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# Legislative Bulletin..............................................April 5, 2006

**Contents:**

**H.R. 513** --- 527 Reform Act

H.R. 513 --- 527 Reform Act (Shays, R-CT)

**[Order of Business]{.underline}**: H.R. 513 is scheduled to be
considered on the House floor on Wednesday, April 5, 2006, subject to a
closed rule (H.Res. 755) allowing no amendments. The rule will
self-execute (i.e. automatically add to the underlying bill) a provision
by Rep. Dreier (R-CA), summarized below. [Note]{.underline}: H.R. 513,
as amended by the self-executing amendment, is substantively identical
to Title VI of House Leadership's lobbying reform bill (H.R. 4975).

**[Background]{.underline}**: H.R. 513 has been referred to as
"Shays-Meehan Part 2," in reference to the last major campaign finance
regulation bill that became law (The Bipartisan Campaign Reform Act,
Public Law 107-155), which also was a Shays-Meehan bill. To see how
Members voted on the first round of Shays-Meehan, visit this webpage:

<http://clerk.house.gov/evs/2002/roll034.xml>

Many supporters of H.R. 513 cite the need to shut down George Soros'
527, MoveOn.org, as justification for this legislation. According to the
IRS website, the MoveOn.org Voter Fund (their 527) reported just
\$14,544 in total expenditures and zero contributions over \$200 during
the last six months of 2005. To view the documentation, visit this
webpage:
<http://forms.irs.gov/politicalOrgsSearch/search/Print.action?formId=18641&formType=E72>

But MoveOn.org's **PAC**, which would NOT be affected by H.R. 513,
reported \$3,912,559 in funds raised during the last half of 2005 and
\$1,245,463 cash-on-hand as of Dec 31, 2005. To view the documentation,
visit this webpage:

<http://images.nictusa.com/cgi-bin/fecimg/?_26990181462+0> [(page
2)]{.underline}

**[Summary]{.underline}**: In short, H.R. 513 would make more
independent citizens' advocacy groups organized under Section 527 of the
Internal Revenue Code subject to the most restrictive federal campaign
finance regulations.

Specifically, the bill:

-   Amends the Federal Election Campaign Act of 1971 (FECA) to include
    any applicable 527 organization in the definition of "political
    committee."

-   [Exempts]{.underline} from the definition of a 527 organization
    under FECA a committee, club, association, or other group of persons
    that

> \--is a 501(c);
>
> \--will not have more than \$25,000 in receipts in a year;
>
> \--is a political committee of a state or local candidate or which is
> a state or local committee of a political party;

\--is organized, operated, and makes disbursements exclusively for
paying certain tax-deductible business expenses or expenses of a certain
kind of political newsletter fund;

> \--consists solely of candidates for or individuals holding state or
> local office, but only if the organization refers only to one or more
> non-federal candidates or applicable state or local issues in all of
> its voter drive activities, without reference to any federal
> candidate; or
>
> \--engages in election or nomination activities relating
> [exclusively]{.underline} to elections where no federal candidate
> appears on the ballot, or to influencing the selection, nomination,
> election, or appointment of one or more candidates to non-federal
> offices or individuals to non-elected offices, or to influencing one
> or more applicable state or local issues.

-   Denies the above exclusivity test for any committee, club,
    association, or other group of persons that makes disbursements
    aggregating more than \$1,000 for:

> \--a public communication that promotes, supports, attacks, or opposes
> a clearly identified federal candidate during the year leading up the
> relevant general or runoff election; or

\--any voter drive activity during a calendar year, except if the group
makes a voter drive in only one state with no reference to, or
affiliation with, federal candidates or national parties and makes no
contributions to federal candidates.

-   Allows organizations to avoid FECA regulation if they, as part of a
    voter drive, refer to a federal candidate only in connection with an
    election for a non-federal office in which such federal candidate is
    also a candidate or in connection with the fact that the candidate
    has endorsed a non-federal candidate or has taken a position on an
    applicable state or local issue.

-   Allows organizations to avoid FECA regulation if they, as part of a
    voter drive, refer to a national party only:

> \--for the purpose of identifying a non-federal candidate;
>
> \--for the purpose of identifying the entity making the public
> communication or carrying out the voter drive activity; or
>
> \--in a manner or context that does not reflect support for or
> opposition to a federal candidate and does reflect support for or
> opposition to a state or local candidate or an applicable state or
> local issue.

-   Defines "voter drive activity" as any of the following activities
    conducted in connection with an election in which a federal
    candidate appears on the ballot (regardless of whether a state or
    local candidate also appears on the ballot):

> \--voter registration activity;
>
> \--voter identification;
>
> \--get-out-the-vote activity;
>
> \--generic campaign activity; or
>
> \--any public communication related to these four activities.

-   Sets the allocation and funding rules for certain expenses relating
    to a 527's federal and non-federal activities, as follows:

> \--100% of the expenses for public communications or voter drive
> activities that refer to one or more clearly identified federal
> candidates, but do not refer to any clearly identified non-federal
> candidates, would have to be paid with funds from a federal account;
>
> \--At least 50% (or greater if the FEC so determines by regulation) of
> the expenses for public communications and voter drive activities that
> refer to one or more clearly identified federal candidate(s) and one
> or more clearly identified non-federal candidate(s) would have to be
> paid with funds from a federal account;
>
> \--At least 50% (or greater if the FEC so determines by regulation) of
> the expenses for public communications or voter drive activities that
> refer to a political party, but do not refer to any clearly identified
> federal or non-federal candidate, would have to be paid with funds
> from a federal account, except if the communications or activities
> relate exclusively to elections where no federal candidate appears on
> the ballot;
>
> \--At least 50% (or greater if the FEC so determines by regulation) of
> the expenses for public communications or voter drive activities that
> refer to a political party and refer to one or more clearly identified
> non-federal candidates, but do not refer to any clearly identified
> federal candidates, would have to be paid with funds from a federal
> account, except if the communications or activities relate exclusively
> to elections where no candidate for federal office appears on the
> ballot;
>
> \--At least 50% (unless otherwise determined by the FEC) of any
> administrative expenses, including rent, utilities, office supplies,
> and salaries not attributable to a clearly identified candidate, would
> have to be paid with funds from a federal account; and
>
> \--At least 50% (or greater if the FEC so determines by regulation) of
> the direct costs of a fundraising program or event, including
> disbursements for solicitation of funds and for planning and
> administration of actual fundraising events, where federal and
> non-federal funds are collected through such program or event (unless
> the solicitations or related activities constitute a public
> communication---then it's 100% federal).

-   Defines the term "federal account" as an account that consists
    solely of contributions subject to FECA's limitations, prohibitions,
    and reporting requirements. Funds in "nonfederal accounts" could
    only be raised from individuals but would not otherwise be subject
    to FECA's limitations and prohibitions (yet would be subject to
    certain reporting requirements).

-   For purposes of the allocation provisions detailed above, a public
    communication or voter drive activity would not be treated as
    referring to a clearly identified federal candidate if it refers to
    a federal candidate only in connection with an election for a
    non-federal office in which such federal candidate is also a
    candidate or in connection with the fact that the candidate has
    endorsed a non-federal candidate or has taken a position on an
    applicable state or local issue.

-   For purposes of the allocation provisions just detailed, a public
    communication or voter drive activity would not be treated as
    referring to a national party if such reference is only:

> \--for the purpose of identifying a non-federal candidate;
>
> \--for the purpose of identifying the entity making the public
> communication or carrying out the voter drive activity; or
>
> \--in a manner or context that does not reflect support for or
> opposition to a federal candidate and does reflect support for or
> opposition to a state or local candidate or an applicable state or
> local issue.

-   Prohibits a non-federal account from accepting more than \$25,000
    from any one individual in any calendar year. []{.mark}

-   Deems as one account the non-federal accounts of 527s that are
    directly or indirectly established, financed, maintained, or
    controlled by the same person or persons.

-   Prohibits donations to a qualified non-federal account from being
    solicited, received, directed, transferred, or spent by or in the
    name of any federal officeholder or any agent, officer, or employee
    of a national party committee.

-   Clarifies that no provision of this legislation should be construed
    as:

> \--approving, ratifying, or endorsing an FEC regulation;

\--establishing, modifying, or otherwise affecting the definition of
"political organization" for purposes of the Internal Revenue Code of
1986; or

> \--affecting the determination of whether a 501(c) is a political
> committee under FECA.

-   Prescribes special rules for legal actions brought before 2009 to
    challenge the constitutionality of any provision in this
    legislation, including requiring that such action be filed in the
    U.S. District Court for the District of Columbia, be heard in
    expedited fashion by a three-judge panel, and be appealed in
    expedited fashion directly to, and only by, the U.S. Supreme Court.

-   Explicitly authorizes Members of Congress to bring an action
    challenging the constitutionality of this legislation or otherwise
    intervene in any such action brought against it. The court could
    require interveners taking similar positions to file joint papers or
    to be represented by a single attorney at oral argument.

*[Summary of the Dreier amendment that will self-execute onto H.R. 513
upon passage of the rule (H.Res. 755):]{.underline}*

-   Removes the party coordinated expenditure limits in current law, so
    that parties can spend an unlimited amount of money on their own
    candidates---even when they coordinate such spending with the
    affected candidates. This is identical to section 3 of "Pence-Wynn"
    (H.R. 1316), as it was reported from the House Administration
    Committee. *\[Current law allows parties to spend an unlimited
    amount of INDEPENDENT expenditures on their candidates, but if
    parties COORDINATE with their own candidates on spending, they can
    only spend certain limited amounts per House or Senate candidate.\]*

**[Additional Background]{.underline}**: A 527 organization, as defined
by section 527 of the Internal Revenue Code, is a party, committee,
association, fund, or other organization (whether or not incorporated)
organized and operated primarily for the purpose of directly or
indirectly accepting contributions or making expenditures, or both, for
influencing or attempting to influence the selection, nomination,
election, or appointment of any individual to any federal, state, or
local public office or office in a political organization, or the
election of presidential or vice-presidential electors (whether or not
such individuals or electors are selected, nominated, elected, or
appointed).

Under current law, independent 527s (i.e. 527s that are not PACs or
political parties or otherwise connected to officeholders) can raise
individual and corporate funds (though corporate funds can't be used for
electioneering communications) without limit (as long as the
contributions were not solicited in a way to indicate that they'd be
used in federal elections). 527s have to disclose donors over \$200 to
the IRS (and the FEC for electioneering communications).

Under current law:

-   527s [can]{.underline} engage in lobbying, educational,
    political/campaign activities (not express advocacy of federal
    candidates), and electioneering communications (using individual
    contributions only).

-   527s [cannot]{.underline} engage in express advocacy of federal
    candidates, make contributions to candidates, or use corporate
    contributions to make electioneering communications.

-   Non-political expenditures and interest income greater than \$100
    per year are taxable for 527s.

When the FEC promulgated regulations for the first round of Shays-Meehan
(Public Law 107-155), it deliberately left independent 527s out of the
regulations, saying it was not clear that Congress had intended to
include 527s in the new campaign finance law. Recently, a federal judge
has ordered the FEC to either provide stronger justification for not
including 527s in its regulations, or to promulgate regulations that
incorporate 527s into the current Shays-Meehan law.

To read the RSC document, "Fast Facts on 527s," visit this webpage:
<http://www.house.gov/pence/rsc/doc/FastFacts_527s.doc>.

To read the RSC document, "527 v. 501(c)4," which compares what 527s can
do now to what 501(c)4s (a likely focus of future campaign activity) can
do now, visit this webpage:

<http://www.house.gov/pence/rsc/doc/040306_527v501c4.doc>.

To read the RSC document, "Where Will 527s Go?" which highlights two
examples of well-funded entities tat will continue to play a large role
in the campaign system if 527s cease to function, visit this webpage:

<http://www.house.gov/pence/rsc/doc/040306_527swherewilltheygo.doc>.

**[Outside Organizations]{.underline}**:

-   H.R. 513 is supported by groups typically associated with an
    increased regulatory approach to campaign finance, such as Democracy
    21 and Common Cause, among others.

-   [The following conservative groups are publicly **opposing**
    Shays-Meehan]{.underline}: Dick Armey's FreedomWorks, Pat Toomey's
    Club for Growth, National Taxpayers Union, Council for Citizens
    Against Government Waste, American Conservative Union, Americans for
    Tax Reform, Traditional Values Coalition, National Tax Limitation
    Committee, Coalitions for America, Competitive Enterprise Institute,
    60 Plus Association, Center for Individual Freedom, Black America\'s
    PAC, Institute for Liberty, RightMarch.com, LobbySense.com,
    CatholicVote.org, Tradition, Family, Property, Inc., Let Freedom
    Ring, Coalition for a Fair Judiciary, American Coalition for Fathers
    and Children, Illinois Family Institute, Maryland Taxpayers
    Association, Inc., the Liberty Committee, Republican Leadership
    Coalition, and Government Is Not God - PAC.

-   The Club for Growth, Citizens Against Government Waste, and the
    National Taxpayers Union have said they will include the vote on
    final passage of H.R. 513 in their annual vote ratings of Congress.

-   *The Wall Street Journal* and *National Review* have opined against
    H.R. 513.

-   H.R. 513 is also opposed by liberal groups, such as America Votes
    and the Sierra Club.

**[Committee Action]{.underline}**: On February 2, 2005, H.R. 513 was
referred to the Committee on House Administration, which, on June 29,
2005, marked up and ordered the bill reported to the full House by a
vote of 5-3.

**[Possible Conservative Concerns]{.underline}**: Some conservatives
might be concerned about:

-   the new and complex federal regulations placed on citizens' advocacy
    groups commonly known as 527s;

-   **a large expansion of the original Shays-Meehan law, against which
    most conservatives voted**; and

-   the attempt by some supporters of H.R. 513 to "shut down" an entire
    class of legally operating citizens' advocacy groups.

**[Administration Position]{.underline}**: The Administration has
expressed support for H.R. 513.

**[Cost to Taxpayers]{.underline}**: CBO estimates that H.R. 513 would
authorize \$1 million in the first year and insignificant amounts in
subsequent years.

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: Yes, the bill would expand federal
regulations to limit the speech and activities of certain nonprofit
entities organized under Section 527 of the tax code.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: Yes, the bill would require
independent 527s to register as political committees with the FEC and
comply with a litany of federal campaign finance regulations, including
certain disclosure requirements and limits on contributions. The bill
contains no intergovernmental mandates.

**[Constitutional Authority]{.underline}**: The House Administration
Committee, in House Report 109-181, cites constitutional authority in
Article I, Section 4, Clause 1 (the congressional power to make or alter
regulations regarding the times, places, and manner of holding elections
for senators and representatives). The First Amendment to the
Constitution states that, "Congress shall make no law...abridging the
freedom of speech...."

**[RSC Staff Contact]{.underline}**: Paul S. Teller,
<paul.teller@mail.house.gov>, (202) 226-9718