On Dec. 10 the Supreme Court ruled on the constitutionality of the Bipartisan Campaign Reform Act of 2002 (BCRA), upholding most of its provisions, including the ban on soft money contributions to political parties and “electioneering communications” restrictions. It is not clear what impact the ruling will have on charitable organizations. Federal Election Commission (FEC) rules implementing BCRA exempt charities from the ban on electioneering communications. However, Rep. Chris Shays (R-CT) and Marty Meehan (D-MA) have filed a lawsuit challenging the rule, saying it is contrary to the intent of Congress. See the text of the decision and the Common Cause summary. The ruling in McConell v. FEC was the last step in legal challenges to BCRA and the election of 2004 will now proceed under its rules. The ban on soft money contributions to political parties means that all contributions and expenditures will be subject to limits and disclosure requirements of the Federal Election Commission. The ban on corporations, including nonprofits, and unions from spending funds on broadcasts that identify federal candidates within 60 days of a general election or 30 days of a primary will go into effect on a schedule set by the FEC. Impact on Nonprofits Candidates and political parties cannot receive soft money contributions, and under the Supreme Court’s interpretation of the law, they also cannot contribute to nonprofits that spend money on federal election activity, such as voter registration and voter education activities. The primary impact on nonprofits will be the rules on electioneering communications, which applies only to broadcasts, but not the Internet, direct mail or phone banks. There are two parts to the rule -- a ban on corporate and union funding for broadcasts within the time period before the election, and permissible broadcasts that are funded solely by individuals. Donors to these funds must be disclosed to the FEC. Nonprofits that wish to mention names of federal candidates in broadcasts during the election season and are not 501(c)(3) organizations will have to set up separate segregated funds with money from individual donors to pay for them. The FEC rules exclude organizations exempt under Section 501(c)(3) from these rules because the Internal Revenue Code forbids charitable groups from supporting or opposing candidates for office, either directly or indirectly. Shays and Meehan’s legal challenge to this exemption is based on the fear that soft money donors will attempt to abuse 501(c)(3) protection by funneling money through sham charities. In early December two campaign reform groups, the Campaign Legal Center and Democracy 21 filed a complaint to the IRS asking that a new charity sponsored by Rep. Tom DeLay (R-TX) be denied charitable status. The group, Celebrations for Children, Inc., is planning to raise funds in New York during the Republican National Convention by giving donors access to members of Congress at various social events. The National Committee for Responsive Philanthropy condemned the scheme as influence peddling. Executive Director Rick Cohen said, "The new DeLay venture evades campaign finance laws through political fundraising disguised as charity. This so-called 'charity' is set up to divide its contributions between helping poor children and electing the very politicians whose policies help keep those children impoverished. It goes beyond hypocrisy to so exploit exploited children in the name of helping them. This is as shameful as it is shameless, and the IRS should not grant Congressman DeLay's latest creation the tax-exempt status intended for true charities. To do so would further erode public confidence in the nonprofit sector, which is already struggling in the wake of scandals, a soft economy, increased human need and cuts in public funding."