FEC, Nonprofits at Odds Over Proposed Changes to Regulations

Posted March 4, 2004 at 3:30pm

In light of the Supreme Court’s affirmation of the Bipartisan Campaign Reform Act, the Federal Election Commission has launched a controversial examination of its definitions of “political committee” and “expenditure,” an exercise that could have enormous impact on how 527 groups and other nonprofits operate in the political arena.

In a 5-1 vote today — Democratic Commissioner Ellen Weintraub dissented — the commission approved a formal, 108-page “notice of proposed rulemaking” to tell the public it intends to “revisit the issue of whether the current definition of ‘political committee’ adequately encompasses all organizations that should be considered political committees subject to” campaign laws.

With the introduction of several alternatives to its current regulations, the FEC is considering revising regulations “to reflect that certain communications and certain voter drive activities have the purpose of influencing elections.”

The FEC’s actions provoked a strong outcry from groups on both sides of the aisle that claimed the FEC is overreaching and would potentially violate their First Amendment rights.

Calling the proposed rulemaking “breathtaking in scope” and “potentially devastating in effect,” People for the American Way President Ralph Neas said the draft rules approved by the FEC “could effectively end legitimate political and electoral advocacy by many nonprofit organizations.”

Neas said that under draft rules included in the notice, “any organization that spends $50,000 a year on any form of communication that criticizes or commends the president or any federal official running for re-election would, according to the draft proposed rulemaking, have to become a federal political committee.”

“In other words,” Neas said, “nonprofit organizations that advocate for cancer research, or promote policies that alleviate poverty, or work to clean up the environment, or to protect civil rights and civil liberties — all these organizations could be transformed into political committees if they criticize or commend Members of Congress or the president based on their official actions or policy positions.”

Club for Growth Executive Director David Keating and Carl Pope, executive director of the Sierra Club, painted an equally dark scenario in a conference call with reporters Thursday afternoon.

“This proposed rulemaking — it’s hard to begin — there’s so many things wrong with it, it boggles the mind,” Keating said, adding that contrary to popular thought the proposed rules don’t just seek to provide guidance to groups operating under Section 527 of the U.S. Code, but “have the potential to reach in and regulate the activity of any organization.”

Moreover, Keating said he found it “ludicrous” that the FEC would consider changing its rules in the middle of an election season that is well under way, and he attacked the lengthy document produced by the FEC general counsel’s office with input from all the agency’s commissioners.

Calling it one of the most “confusing documents” he’s ever read, Keating called the proposed notice of rulemaking a “radical overreach by the commission” and said that if there is an argument for changing the rules, “this is something where Congress should pass a new law and have it tested by the courts.”

Pope, meanwhile, called the move the “most fundamental assault on the Constitution” that he has witnessed in 30 years.

“It would reclassify as a federal political committee anyone — a corporation, a nonprofit, a charity, three or four neighbors, a professional organization — any association of Americans who choose in the course of a year to spend $50,000 or more talking about anybody who has declared they are candidates for public office in any way,” Pope explained.

At the heart of the ongoing debate, which is on the FEC’s fast track, is the proliferation of 527 political groups in the aftermath of passage of the McCain-Feingold campaign finance bill.

Democratic groups such as America Coming Together, which has registered as a federal political committee, and the Media Fund, which has not, are currently raising millions of dollars outside the limits of BCRA to fund a variety of activities to help defeat President Bush.

Many Republicans, who would like to see that flow of soft money cut off before much more time passes this election cycle, view the FEC’s potential action in this area as a critical step.

Several campaign watchdog groups — such as Democracy 21, the Center for Responsive Politics and the Campaign Legal Center — also favor the FEC making changes to its rules in this area to crack down on what they believe are groups operating as “shadow” political parties.

Commissioner Michael Toner, a Republican who has enthusiastically supported the rulemaking effort, made similar arguments.

“Outside groups today are essentially seeking to replicate much of the advertising and voter mobilization activities that the national parties financed in part with soft-money funds before the new law was enacted,” Toner said at Thursday’s meeting. “In deciding whether this is legally permissible, I believe the commission should keep the Supreme Court’s admonitions in [McConnell v. FEC] close in mind.”

Toner noted that the law “is very different today than it was before the Supreme Court issued its ruling in McConnell.”

“I seriously doubt we would be conducting this proceeding today if the Supreme Court had not ruled the way it did in McConnell,” Toner said. “In upholding the constitutionality of the McCain-Feingold law, the court repeatedly indicated that the government has the power — indeed the obligation — to prevent circumvention of the campaign finance laws.”

Weintraub had urged her fellow commissioners to take more time in coming up with its rulemaking notice, but to no avail.

“I asked for a week because I thought it wouldn’t be that much time, but frankly this document could take a month,” Weintraub said.

Fellow Democrat Danny McDonald said he found the rulemaking notice approved Thursday a “truly very difficult document” and said he worried about the tone of the document, which asks as many questions as it proposes potential solutions.

Commissioner Bradley Smith, a Republican, said Thursday that he supported the FEC’s move in taking a closer look at the issue, but cautioned that agency not to go too far.

Smith cautioned against a knee-jerk reaction on the basis of what some define as loopholes in the law, or methods of circumvention.

“When I hear someone say it is a loophole in the law, I am reminded it is legal,” Smith said, adding that typically it takes intervention from Congress to fix so-called loopholes.

Democratic Commissioner Scott Thomas, however, said that if commissioners have a sense that “there are some folks out there going beyond circumvention, going beyond a loophole” then the FEC has a duty, at a bare minimum, to provide clarification of the existing law.

Democracy 21 President Fred Wertheimer rejected the notion that the FEC’s rulemaking process would negatively impact 501(c) groups and argued that changes are necessary to bring other groups, who are take advantage of loopholes, into compliance with the intent of the law.

“The rulemaking proceeding initiated today by the Federal Election Commission is extremely important to ensure that political groups, including section 527 groups, whose major purpose is to influence federal elections, are complying with federal campaign finance laws,” Wertheimer said in a statement Thursday.

He went on to say that while the rulemaking raises questions about the treatment of 501(c) groups, both federal campaign finance laws and Supreme Court precedents require different treatment for these organizations whose major purpose is other than influencing elections.

“Section 501(c) nonprofit groups, which, by definition, cannot have as their primary purpose influencing elections, often praise or criticize federal officeholders in conducting their issue advocacy and public education efforts,” Wertheimer stated.

He added: “Federal campaign finance laws and Supreme Court precedents have long taken a different approach for these groups that recognizes that these organizations are not in the business of influencing elections. This approach leaves substantial room for section 501(c) groups to praise or criticize federal officeholders without such public communications being covered by campaign finance laws.”

Those wishing to comment on the proposal may submit written comments to the FEC in either written or electronic form. The FEC will hold hearings on the proposed rules at 10 a.m. April 14 and 15.