted in the 2002 Bipartisan Campaign Reform Act (501(c)(3) organizations were exempted).

The measure was amended during committee consideration to include provisions requiring 527 groups to report to the FEC as well as to the IRS, and to file more frequent reports. The amended version also includes an exemption from FEC regulations for Internet communications. Some supporters of campaign finance reform - including Reps. Christopher Shays (R-CT) and Marty Meehan (D-MA) and Senators John McCain (R-AZ) and Russ Feingold (D-WI) - are opposed to HR 1316, and instead favor legislation that further restricts 527 groups.

Senate Action
A bill that would require Section 527 groups to register with the Federal Election Commission as political committees cleared the Senate Rules Committee on April 27, 2005. The 527 Reform Act (S 1053) would also bar 527s from raising and spending unlimited sums on federal campaigns.

Before passing the bill, the Senate Rules Committee adopted an amendment offered by Senator Charles Schumer (D-NY) to exempt 527 organizations that work exclusively on voter registration and get-out-the-vote drives. The Committee also adopted an amendment offered by Senator Robert Bennett (R-UT) to raise PAC contribution limits from $5,000 to $7,500 and to prohibit the FEC from regulating Internet activity.

Certain Section 527 groups that are involved in state elections or local ballot initiatives would be exempt.  The bill also explicitly exempts 501(c) organizations, unlike a similar version of the bill introduced in the 108th Congress.

Summary of the 527 Reform Act
S 271/ HR 513 would:

• Require 527s to register as political committees with the Federal Elections Commission (FEC)
• Set minimum allocation formulas for political committees which have both a federal and non-federal account; and
• Limit contributions to non-federal (soft money) accounts of political committees to a $25,000 annual contribution per donor.

Under existing federal election law, political committees are prohibited from raising money from corporations (including nonprofit corporations) or unions or from using contributions in excess of $5,000 from an individual to pay for electioneering activities. Political committees must also disclose names of contributors in regular reports to the FEC, and contributions to such committees are not tax-deductible.

More on FEC consideration of Section 527 organizations.

Last updated: June 14, 2006