Shaw Seeks to Have FEC Oversee 527s

Posted April 27, 2005 at 6:52pm

Adding his voice to the 527 debate, Rep. Clay Shaw (R-Fla.) introduced legislation this week that would require the independent political groups to file reports with the Federal Election Commission.

Shaw’s bill would not prohibit 527 groups from raising and spending soft money. Instead, it would put 527s in line with other political groups in disclosing to the FEC. Currently, 527s — named for the section of the tax code they operate under — file with the Internal Revenue Service.

Many campaign finance experts believe the FEC is better equipped than the IRS to handle the disclosure requirements of political organizations.

“I think we need absolute transparency,” he said.

The Florida lawmaker’s bill would also assess a fine of 30 percent on 527 groups that fail to report a contribution or expenditure and make the group’s board of directors ultimately responsible for the fine.

That way, Shaw said, if the group can’t come up with the money to pay the fine or simply dissolves, someone would “continue to be liable for the amount of the fines.”

Failure to report the contributor’s name would also result in the loss of the donation’s exemption from gift and estate taxes.

“What we’re trying to do is raise the price on secrecy,” Shaw said.

Asked whether 527s could simply choose to pay the 30 percent for nondisclosure and treat it as a cost of doing business, Shaw said that together with the loss of the gift or estate tax exemption (which can be as much as 50 percent), “It gets pretty expensive to do that. So we’ve got them coming and going.”

— Suzanne Nelson