FEC Adopts Rule to Control 527 Political Groups

On August 19, the Federal Election Commission (FEC) adopted a new rule to control nonparty political organizations by making it more difficult for certain independent organizations -- known as 527 groups -- to raise and spend donations in the 2006 election. The rule will affect some organizations that currently claim exemption from FEC rules. The Bipartisan Campaign Reform Act (BCRA) placed new limits on political parties. Independent organizations such as the Media Fund and America Coming Together have been set up in response. Under this latest FEC ruling, if an organization solicits contributions based on an appeal to support specific federal candidates, the group becomes subject to FEC regulations. The new rule is less far-reaching than those discussed earlier this year, when the commission considered broad restrictions not only on 527 committees, but also charities, trade associations, labor unions, social welfare groups and other nonprofit organizations operating under Section 501(c) of the tax code. Instead, the new regulation focuses more directly on 527 committees, while allowing most major other nonprofits to escape heavy regulation if political work is only a part of their activities. Adopted on a 4-2 vote, the new regulation will take effect January 1, 2005 and will not affect current fundraising by 527 organizations. Specifically, the regulation involves fundraising solicitations. If a plea to a prospective donor "indicates that any portion of the funds will be used to support or oppose a federal candidate," then the maximum that can be contributed is limited to $5,000.00 and cannot come from corporations or unions. This could harm the success of the fundraising of these organizations, which have received individual donations of millions of dollars. In Addition, the 527 groups will be required to pay for at least 50 percent of their expenses, including salaries, rent and other overhead, with hard money. The future of 527 organizations remains unclear. Campaign finance reform advocates allege that 527 groups will be able to evade the new regulations simply by tailoring their solicitations to talk about policy as well as election prospects. However, with increased FEC scrutiny, it is uncertain whether these nonparty groups will be able to adjust fundraising and spending practices to accommodate the new guidelines successfully.
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