A bill to amend the Federal Election Campaign Act of 1971 to define political committee and clarify when organizations described in section 527 of the Internal Revenue Code of 1968 must register as political committees, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``527 Reform Act of 2004''.

SEC. 2. TREATMENT OF SECTION 527 ORGANIZATIONS.

    (a) Definition of Political Committee.--Section 301(4)(A) of the 
Federal Election Campaign Act of 1971 (2 U.S.C. 431(4)(A)) is amended 
to read as follows:
                    ``(A) any committee, club, association, or other 
                group of persons that--
                            ``(i) during one calendar year, receives 
                        contributions aggregating in excess of $1,000 
                        or makes expenditures aggregating in excess of 
                        $1,000; and
                            ``(ii) has as its major purpose the 
                        nomination or election of one or more 
                        candidates;''.
    (b) Definition of Major Purpose for Section 527 Organizations.--
Title III of the Federal Election Campaign Act of 1971 (2 U.S.C. 431 et 
seq.) is amended by adding at the end the following new section:

``SEC. 325. DEFINITIONS AND RULES FOR DETERMINING ORGANIZATIONS AND 
              DISBURSEMENTS INFLUENCING FEDERAL ELECTIONS.

    ``(a) Major Purpose of Section 527 Organizations.--For purposes of 
section 301(4)(A)--
            ``(1) In general.--A committee, club, association, or group 
        of persons that--
                    ``(A) is an organization described in section 527 
                of the Internal Revenue Code of 1986, and
                    ``(B) is not described in paragraph (2),
        has as its major purpose the nomination or election of one or 
        more candidates.
            ``(2) Excepted organizations.--Subject to paragraph (3), a 
        committee, club, association, or other group of persons 
        described in this paragraph is--
                    ``(A) an organization described in section 
                527(i)(5) of the Internal Revenue Code of 1986, or
                    ``(B) any other organization which is one of the 
                following:
                            ``(i) A committee, club, association, or 
                        other group of persons whose election or 
                        nomination activities relate exclusively to 
                        elections where no candidate for Federal office 
                        appears on the ballot.
                            ``(ii) A committee, club, association, or 
                        other group of persons that is organized, 
                        operated, and makes disbursements exclusively 
                        for one or more of the following purposes:
                                    ``(I) Influencing the selection, 
                                nomination, election, or appointment of 
                                one or more candidates to non-Federal 
                                offices.
                                    ``(II) Influencing one or more 
                                State or local ballot initiatives, 
                                State or local referenda, State or 
                                local constitutional amendments, State 
                                or local bond issues, or other State or 
                                local ballot issues.
                                    ``(III) Influencing the selection, 
                                appointment, nomination, or 
                                confirmation of one or more individuals 
                                to non-elected offices.
                                    ``(IV) Paying expenses described in 
                                the last sentence of section 527(e)(2) 
                                of the Internal Revenue Code of 1986 or 
                                expenses of a newsletter fund described 
                                in section 527(g) of such Code.
            ``(3) Section 527 organizations making certain 
        disbursements.--A committee, club, association, or other group 
        of persons described in paragraph (2)(B) shall not be 
        considered to be described in such paragraph for purposes of 
        paragraph (1)(B) if it makes disbursements for a public 
        communication that promotes, supports, attacks, or opposes a 
        clearly identified candidate for Federal office during the 
        period beginning on the first day of the calendar year 
        preceding the calendar year in which the general election for 
        the office sought by the clearly identified candidate occurs 
        and ending on the date of the general election.''.

SEC. 3. CERTAIN EXPENSES BY MAJOR PURPOSE ORGANIZATIONS TREATED AS 
              EXPENDITURES.

    (a) In General.--Section 301(9)(A)(i) of the Federal Election 
Campaign Act of 1971 (2 U.S.C. 431(9)(A)(i)) is amended by inserting 
``, including any amount described in section 325(b)'' after 
``office''.
    (b) Applicable Communications.--Section 325 of the Federal Election 
Campaign Act of 1971 (as added by section 2(b)) is amended by adding at 
the end the following new subsection:
    ``(b) Certain Expenditures for Major Purpose Organizations.--
            ``(1) In general.--Subject to paragraph (2), a purchase, 
        payment, distribution, loan, advance, deposit, or gift of money 
        or anything of value for--
                    ``(A) a public communication that refers to a 
                clearly identified candidate for Federal office or to a 
                political party (regardless of whether a candidate for 
                State or local office is also mentioned or identified) 
                and that promotes, supports, attacks, or opposes a 
                candidate for that office or a political party 
                (regardless of whether the communication expressly 
                advocates a vote for or against a candidate), or
                    ``(B) voter registration activity, voter 
                identification, get-out-the-vote activity, or generic 
                campaign activity conducted in connection with an 
                election in which a candidate for Federal office 
                appears on the ballot (regardless of whether a 
                candidate for State or local office also appears on the 
                ballot),
        shall be an expenditure under section 301(9)(A)(i) if made by, 
        or on behalf of, a political committee (as defined in section 
        301(4)) or a committee, club, association, or other group of 
        persons for which the nomination or election of one or more 
        candidates is its major purpose.
            ``(2) Exception.--Any funds used for purposes described in 
        paragraph (1) that, in accordance with allocation rules set 
        forth in section 325(c), are disbursed from a non-Federal 
        account shall not be treated as expenditures.''.

SEC. 4. RULES FOR ALLOCATION OF EXPENSES BETWEEN FEDERAL AND NON-
              FEDERAL ACTIVITIES.

    Section 325 of the Federal Election Campaign Act of 1971 (as added 
by section 2(b) and amended by section 3) is amended by adding at the 
end the following:
    ``(c) Allocation and Funding Rules for Expenses of Separate 
Segregated Funds and Nonconnected Committees Relating to Federal and 
Non-Federal Activities.--
            ``(1) In general.--In the case of any disbursements by any 
        separate segregated fund or nonconnected committee for which 
        allocation rules are provided under paragraph (2)--
                    ``(A) the disbursements shall be allocated between 
                Federal and non-Federal accounts in accordance with 
                this subsection and regulations prescribed by the 
                Commission, and
                    ``(B) in the case of disbursements allocated to 
                non-Federal accounts, may be paid only from a qualified 
                non-Federal account.
            ``(2) Costs to be allocated and allocation rules.--
        Disbursements by any separate segregated fund or nonconnected 
        committee in connection with Federal and non-Federal elections 
        for any of the following categories of activity shall be 
        allocated as follows:
                    ``(A) At least 50 percent of any administrative 
                expenses, including rent, utilities, office supplies, 
                and salaries not attributable to a clearly identified 
                candidate shall be paid with funds from a Federal 
                account, except that for a separate segregated fund 
                such expenses may be paid instead by its connected 
                organization.
                    ``(B) At least 50 percent 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 shall be paid with funds from a 
                Federal account, except that for a separate segregated 
                fund such costs may be paid instead by its connected 
                organization.
                    ``(C) At least 50 percent 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, 
                shall be paid with funds from a Federal account.
                    ``(D) 100 percent of the expenses for public 
                communications or voter drive activities that refer to 
                a political party, and refer to one or more clearly 
                identified Federal candidates, but do not refer to any 
                clearly identified non-Federal candidates, shall be 
                paid with funds from a Federal account.
                    ``(E) At least 50 percent 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, 
                shall be paid with funds from a Federal account, except 
                that this subparagraph shall not apply to 
                communications or activities that relate exclusively to 
                elections where no candidate for Federal office appears 
                on the ballot.
                    ``(F) At least 50 percent of the expenses for 
                public communications and voter drive activities that 
                refer to one or more clearly identified candidates for 
                Federal office and one or more clearly defined non-
                Federal candidates, without regard to whether the 
                communication refers to a political party, shall be 
                paid with funds from a Federal account.
            ``(3) Qualified non-federal account.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified non-Federal 
                account' means an account which consists solely of 
                amounts--
                            ``(i) that, subject to the limitations of 
                        subparagraphs (B) and (C), are raised by the 
                        separate segregated fund or nonconnected 
                        committee only from individuals, and
                            ``(ii) with respect to which all other 
                        requirements of Federal, State, or local law 
                        are met.
                    ``(B) Limitation on individual donations.--
                            ``(i) In general.--A separate segregated 
                        fund or nonconnected committee may not accept 
                        more than $25,000 in funds for its qualified 
                        non-Federal account from any one individual in 
                        any calendar year.
                            ``(ii) Affiliation.--For purposes of this 
                        subparagraph, all qualified non-Federal 
                        accounts of separate segregated funds or 
                        nonconnected committees which are directly or 
                        indirectly established, financed, maintained, 
                        or controlled by the same person or persons 
                        shall be treated as one account.
                    ``(C) Fundraising limitation.--No donation to a 
                qualified non-Federal account may be solicited, 
                received, directed, transferred, or spent by or in the 
                name of any person described in subsection (a) or (e) 
                of section 323.
            ``(4) Voter drive activity and federal account defined.--
        For purposes of this subsection--
                    ``(A) Voter drive activity.--The term `voter drive 
                activity' means any of the following activities 
                conducted in connection with an election in which a 
                candidate for Federal office appears on the ballot 
                (regardless of whether a candidate for State or local 
                office also appears on the ballot):
                            ``(i) Voter registration activity.
                            ``(ii) Voter identification.
                            ``(iii) Get-out-the-vote activity.
                            ``(iv) Generic campaign activity.
                    ``(B) Federal account.--The term `Federal account' 
                means an account which consists solely of contributions 
                subject to the limitations, prohibitions, and reporting 
                requirements of this Act. Nothing in this subsection or 
                in section 323(b)(2)(B)(iii) shall be construed to 
                infer that a limit other than the limit under section 
                315(a)(1)(C) applies to contributions to the 
                account.''.

SEC. 5. CONSTRUCTION.

    No provision of this Act, or amendment made by this Act, shall be 
construed--
            (1) as approving, ratifying, or endorsing a regulation 
        promulgated by the Federal Election Commission, or
            (2) as establishing, modifying, or otherwise affecting the 
        definition of political organization for purposes of the 
        Internal Revenue Code of 1986.

SEC. 6. EFFECTIVE DATE.

    The amendments made by this Act shall take effect on January 1, 
2005.

Summary: Reform Act of 2004 - Amends the Federal Election Campaign Act of 1971 to revise the definition of political committee to include any committee, club, association, or other group of persons that has as its major purpose the nomination or election of one or more candidates . Treats certain expenses by major purpose organizations as expenditures subject to the limitations and reporting requirements of such Act. Provides that any disbursement by separate segregated fund or nonconnected committee shall be allocated between Federal and non-Federal accounts in accordance with this Act and regulations prescribed by the Federal Election Commission. States that disbursements allocated to non-Federal accounts may be paid only from a qualified non-Federal account. Prohibits a separate segregated fund or nonconnected committee from accepting more than $25,000 in funds for its qualified non-Federal account from any one individual in any calendar year.