527s Prepare Their Defense

Posted February 18, 2005 at 6:24pm

Defenders of 527 groups are gearing up to battle Congressional efforts to more strictly regulate their political efforts, which are estimated to have resulted in more than $400 million in spending during the 2004 election cycle.

“With everyone assuming that President Bush is willing to sign the bill, the battle’s going to be intense,” predicted one key player intimately involved with behind-the-scenes efforts to mount opposition to the legislation.

Some House Members are also vowing to fight efforts to regulate 527s.

“We shouldn’t compound the harm we’ve done with the campaign finance reform,” Rep. Roscoe Bartlett (R-Md.) said in an interview, referring to the Bipartisan Campaign Reform Act of 2002.

“The 527 is just another way of [making] political speech,” added Bartlett, who has been touting his own bill to undo restrictions imposed by BCRA on certain types of political advertising. “Water runs down hill and our people will find a way to express themselves.”

But any fight to stave off any additional campaign finance regulation also promises to be more difficult than ever — and not simply because Sen. John McCain (R-Ariz.) has secured the president’s support in his effort to crack down on the tax-exempt political organizations.

The newly introduced 527 Reform Act of 2005 also has the backing of two Senate heavy weights: Rules and Administration Committee Chairman Trent Lott (R-Miss.) and Democratic Senatorial Campaign Committee Chairman Charles Schumer (N.Y.).

The two have joined forces with McCain, Sen. Russ Feingold (D-Wis.), and Reps. Christopher Shays (R-Conn.) and Marty Meehan (D-Mass.) and could provide the longtime reform champions with the extra boost needed to sell the new regulations to their colleagues in both parties.

House Administration Chairman Bob Ney (R-Ohio) has also promised to hold a hearing on the issue in the near future, and said he is open to the idea of placing limits on contributions to the groups.

The debate over the future of the controversial organizations, which organize under Section 527 of the Internal Revenue Code, promises to take center stage two weeks from now when Lott, who has described 527 spending to influence elections as “sewer money,” chairs a long-promised hearing on the bill. Lott plans to use the hearing to examine the regulatory and reporting structure of 527s.

Two campaign finance experts, meanwhile, will give a preview of that contentious debate on March 7.

Democratic Party lawyer Bob Bauer, who runs Perkins Coie’s political law group, and Trevor Potter, a supporter of BCRA who practices with the firm Caplin & Drysdale, will square off in a debate sponsored by the Alliance for Justice.

If they have seemed quiet thus far, allies of the 527 groups admit they are still taking stock of the new bill’s approach to reining in 527s.

“I think people are still trying to sort it out to make sense of what it really would [and] wouldn’t do [and] mean,” explained a Republican lawyer who has been tracking the bill.

The bill unveiled earlier this month would require all 527s to register with the Federal Election Commission as political committees — and thus subject to FEC fundraising, contribution and disclosure restrictions — unless they fall into a set of narrow exemptions. By comparison, a bill introduced last year would have applied a “major purpose” test to 527 groups to determine whether they qualified as political committees.

The former approach raised the ire of dozens of nonprofit groups that argued that, by operating as 501(c)(3)s, they might also be in jeopardy.

At a recent press conference, McCain and Feingold pointed out repeatedly that such nonprofits would be completely unaffected by their new approach.

But Bauer is not so sure.

On his Web site, www.softmoneyhard law.com, Bauer argues that that while the 501(c) fight may be deferred to another day, the “battle, however, still looms, and the passage of this bill would shift the advantage in favor of those who would seek at some later date to extend regulation still further to the 501(c) tax-exempts.”

In a related development last week, a federal judge combined into one case lawsuits filed by President Bush’s campaign and Reps. Shays and Meehan against the FEC for failing to crack down on 527s.

According to The Associated Press, which first reported on the move, U.S. District Judge Emmet Sullivan said that the issues raised in the two lawsuits were virtually identical.

Both Bush and the lawmakers are seeking to have Sullivan force the FEC to crack down on the 527 groups and require them to register with the campaign watchdog agency.

Sullivan has scheduled a Sept. 13 hearing on the case and written arguments are due from the plaintiffs starting in late April, the AP reported.