FEC Restricts Certain 527s’ Ability to Spend Soft Money

Posted February 18, 2004 at 2:51pm

So-called 527 groups that register with the Federal Election Commission will not be permitted to use unlimited amounts of soft money to influence federal elections — but may use a mix of hard and soft money to pay for certain types of activities that refer to both federal and nonfederal candidates — the FEC said today.

The FEC’s eagerly awaited advice came in the form of an advisory opinion to the Republican-leaning Americans for a Better Country, which had recently asked the FEC to weigh in on a number of its proposed activities for the 2004 elections.

According to the compromise drafted by FEC Vice Chairwoman Ellen Weintraub that was approved in a 4-2 vote this afternoon, registered political committees will be bound by the constraints of the Bipartisan Campaign Reform Act and limited to using federal funds only when making expenditures that “promote, support, attack or oppose” federal candidates.

The agency stopped short of applying its advice to other outside groups such as 501(c)3s or unregistered 527s — today’s decision will apply only to organizations registered under Section 527 of the Internal Revenue Code — and deferred such questions to a broader rulemaking process scheduled to commence this spring.

But campaign finance watchdogs observed that today’s action by the FEC is extremely narrow in scope still leaves unanswered many questions regarding what activities unregistered 527s may undertake and the extent to which they may use soft money on federal election activities.

Moreover, even with today’s action, Democracy 21 President Fred Wertheimer expressed concern that registered 527s with federal and non-federal accounts can exploit the allocation formulas. Wertheimer noted that in 2003, one such Democratic-led 527 known as ACT, or America Coming Together, allocated 98 percent of its expenses from its soft money accounts and only 2 percent as hard, federal dollars.

ACT spokesman Jim Jordan, meanwhile, said that today’s action was “limited in its scope” and that the group would move forward with its plans.

“We remain confident that we’ll have the room we need to operate robustly and effectively.  We’re pushing ahead precisely as planned,” Jordan said.

Along with fellow Democrats Scott Thomas and Danny McDonald, Weintraub received support for her proposal from GOP Commissioner Michael Toner, who has been spearheading a move to crack down on the election activity of various outside groups.

The agency’s two other Republican commissioners, Dave Mason and Chairman Brad Smith, voted against Weintraub’s draft, which was undergoing additional tweaking through a continuing amendment process Wednesday afternoon.

The watchdog agency rejected broader alternative proposals, which some in the nonprofit community feared could severely curtail the activities of 501(c)3s, and several commissioners said they would wait to address such matters when the FEC undertakes a larger rulemaking on the 527 issue.

As commissioners debated the touchy issue in a mobbed open meeting Wednesday morning, Smith said he was “disappointed” by his party and suggested that the drive to regulate 527s and other groups was motivated purely by a lust for partisan advantage.

“If they think they’re going to win by silencing their opponents, they’re going to deserve, in fact, to lose,” Smith said in explaining his unwillingness to side with other Republicans who had been pushing for more intensive regulation.

Referring to her proposal as a “stop gap” measure in the regulation of 527s, Weintraub said the FEC would be leaving “the status quo” in place until it could “get to the rulemaking.”

With the Weintraub compromise, the FEC adopted a “promote, support, attack or oppose” standard when defining expenditures by a political committee and stated unequivocally that a 527 registered with the commission must use only federal funds when making expenditures that “promote, support, attack or oppose” a clearly identified candidate.

Such groups will be required to use a combination of hard and soft money when referring to both federal and nonfederal candidates or elections or when they are conducting generic get-out-the-vote or voter registration drives.

“The whole area of GOTV is not one we should go out of our way to discourage,” Weintraub said in explaining the philosophy behind her draft opinion.

The FEC’s opinion also stated that solicitations by such groups referring to clearly identified federal candidates may only be used to raise hard money.

But campaign finance watchdogs observed that today’s action by the FEC is extremely narrow in scope and still leaves unanswered many questions regarding what activities unregistered 527s may undertake and the extent to which they may use soft money on federal election activities.

Moreover, even with today’s action, Democracy 21 President Fred Wertheimer expressed concern that registered 527s with federal and nonfederal accounts can exploit the allocation formulas. Wertheimer noted that in 2003, one such Democratic-led 527 known as America Coming Together allocated 98 percent of its expenses from its soft-money accounts and only 2 percent as hard, federal dollars.