On Feb. 2, seeking to act before the 2006 congressional campaigns get underway, sponsors of the Bipartisan Campaign Reform Act of 2002 (BCRA) announced the introduction of a new bill aimed at regulating independent political committees. The 527 Reform Act of 2005, S. 271, specifically targets groups exempt under Section 527 of the tax code, so that charities and other groups exempt under Section 501(c) that focus on issues, not candidates, would not be impacted. Chairman Trent Lott (R-MS), a co-sponsor of the bill, scheduled a hearing for March 8 in the Senate Rules and Administration Committee. S. 271 is an improvement over last yearÕs version, as well as the approach advocated by some reformers in rulemaking proceedings at the Federal Election Commission (FEC) in the summer of 2004. It drops vague language that would have regulated any group whose Òmajor purposeÓ is to influence federal elections and specifically targets 527 groups. However, some concern remains that the rationale behind the bill could be extended to 501(c) groups in the future. The premise behind the bill is that all groups seeking to influence federal elections should be subject to the same regulations, whether they are candidate campaigns, political parties or independent groups that have no ties to parties and candidates and do not coordinate with them. This rationale goes beyond the arguments used to uphold the constitutionality of BCRA, which addressed the potential for corruption in the link between donors and federal officeholders. Although sponsors cited the potential of large donors to independent political committees to corrupt the electoral process, the bill makes no distinction between 527s dominated by large donors and 527s that may be made up of small donors or are membership governed. S. 271 would require 527 groups to comply with the same regulations as federal candidates, campaigns and parties. These include:

• a ban on corporate contributions and a $5,000 annual limit on individual contributions;
• the use of only hard money (collected subject to federal contribution limits) for public communications that Òpromote, support, attack or opposeÓ a federal candidate, regardless of whether it expressly advocates election or defeat of that candidate;
• the allocation of expenses for communications that mention political parties and state or local candidates, even if no federal candidate is mentioned, so that 50 percent of the costs are paid from federally regulated funds;
• the allocation of expenses for communications that mention both state/local and federal candidates so that 50 percent of the costs are paid from federally regulated funds, regardless of how much time or space is allocated to the federal candidate;
• a cap of $25,000 on contributions from individuals for the state and local component of a 527 that works on both federal and state/local elections.

The 50-50 allocation rule is similar to a regulation approved by the FEC last year currently being challenged in court by the political action committee (PAC) EmilyÕs List. The bill contains exemptions for 527 groups:

• with annual budgets under $25,000;
• that work exclusively on non-federal campaigns or elections with no federal candidate on the ballot;
• that work exclusively on state or local ballot initiatives;
• that work on the nomination or confirmation of non-elected officeholders.

House sponsors of the bill said they believe leadership will take it up promptly. House Administration Committee Chairman Bob Ney (R-OH) said he expects to hold hearings on a similar bill.