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94–496 2004

HEARING ON FEDERAL ELECTION 

COMMISSION AND 527 GROUPS 

HEARING 

BEFORE THE

COMMITTEE ON HOUSE 

ADMINISTRATION 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED EIGHTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, MAY 20, 2004 

Printed for the Use of the Committee on House Administration 

( 

(II) 

COMMITTEE ON HOUSE ADMINISTRATION 

BOB NEY, Chairman 

VERNON J. EHLERS, Michigan 

JOHN L. MICA, Florida 

JOHN LINDER, Georgia 

JOHN T. DOOLITTLE, California 

THOMAS M. REYNOLDS, New York 

JOHN B. LARSON, Connecticut 

Ranking Minority Member 

JUANITA MILLENDER-MCDONALD, 

California 

ROBERT A. BRADY, Pennsylvania 

PROFESSIONAL STAFF

PAUL VINOVICH, Staff Director 

GEORGE SHEVLIN, Minority Staff Director 

(1) 

FEC AND 527 GROUPS 

THURSDAY, MAY 20, 2004 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON HOUSE ADMINISTRATION, 

Washington, DC. 

The committee met, pursuant to call, at 4:30 p.m., in room 1309, 

Longworth House Office Building, Hon. Robert W. Ney (chairman 

of the committee) presiding. 

Present: Representatives Ney, Ehlers, Mica, Doolittle, Larson 

and Brady. 

Staff Present: Jeff Janas, Professional Staff Member; Paul 

Vinovich, Staff Director; Matt Petersen, Counsel; George Shevlin, 

Minority Chief of Staff; Tom Hicks, Minority Professional Staff 

Member; Charles Howell, Minority Chief Counsel; and Matt 

Pinkus, Minority Professional Staff Member. 

The CHAIRMAN. The committee will come to order. I want to 

thank the Chair and the Commissioners for coming today. The 

committee is meeting today to hear from four members of the Federal Election Commission about the legal and regulatory framework governing nonparty political organizations, more commonly 

known as the 527s, so called because of the section of the Tax Code 

under which they are registered. 

Earlier this year the FEC commenced a rulemaking to determine 

whether its current regulations needed to be revised so as to apply 

to political organizations like 527 groups that had heretofore 

claimed to be exempt from Commission rules. 

The committee does look forward to hearing directly from the 

Commissioners regarding last week’s developments on the rulemaking, but before we do, I first want to look back at the developments, I think, that led to the proliferation of 527 groups in the 

first place. 

Over 2 years ago Congress enacted, as we all know, Bipartisan 

Campaign Reform Act, or BCRA, which the President signed into 

law. Among other things, BCRA prohibited the national political 

party committees from soliciting and receiving soft money, the unlimited and largely unregulated contributions from labor unions, 

corporations and wealthy individuals. In addition, BCRA placed restrictions on issue ads mentioning candidates for Federal office 

that run in the days leading up to an election. 

Those who champion BCRA on both sides of the aisle asserted 

that the new law was necessary to cleanse the Federal campaign 

finance system from the allegedly corrupting influence of soft 

money. I say allegedly, because obviously I didn’t support BCRA 

2 

then, and I wouldn’t support it today, and wouldn’t support it tomorrow. 

And in fact, I worked with my friend Al Wynn, a Democrat from 

Maryland, to block its passage. We had an alternative, I think, that 

was fair and balanced, and gave the political parties, with some 

limitations, the options to use soft money for overhead and still 

allow for voter registration and a lot of other things that I happen 

to believe. You can call me old-fashioned, but I kind of like the first 

amendment freedom of speech, expression and association. 

Moreover, I believe that BCRA would do serious damage to our 

democratic process by weakening the political parties and shifting 

more power and influence to unaccountable, ideologically driven 

outside groups. And again, if they are operating, and the parties 

can operate, then I think it is a level playing field. 

As I point out repeatedly during the floor debate, BCRA does not 

ban soft money, notwithstanding repetitive claims to the contrary 

by the law’s supporters; rather BCRA merely redirected soft money 

to less accountable groups. Unfortunately, I was unsuccessful in efforts to defeat BCRA. 

Before the ink on the President’s signature had dried, new 

groups had begun to act like vacuum cleaners, picking up soft 

money as possible situations began to proliferate, I think, right before our eyes. 

Immediate reports indicated that organizations whose primary 

purpose was to function as a shadow political party committee were 

being established with the apparent stamp of approval by relevant 

Federal officeholders and party officials to solicit and spend soft 

money in support of parties, candidates and their agendas. Most of 

these groups were established for the express purpose of defeating 

President Bush in November of 2004, which is particularly stunning, considering that many Democrats, and some Republicans, 

had championed the efforts to, quote, ban soft money. 

However, data compiled by the Center For Responsive Politics 

notes that the top 24 individual soft money donors of the current 

election cycle are giving exclusively to Democrat-leaning 527 

groups, but, I think, after today you probably will also see them 

giving it to Republican soft money-leaning groups. I am trying to 

be fair and balanced, not to steal something from that show on TV. 

[Laughter.] 

But the committee held a hearing last November to provide an 

opportunity for representatives from prominent 527 groups to explain their activities, and to gain a greater understanding about 

the extent to which BCRA has reallocated political power and resources in the United States. 

The representatives of the Republican-leaning groups showed up. 

The representatives of the Democrat-leaning groups who had been 

invited refused to attend. Those who refused to testify then 

stonewalled, I think, the committee’s legitimate attempts to receive 

more information about the activities of the groups that they head. 

Eventually after the committee had to consider exercising subpoena power to gain a measure of cooperation, these groups gradually produced a limited number of documents, almost all of which 

were already publicly available on the Internet and elsewhere. 

3 

At about this same time, the FEC initiated a rulemaking to examine whether its rules ought to be amended so as to regulate 527 

groups, especially in wake of the Supreme Court’s McConnell v. 

FEC opinion that upheld most of BCRA. I welcome this effort by 

the FEC to bring clarity to an area of the campaign finance law 

where there has been a great deal of confusion. The committee decided to postpone its inquiry into the activities of these 527 groups 

and their efforts to influence Federal elections to allow the FEC an 

opportunity to thoroughly look into the issue. 

Over the past few months, the FEC has addressed proposed 

rules, held hearings at which interested parties commented on the 

wisdom or the defectiveness of the proposed rules, and received 

over, I believe—and correct me if I am wrong—100,000 written 

comments from concerned groups and citizens. Comments were 

submitted by approximately 130-some Members of the House on 

the Democrat side. One of the passages from the letter reads: 

‘‘there has been absolutely no case made to Congress or a record 

established by the Commission to support any notion that tax-exempt organizations and other independent groups threaten the legitimacy of our government when criticizing its policies. We believe 

instead that more, not less, political activity by ordinary citizens 

and the associations they form is needed in our country.’’ 

Let me say, first of all, it sounds like I probably should have 

signed that myself, but I am glad to see that members of the other 

party have discovered the importance of protecting the free speech 

and the associational rights of our citizens. This is certainly a far 

cry from some of the rants about the evils of soft money and special 

interests that were made during BCRA by members of both parties. 

However, I wish that we would have found this voice to support 

Congressman Wynn and I at that time, then maybe we could have 

gotten more votes for our proposal. 

Nevertheless, we are now stuck with a complex and convoluted 

law that doesn’t ban or even reduce soft money in the Federal political system, but does impose significant burdens on individuals 

and groups seeking to be involved in the political process, and especially, I think, in the area of voter registration, which is one of the 

largest problems I had with BCRA, especially since public communications encouraging people to register are cut off so close to the 

election when people are really interested in registering to vote. 

So we commend the FEC’s efforts to inform the regulated community regarding what activities BCRA permits and what activities it forbids, especially with respect to 527 groups. I must confess 

that my friends on the other side of the aisle aren’t the only ones 

who have had a sudden change of heart about the merits of various 

campaign finance regulations. Members of my own side of the aisle 

who oppose BCRA now wish to see it applied broadly so as to hobble the groups that are supporting their political opponents. 

It is a strange day indeed when you find the Democrats defending unfettered spending as a legitimate political right and the Republicans want to prohibit it by a regulatory agency, yet that is 

where I think we find ourselves. 

Accordingly, last week’s FEC decision to forego regulation of 

these groups with the election cycle was jeered by some, and obviously cheered by others. I hope the FEC process will provide guidVerDate May 21 2004 23:41 Jul 26, 2004 Jkt 094496 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HR\OC\A496.XXX A496
4 

ance to the regulated community, some of whom may have felt paralyzed to act because the legal landscape remained too murky for 

them to operate comfortably, or operate in a pattern they felt might 

have potentially been illegal. 

Though the 90-day delay leaves open the questions of what the 

rules will be in the next election cycle, there should be no mistake 

that a decision has been made for this cycle (by the fact that no 

decision was made), and I will ask some questions on that today. 

Therefore, I am anxious to hear from the Commissioners themselves regarding the rulemaking. Furthermore, I look forward to 

hearing the Commissioners’ talk on the permissible range, frankly, 

of activities in which 527 groups may engage. 

I understand, of course, that the Commissioners won’t be able to 

comment on the specific actions of particular groups currently subject to ongoing FEC enforcement actions, and I respect that, and 

obviously yield to the proper nature of not asking you to do that. 

One final comment before I recognize our other Members: some 

of those who support campaign finance reform have argued that 

last week’s action is a demonstration of the deficiencies of the FEC 

and provides evidence of the need to restructure that agency. These 

supporters are understandably chagrined by the soft money groups 

that have made, I think, a mockery of the law that they championed. They are faced with two choices: Admit, number one, that 

they were wrong and the bill was a mistake, or it is a failure; or 

number two, that they have to attack the FEC. 

Number one probably, I think, is the appropriate response, not 

the attack of the FEC. Instead, I think they will choose number 

two, to attack the Federal Election Commission. We should be 

clear, though, that the deficiencies of this law are the responsibility 

of the authors and the Members who have voted for it. 

I want to thank you again for coming here today. I also want to 

thank our Ranking Member, Congressman Larson for agreeing to 

the hearing and our Members for being here today. 

And with that, I am going to yield to our distinguished Ranking 

Member, Mr. Larson. 

Mr. LARSON. Thank you very much, Mr. Chairman. And I want 

to thank you and also thank our distinguished panelists for being 

here this afternoon and for holding this oversight hearing to review 

the Federal Election Commission’s rulemaking process regarding 

527 groups. 

I know in conversations with the Chairman the need for additional hearings related to this issue under the committee’s jurisdiction, and especially given the Chairman’s major role and the outstanding role he played in the passage of HAVA, and also concerns 

that I think a number of Members have about the Presidential 

public financing fund. I am interested in hearing from the Commission about the role 501(c)(3)s may be playing in influencing elections. 

To that end I would ask unanimous consent to ask that this article from the Washington Monthly be inserted as part of the record, 

which explores at length the—— 

The CHAIRMAN. Can I read it first? 

Without objection. 

5 

Mr. LARSON [continuing]. The both 527s and as the relationship 

between 527s and 501(c)s, and the potential for one to sort of meld 

into the other, which I found both interesting reading, and also, I 

am sure, made for the complexity involved in the decisionmaking 

that all of you on the Commission have been asked to give. 

The news media for the most part has been able to focus on 527s, 

because they have disclosure requirements, which makes information readily available. But some groups are using 501(c) status as 

a way not to disclose their donors’ activities, and these groups may 

be a bigger influence on elections than 527s are perceived. 

One group, Americans for Job Security, by all appearances is 

raising millions of non-Federal dollars for the sole purpose of defeating Democrats. This is done without the same donor disclosure 

rules that 527s follow. While we are here to talk about the FEC 

rulemaking process, I am interested in hearing from the witnesses 

how they can bring these groups that have been called the shadow 

Republican Party into the light as well. 

Again, as I have indicated, I would like to submit this article for 

the record. 

[The information follows:] 

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Mr. LARSON. 527s are named after a section of the Internal Revenue Code that specifies the tax treatment accorded political organizations and tax-exempt organizations which make political expenditures. Congress, as was pointed out by the Chair, addressed 

527s twice in the last 4 years. In 2000, we passed legislation that 

required all 527s that expect to have gross receipts of over $25,000 

during a taxable year to register with the Internal Revenue Service 

within 24 hours of their formation. They were not required to report to the FEC. These 527s are then subject to the public disclosure and review requirements of the IRS, and if they meet additional requirements, they are subject to public disclosure and review requirements of the FEC as well. 

I note that our distinguished colleague Mr. Doolittle has just arrived, and Roll Call on May 17, he said, I appreciate today’s FEC 

decision which applied a strict constructionalist approach to the 

law and rendered this decision in a fair and impartial manner. 

I agree with Mr. Doolittle. 

He went on to say, the ruling did not attempt to make law as 

the petitioners had sought, but instead followed the law as it was 

written by Congress. He then added, as abysmal as that law may 

be. 

Mr. DOOLITTLE. Which it definitely is. 

Mr. LARSON. I just want today to make sure I gave you full credit, but I wanted you to know that in the spirit of what you had to 

say, I was in agreement, not necessarily with your final comment. 

But in 2002, we passed legislation which was intended, among 

other things, to reduce unnecessary and duplicative Federal reporting by certain State and local political committees where the information was already required to be reported and be publicly disclosed under the State law. 

Federal courts have not been silent on the matter of 527 disclosure requirements. On Christmas Eve of last year, the U.S. Court 

of Appeals for the Eleventh Circuit unanimously reversed the district court ruling. In Mobile Republican Assembly v. U.S., the court 

of appeals held that the disclosure requirements do not impose an 

unconstitutional penalty on 527s. The disclosure requirements are 

merely a condition precedent to receiving a Federal subsidy by way 

of a voluntary tax exemption. 

Last December in McConnell v. The Federal Election Commission, the Supreme Court clearly stated that placing limits on raising of unregulated corporate, union and large individual contributions donated by organizations and individuals with general or specific legislative objectives would not have the same application to 

broader citizen-based interest groups. Any entity that believes, 

feels that these disclosures requirements are too severe may choose 

to organize differently. While they may be subject to higher corporation taxes and additional regulations, it is their choice. 

Congress is free to impose additional regulations on 527s if it can 

be clearly demonstrated that these groups have the same corrosive 

influence on the electoral process. 

I would encourage a cost approach to the imposition of additional 

restrictions. Political free speech, as has been noted by the Chair, 

is the lifeblood of any vibrant democracy. Congress should not restrict individuals from donating money to groups like the NRA for 

15 

use in publishing a legislative report card on the voting records of 

Members of Congress, nor restrict the National Association For the 

Advancement of Colored People from spending contributed funds to 

conduct voter registration drives. Arguably these types of activities 

amount to public service functions, and Congress should encourage 

these citizen-based activities and not stymie groups from informing 

the public about their position or from getting more citizens to participate in our democracy. 

I supported BCRA because it severed the link between undisclosed and unregulated political contributions known as soft money 

and the corrosive effect such contributions have on the credibility 

of government, on Federal officeholders, on candidates and their 

parties. 

To say that the law, as the Chairman pointed out, is difficult to 

interpret and gray and vague in many areas is an understatement 

and, too, I think, further complicates the task that the FEC has at 

hand, but, again, is why I would urge caution in moving forward. 

The FEC voted unanimously last week to accept the general 

counsel’s recommendation to act within the next 90 days. I am interested in hearing from the Commissioners on what will happen 

in that time frame, and if that is enough time to issue any changes. 

I would like to bring to the Commission’s attention that when 

Congress enacted BCRA, we chose to defer the effective date to the 

following election cycle. This decision allowed all affected groups 

and parties to have sufficient time to transition from existing rules 

to the new rules under BCRA without distorting the electoral process in midcycle, where we find ourselves currently. 

The FEC should continue to take whatever time is needed to adequately consider and craft any proposed changes, but with an eye 

toward avoiding disruptions during the present election cycle which 

would affect political committees, organizations and candidates. 

I look forward to hearing how the Commission reached their decisions and what the future may hold for 527s. Thank you, Chairman. 

The CHAIRMAN. I want to thank the Ranking Member. 

[The statement of Mr. Larson follows:] 

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The CHAIRMAN. Mr. Mica. 

Mr. MICA. Thank you, Mr. Chairman. I thank you for holding 

this meeting. We talked about it very shortly after the decision of 

the Federal Election Commission not to further regulate the 527s. 

I was disappointed by their action, because I have always viewed 

the Commission as being responsible for Federal elections, and 

they all seem to act in the past in the best interest of the electoral 

process. 

I did not support the so-called campaign reform legislation basically because of what some of us predicted would happen, and unfortunately in our worst nightmarish dreams we couldn’t have predicted a greater distortion of the Federal election process. So therefore, I am very disappointed. 

I don’t know if the Members have been blindfolded and kept in 

a dark room and fed mushrooms in the past few months, but—and 

just my background, I come from a bipartisan family. I have a 

brother who served as a Democrat for 10 years, he was an aide 

here for 10 years; another brother a Democrat, aide to Lawton 

Chiles. I have been around the process for 40 years, and I have 

never, ever seen anything like this, such an undermining of the 

Federal elections process. The campaigns have started with the 527 

in the most vicious approach, and people are just totally dismayed, 

not just people in politics, but the average person on the street, by 

what has taken place. 

We did not regulate soft money. We moved it around, and we 

have created a horrible vacuum and undermining of the process. I 

have never seen, again, anything like what we are experiencing 

now, totally out of control, and then a third more money—I read 

the other day a third more money into congressional races, so pouring more money in soft monies by finding circuitous routes and the 

Federal election process being made a sham. 

I share some of the sentiments of Mr. Doolittle. The only thing 

you can really do is have full disclosure, and we have less disclosure of huge amounts of money being spent already. The 527s have 

made a complete joke of the process and the attempts to curtail soft 

money. 

We were shown some charts here of the predicted expenditures, 

and I thought a half a billion dollars might be far-fetched, but I am 

told now that it may reach a half a billion dollars, which is absolutely outrageous, and the people do not have a clue as to where 

these funds are coming from. The disclosures—and if they aren’t 

involved in a Federal election, somebody wake me up and tell me 

it isn’t so. Again, I can’t totally blame the Federal Election Commission, even though you have responsibility for regulating and 

overseeing the elections and also interpreting your responsibility. 

I would have voted for a stricter approach to regulation without 

a—I can’t tell you how disappointed I am. It may be too late for 

the 2004 elections. That is the sad part of this. And the worst part 

about all of this is I think that the so-called reform measure and 

your actions to not take a stricter approach to regulation of an outof-control chase and display—blatant display of unregulated money 

in a Federal election, the worst part about this is this is undermining people’s faith in our democratic process, and that is the 

20 

saddest part about what Congress has done and what you haven’t 

done. 

So with that, I yield back. 

The CHAIRMAN. I thank the gentleman. 

The gentleman from California, do you have an opening statement? 

Mr. DOOLITTLE. You know, Mr. Chairman, I really came to hear 

the Commissioners, and I will make any statements I have in the 

context of the back and forth. 

The CHAIRMAN. Thank you. 

The gentleman from New York. 

Mr. REYNOLDS. No, thank you. 

The CHAIRMAN. Thank you. 

I want to thank again all the Members and Commissioners for 

coming. 

Today we have the Honorable Michael Toner, Commissioner, 

Federal Election Commission; the Honorable Scott E. Thomas, 

Commissioner, Federal Election Commission; the Honorable Ellen 

L. Weintraub, Vice Chair, Federal Election Commission; and the 

Honorable Bradley A. Smith, Chairman of the Federal Election 

Commission. 

And with that I guess it is like Marvin Gaye’s song ‘‘What’s 

Going On.’’ [Laughter.] 

We will start with you, Mr. Toner. 

STATEMENTS OF MICHAEL TONER, COMMISSIONER, FEDERAL 

ELECTION COMMISSION; SCOTT E. THOMAS, COMMISSIONER, FEDERAL ELECTION COMMISSION; ELLEN L. 

WEINTRAUB, VICE CHAIR, FEDERAL ELECTION COMMISSION; AND BRADLEY A. SMITH, CHAIRMAN, FEDERAL ELECTION COMMISSION 

STATEMENT OF MICHAEL TONER 

Mr. TONER. Thank you, Mr. Chairman, Mr. Ranking Member, 

members of the committee. Thank you for inviting us to testify. It 

is always a pleasure to be here. 

Under the Federal election laws, a political committee is defined 

as any group that receives more than $1,000 of contributions or 

makes more than $1,000 of expenditures in a calendar year. 

Prior to the Supreme Court’s ruling in McConnell, many people 

believed that for independent groups not controlled by candidates, 

expenditures for political committee status were limited to those 

that were made for express advocacy, communications that on their 

face expressly advocate the election or defeat of a clearly identified 

Federal candidate. 

The Supreme Court concluded in McConnell that the express advocacy test is not constitutionally mandated. The Court further 

concluded that the express advocacy test in practical application is 

functionally meaningless in the real world of politics, and the Court 

emphasized that political consultants long ago shaped political advertisements with no consideration of express advocacy; that many 

campaign commercials paid for by Federal candidates did not contain express advocacy; and that political consultants had generally 

21 

agreed that express advocacy was not the way to move voters in 

America. 

Despite all of this, for over 20 years the express advocacy test 

has played a major role in the Commission’s determination of 

whether an organization is a political committee that must abide 

by the hard-dollar limits of Federal law. 

In this rulemaking the Commission is confronting the basic question of whether we are going to continue to use a legal test that 

has largely been discredited by the Supreme Court or whether the 

Commission is going to develop a regulatory test that might actually be effective and might have meaning in the political world. 

I strongly believe the Commission should take the latter course, 

and it was in that spirit that Commissioner Thomas and I sponsored a set of regulations that would have turned on a different 

regulatory test for 527 organizations, namely whether they promote, support, attack or oppose a Federal candidate in their public 

communications. 

This promote, support, attack, oppose standard was crafted by 

Congress and enacted into law in BCRA. The standard currently 

applies to public communications made by State and local political 

parties and candidates. The standard was upheld as constitutional 

in McConnell against a vagueness challenge. The Court concluded 

there that the statutory provisions, ‘‘provide explicit standards for 

those who apply them, and give the person of ordinary intelligence 

a reasonable opportunity to know what is prohibited.’’ 

The Court further went on and indicated that this standard provides clear notice as applied to political parties since, ‘‘every actions 

they take are presumed to be in connection with election campaigns.’’ 

We believe political parties—Commissioner Thomas and I do— 

that political parties and other campaign organizations and 527 

groups have many of the same characteristics, particularly because 

527 groups operate as a matter of law for the purpose of influencing or attempting to influence the selection, nomination, election or appointment of individuals to Federal, State or local office. 

527 organizations voluntarily choose to organize under section 

527 of the Code. They gain substantial tax benefits as a result of 

that voluntary choice, and they also hold themselves out as operating to influence elections to public office. Given this, it is very 

clear that 527 organizations are fundamentally partisan political 

organizations, which is fine, but the conclusion that flows from that 

is that they are very synonymous with the types of groups that the 

Supreme Court has made clear are appropriate for campaign finance regulation. 

In McConnell the Court made clear that in terms of 527 organizations, the Court views them as organized for the express purpose 

of engaging in partisan political activity and, ‘‘by definition engage 

in partisan functions.’’ 

With all of this, Commissioner Thomas and I believed it was appropriate for the Commission to develop a broader standard for political committee status that did not turn on express advocacy in 

terms of 527 groups, but instead turned on several key elements: 

first, whether or not they are running commercials that promote or 

attack Federal candidates. In our view, if they do, they clearly are 

22 

for the purpose of influencing a Federal election and, therefore, 

should be required to be classified as a political committee and 

abide by the hard-dollar limits of Federal law. 

Second of all, our proposed regulations would have made clear 

that 527 organizations that engage in partisan voter mobilization 

activities, activities that include communications that attack or 

promote Federal candidates, also should be treated as political 

committees required to abide by the hard-dollar limits. In our view 

that is the scope of a practical, meaningful set of regulations for 

527 groups that, after all, at bottom are partisan organizations. 

We also strongly believed that it was critical that the agency 

take action for the 2004 election. The McConnell case came down 

in December of 2003, and so the timing of these questions arising 

was not of our choosing, but the magnitude of the issues is enormous. 

A Presidential election is going to be conducted in 6 months, and 

there is no question that hundreds of millions of dollars are going 

to be spent by 527 organizations on activities that will directly affect the Presidential election. With all of that in mind, Commissioner Thomas and I sought to develop a narrowly tailored approach that would have effectively regulated this type of conduct. 

With that, Mr. Chairman, I see that my 5 minutes has elapsed, 

and I will yield back my time. 

The CHAIRMAN. Thank you. 

[The statement of Mr. Toner follows:] 

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The CHAIRMAN. Commissioner Thomas. 

STATEMENT OF SCOTT E. THOMAS 

Mr. THOMAS. Thank you, Mr. Chairman and members of the 

committee. I will try to pick up to deal with the latter part of the 

proposal that Commissioner Toner and I cobbled together. It relates mostly to the so-called allocation issue. 

For groups that cross the political committee threshold, the 

FEC’s Federal/non-Federal allocation regulations have long required the use of a funds-expended formula under which a share 

of the groups’ administrative expenses and generic voter driving expenses must be paid for from federally restricted funds. The Federal share is determined by dividing the amount contributed to or 

otherwise spent on behalf of specific Federal candidates by the 

total Federal and non-Federal disbursements for specific candidates. The formula can be easily manipulated if only contributions and express advocacy are counted as candidate-specific outlays. 

For example, a group could contribute $1 to a Federal candidate 

and $99 to a non-Federal candidate and avoid express advocacy 

and thereafter work with a 1 percent Federal, 99 percent non-Federal ratio for all applicable expenses. Indeed, we have seen evidence of political committees seemingly focused on the current 

Presidential race treating the vast majority of funds raised and 

spent as non-Federal, nonrestricted dollars. If the news accounts 

are close to accurate, tens of millions of dollars are likely to be 

spent by these groups to influence the upcoming Federal elections 

outside the Federal funding restrictions. 

Part of the Toner-Thomas proposal that would have modified the 

allocation rules really had two purposes. First, for purposes of calculating the funds-expended ratio, political committees involved in 

both Federal and non-Federal elections were to use the promote, 

support, attack or oppose standard for calculating funds disbursed 

for candidate-specific purposes. This would assure that a public 

communication by a political committee saying, ‘‘Bush is wrong’’ or 

‘‘Kerry is right,’’ would count as an expense on the Federal side of 

the formula. No longer would registered political committee agents 

be able to claim that only the cost of ‘‘defeat Bush’’ or ‘‘elect Kerry’’ 

messages count toward the Federal portion. This legal approach, by 

the way, already had been approved by four members of the Commission in Advisory Opinion 2003–37. 

Second, this proposal was designed to prevent the same kind of 

gamesmanship that seems to have emerged using the contribution 

and independent expenditure concepts when calculating the Federal share. A group that really wants to focus vast soft money resources on a Presidential race could simply include nominal references to several non-Federal candidates in its communications 

and thereby skew the ratio. 

The Toner-Thomas proposal builds in a 50 percent minimum for 

the Federal share in the allocation ratio to prevent such a result. 

It was similar to the 65 percent minimum Federal percentage that 

has been applied for years to the parties’ House and Senate campaign committees. 

29 

With my remaining time, I will take a crack briefly at just addressing some of the most obvious concerns that have been noted. 

Really, there is a valid concern about getting involved in the middle of an election cycle, but I come back to the basic proposition it 

is really entirely dependent on how big of a problem we are facing. 

Here, after BCRA’s passage, new groups sprang up or expanded 

greatly and began openly raising and spending tens of millions of 

dollars to influence Federal elections outside the Federal campaign 

finance rules. Their Web sites and other communications sometimes state expressly they are designed to defeat a particular Federal candidate. Hard-hitting attack ads or lofty messages of praise 

regarding candidates seem to be their only function in some cases. 

These groups are being run in many cases by well-connected political operatives with easy direct or indirect access to elected officials. The major purpose of these groups seems to be influencing 

elections and use of the express advocacy shield, and weak FEC allocation regulations seems to be leading them to use huge donations to influence Federal elections. 

That is what the political committee rules are designed to prevent. Only by acting quickly could the FEC hope to stop this problem before possibly hundreds of millions more were going to be 

raised and spent this way. 

Now, there are some problems, in essence, that you don’t want 

to wait on. I like to use the analogy these days, if I have a fire that 

is starting in my house, I am not going to wait 90 days to call the 

fire department. To me and to Commissioner Toner, we felt that 

the problem we had seen was concrete, it was present, and it was 

something we needed to address sooner rather than later. 

With that, I will cut off. I see my time is up. Thank you. 

The CHAIRMAN. I thank the gentleman. 

[The statement of Mr. Thomas follows:] 

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The CHAIRMAN. Commissioner Weintraub. 

STATEMENT OF ELLEN L. WEINTRAUB 

Ms. WEINTRAUB. Thank you, Mr. Chairman and Ranking Member Larson and members of the committee. Thank you for inviting 

us. I have always found that our discussions have been productive. 

I did not support the Toner-Thomas proposal. I had a lot of substantive problems with it. I respect the efforts of my colleagues. 

Maybe that was the best proposal that could be put together on the 

time line that they insisted on following, but I don’t think it was 

a realistic time line. I never believed that it was. We received tens 

of thousands of comments. We haven’t had adequate time to take 

all of them into consideration. 

The proposal was not based on any elaborate—or any developed 

factual record at all. It wasn’t supported by our general counsel. It 

wasn’t supported by the recommendations of the tax experts who 

testified before us, and I think it embodied oversimplified notions 

of tax law. 

Albert Einstein once said everything should be made as simple 

as possible, but not simpler, and I think that is what this proposal 

attempted to do. It lacked key definitions. The allocation formula 

lacked any supporting data other than an impressionistic reaction 

to what a couple of well-publicized committees are doing, but we 

have to remember that when we are regulating political committees and political organizations across the country, there are thousands of them, and they are all going to be subject to the same 

rules. This isn’t an enforcement action. 

We received some very persuasive testimony from tax experts as 

to the differences between the tax law and the election law and 

how they have been construed over decades by courts and by agencies. The IRS is unconstrained by first amendment concerns that 

we have to take into account, and 527 was described by one of our 

tax experts as the kitchen junk drawer of regulations. The IRS just 

sort of piles all sorts of things into it. 

Another one in written comments pointed out that it is meant to 

be sort of a mirror image of 501(c)(3), and the IRS drew a very 

wide circle around 501(c)(3) activities, because those you get a tax 

deduction for, and they didn’t want anything that was remotely political to come under 501(c)(3). So anything that was even tangentially political got dumped into 527, and it encompasses a lot of activities that this agency has not traditionally regulated and that I 

think a lot of people don’t think we ought to be regulating. 

There were concerns that were expressed by the nonprofit community as to how this would affect them, and I think that they 

were valid concerns. There is a legitimate role for people to criticize 

the government. A lot of nonprofit entities use criticizing elected officials close to the election as a primary form of advancing their 

legislative and policy agenda, and they have the first amendment 

right to do that, and we have to be very, very careful if we are 

going to be intruding in those areas. 

Now, while my concerns about some of the specifics of the proposal could be addressed given the extra time that our general 

counsel has asked for, perhaps as Congressman Larson has suggested, perhaps even more time, there is one problem that is sort 

39 

of fundamental, and I just am having a hard time working around 

that, and that is the fact that Congress has acted in this specific 

area. Congress passed legislation directly addressing the problem 

of unregistered 527 organizations, 527 organizations that didn’t 

register with the FEC. And what Congress decided to do in 2000, 

and again they amended the law, you amended the law in 2002 

after BCRA was passed, and the route that you chose was to have 

disclosure to the IRS. 

A proposal was suggested. A bill was introduced in the Senate 

that would have gone along very similar lines to what Commissioners Thomas and Toner have proposed in terms of making 527 

entities, for the most part, into political committees. That was not 

the proposal that was enacted into law, and if we were to adopt 

this proposal, we would substantially nullify the law that Congress 

actually did pass. 

I would think that you guys would be kind of angry at us if we 

did that. It would be like the FEC saying to Congress, you had various policy options in front of you when you decided to act legislatively on the 527 issue. You chose one route. We think you made 

a mistake. You should have chosen this other route, and that is the 

one that we are going to apply. 

As an administrator, I don’t see how I can—maybe it is my background as a House staffer years ago that I just can’t quite shake 

these ‘‘deferential to Members of House’’ instincts of mine, but I 

think that you guys would probably be kind of upset with us if we 

tried to initiate the kind of choice that Congress made. 

I also paid very close attention to the letter that Chairman Ney 

alluded to from 128 House Members. We got a similar letter from 

19 Senators as to what they intended when they passed BCRA. Mr. 

Larson, you signed that letter, and I read it very carefully, and I 

paid a lot of attention to it. It was very persuasive to me. I don’t 

see how we go and do something in interpreting a law that the 

Members of Congress who voted for it have told us was not their 

intention. 

There are definitional problems in this proposal that I think are 

very, very troubling. There is no definition of major purpose. There 

is no definition of promote, support, attack or oppose. I know the 

Supreme Court has upheld the latter standard with respect to political parties, but we had reams of testimony from members of the 

regulated community that they don’t understand what it means, 

and I don’t want to push forward any kind of regulation that is 

going to confuse the regulated community. 

People in the regulated community need to understand what the 

rules are so they can comply with them. I want them to comply 

with the rules, but they have to understand them. And I don’t 

think we ought to be shooting from the hip just to put some kind 

of a quick fix out there without adequately considering what the 

impact is going to be on the regulated community. 

I see my time is up, so I will stop. 

The CHAIRMAN. Thank you. 

[The statement of Ms. Weintraub follows:] 

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The CHAIRMAN. Chairman Smith. 

STATEMENT OF BRADLEY A. SMITH 

Mr. SMITH. Thank you, Mr. Chairman, members of the committee. 

I have to say I don’t know that I have ever seen so much excitement over a decision which simply maintains it is status quo, because that is what the Commission did. The law has long required 

that a group must engage in express advocacy before it is considered a political committee. Now, some have argued that that interpretation of the law is incorrect, but they have admitted that it is 

the interpretation of the law. 

For example, in January 2003, 10 months after BCRA was 

passed, 2 months after it took effect, representatives of Public Citizen, Democracy 21, Common Cause and the Center for Responsive 

Politics wrote to the IRS, quote, for well over a decade, independent groups learned that by simply avoiding the magic words 

of express advocacy as defined by the courts, these groups were no 

longer required to register as PACs with the FEC and fell outside 

of Federal campaign finance laws. 

Now, in BCRA Congress did not change the definition of political 

committee, nor did it change the definition of expenditure or contribution, which are the predicates for defining a political committee. 

In the regulations that we considered, not once did any witness 

come before us and say, if you are going to properly implement this 

law, you need to address the definition of political committee or expenditure. In a lawsuit that the House sponsors filed against our 

regs saying they didn’t properly implement the bill, they did not 

suggest anywhere in that lawsuit that we should have changed or 

added new definitions for expenditure, contribution or political 

committee. The legislative history, I think, shows very clearly that 

Congress understood this definition when it passed BCRA, and it 

understood the activity would gravitate to 527 groups. 

My written testimony, as with the written testimony of the Vice 

Chair, includes a large number of quotes primarily from Senators, 

but there were also many Members of the House who understood 

this, including members of this committee. For example, Congressman Linder said, ‘‘Shays-Meehan is merely diverting and channeling soft money into an ever-growing number of parties, while allowing corporations and unions to spend unlimited and unregulated dollars on electioneering. This does not and will not change 

the amount or type of money in the system, and it certainly does 

not alter the ability of outside groups to influence elections.’’ 

Or, Congressman Reynolds, you, too, anticipated exactly this result. You said, ‘‘we would be fooling ourselves if we believed the notion that the Shays-Meehan legislation represents a complete ban 

on soft money. Let us be honest. In this bill there is no such thing 

as a ban on soft money. This bill creates even bigger loopholes than 

before, loosening even further the loopholes that allow party committees to shift their current soft money over to nonprofits, who in 

turn could use 100 percent soft money for issue advocacy.’’ 

And Representative Shays, when they were amending the 527 

disclosure bill that the Vice Chair referred to a few months later, 

102 

said, quote, the one thing we know with our campaign finance reform bill is 527s are going to proliferate. We know that. Special interests will have a greater say. We know that. That is what people 

on both sides of the aisle argued for. Let Americans have their say. 

In response to this argument, supporters of the bill tended to 

argue four things. First, if a committee of a 527 were established, 

financed, maintained or controlled by a party, it would be treated 

like a party. 

Secondly, they required us to write a tougher definition of coordination, making it tougher for these groups to work with candidates 

and parties. 

Third, they prohibited Members from soliciting funds for these 

groups with one exception that is somewhat important that we may 

get a chance to talk about later. 

And fourth, they put on the electioneering communications ban, 

which you are aware of: the ban on an ad 60 days before an election. 

By the way, this argument was also made by the Republican 

Party before the Supreme Court. Its very able litigator Bobby 

Birchfield, began his oral argument by pointing out to the Court— 

he said, if you uphold this law—I am not quoting him, but he said, 

if you uphold this law, here is what is going to happen. George 

Soros is going to give millions to 527s, and all same activity is 

going to continue. They did not say, if you uphold this law, it is 

going to limit the speech of all these 527s. They said exactly the 

opposite. 

Now, how did the Supreme Court respond to this? Well, the Supreme Court said, if I can find these quotes here—the Supreme 

Court said, ‘‘BCRA imposes numerous restrictions on the fundraising abilities of political parties of which the soft money ban is 

only the most important. Interest groups, however, remain free to 

raise money to fund voter registration, get-out-the-vote activities, 

mailings and broadcast advertising other than electioneering communications.’’ 

The Supreme Court also noted in response to the argument of 

the Republican Party that—they said, well, that argument is 

wrong, and they said, you might as well say it is overinclusive. 

They said, reform can take one step at a time. And here is what 

they wrote: ‘‘One might just as well argue that the electioneering 

communication definition is underinclusive because’’—here is the 

point I want you to hear—‘‘because it leaves advertising 61 days 

in advance of an election entirely unregulated.’’ And they continue, 

‘‘the record justifies Congress’s line-drawing.’’ 

Now, the Toner-Thomas proposal would have regulated advertising 61 days in advance of the election, thereby making nonsensical this Court’s statement. 

So as I see it, the comments about what the Court said in 

McConnell and so on are very interesting. They might be interesting if I were a Member of Congress and I had asked for a report 

as to what it might be constitutional for me to do, and I might 

weigh those factors in, but they are not very relevant to us on the 

Federal Election Commission because it was not what was passed 

by Congress. The Court did not say that you can apply ‘‘support, 

promote, attack, oppose’’ to nonparty groups because it wasn’t in 

103 

the law. They didn’t have a reason to discuss that issue, and, therefore, again, it is not really relevant to us. 

Ultimately, then, this is an issue that is for Congress. There are 

still some constitutional restraints out there, which is one of the 

reasons it is better that Congress attempt this expansion of regulation than that we do it. As my time is up, I would urge you to simply refer to my lengthy written statement for a detailed explanation of this legal analysis. And, of course, I am happy to take 

your questions. Thank you. 

[The statement of Mr. Bradley A. Smith follows:] 

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The CHAIRMAN. Well, I thank everyone for their testimony. 

I am going to keep my questions brief and under the time, because I want everyone to have a chance. And if we have a little bit 

more time I will allow more questions, but if not, I will submit it 

for the record. 

I want to go to the role of the FEC. Considering the important 

constitutional freedoms at stake, when you as FEC Commissioners 

are making rules or carrying out your responsibilities that impact 

speech and associational rights, how broadly or how narrowly do 

you believe you should interpret the law? Broadly, narrowly or in 

between? 

Mr. THOMAS. Well, I will jump in first, Mr. Chairman. I guess 

I’ve had somewhat of a philosophical disagreement with some of 

my colleagues over the years. I am someone who feels like the 

words Congress puts in the statute are my direction. Those are 

what I am supposed to follow, those are what I am supposed to defend, and those are what I am supposed to try to make work. And 

I have over the years tried to discourage my colleagues from trying 

to anticipate what constitutional battle might emerge if we adopt 

a certain construction of the statute. I have tried to encourage my 

colleagues to try to implement the statute as Congress intended it. 

And it is interesting in this particular dispute, because as I see 

it, what we have got here is a question about interpreting statutory 

provisions Congress passed back in the 1970s about what is a political committee. That term is a term of art that has been there since 

the 1970s, as has the word expenditure. And so when I see arguments that, well, the effort to amend the legislation to require IRS 

disclosure of some 527s in 2000 or the BCRA legislation in 2002 

somehow was a signal that the Commission should steer clear of 

getting into this issue we have in front of us today, I go back and 

say, look, the statute has been there for years and the FEC is supposed to figure out what is supposed to be, what is required to be 

regulated as a political committee. So I feel like I am trying to adhere to Congress’s wishes when I go back and apply the entire statutory scheme. 

The CHAIRMAN. Also, as a follow-up point, how do you determine 

intent? What was your intent? You determine just what was written in the law or the opinions of those who voted for it? Now, we 

have talked about this letter with 140 Members stating what they 

thought the intent of BCRA was, but you have the authors of the 

bill of the Senate and the House (the two authors respectfully, Mr. 

Shays and Senator McCain) saying, that wasn’t our intent. 

Do you go with the 140 because there are more numbers to decide intent, or do you go with the two who wrote the bill, or is it 

not a factor? 

Mr. THOMAS. Well, any expression of congressional intent by a 

Member of Congress is relevant to me, but I would say that the 

dispute that we see coming from these alternative constructions 

from Members themselves demonstrates that it is an almost impossible question for the FEC to resolve, what was the intent. And so 

it is in my mind, again, better to go back and really try to opine 

and make the statutory words work and function together. 

The CHAIRMAN. Yes, Commissioner. 

127 

Ms. WEINTRAUB. Mr. Chairman, if I might, I think that we all 

try to interpret the words of the statute. I don’t think Commissioner Thomas is alone in that. We also need to take into account 

what courts have said about the statute, as indeed Commissioner 

Thomas did when he tried to import a major purpose test into his 

regulatory proposal, because that is not part of the statute anywhere. That is strictly coming out of Buckley v. Valeo and the 

MCFL decision. So that is entirely a judicial construct. And we 

have to take into account if the Supreme Court says something is 

unconstitutional, that is obviously something we have to pay attention to. 

In terms of intent, I think it is entirely plausible that different 

Members of Congress had different intent when they voted for the 

law, but I suppose that I do find some weight in numbers, in that, 

as you know, you need a certain number of votes to get a law 

passed, and if more of the people who voted for that law who provided that majority had one view of the law, that I think is somewhat influential to me. We go back to the legislative history, look 

at what was said on the floor when people were debating, what was 

their understanding at the time. I think all of these factors are important. 

The CHAIRMAN. Any other opinions? 

Mr. SMITH. Well, I would echo the Vice Chair that all of us, I 

think, attempt to apply the statute. I know that 4 years ago I appeared before the other body at my confirmation hearing, and the 

point I made at that time, I promised Members, was that I would 

attempt to apply the law that they had written and not to apply 

my own preferences, and that is a vital consideration for us. 

I feel that part of the reason I was appointed to the Commission 

was because of a sense of many Members that the Commission had 

frequently overreached in the past, that it had far too often found 

its interpretations of the law struck down as unconstitutional by 

the Court or as being contrary to the statute by the various courts. 

And so I think one should not make the mistake of thinking that 

following the law involves constantly trying to push the envelope 

to the furthest possible limit. I think following the law means looking at the language of the statute, looking at the relevant court decisions that interpret that language, looking at what Members of 

Congress said at the time and what they might say in comments, 

and other expert witnesses, and applying that in a consistent way 

and in a way that does not step on the prerogatives of Congress. 

The CHAIRMAN. Gentleman from Connecticut. 

Mr. LARSON. Thank you, Mr. Chairman. And let me start by saying, again, the profound respect that I have for the difficulty of the 

task that you have at hand as witnessed by the testimony and the 

answers that you all have given. I find it interesting, too, that the 

four of you represent Republican, Democrat, Democrat, Republican 

as well, and I do believe that the task at hand is a very difficult 

one and provides caution. 

I was struck by what Mr. Thomas had to say about wanting to 

go in and put out a fire, but I wanted to ask you, what kind of a 

fire do you think is raging with respect to 501(c)(3)s? And if we are 

going to put out a fire, shouldn’t we put out the entire fire? 

128 

Mr. THOMAS. Congressman, that is a great point, and I think we 

should, if we find the same kind of abuse in the 501(c) area, basically apply the same legal analysis ultimately. If the major purpose 

of the organization could be shown based on reasonable objective 

analysis to be influencing elections, then I say you can apply the 

same tests. 

Now, Commissioner Toner and I in our proposal were attempting 

to focus initially on the 527 phenomenon, because those folks under 

the tax laws have that special ‘‘for the purpose of influencing’’ kind 

of construct that they have to follow in the first place. 

But we were intending for these other groups, the 501(c) groups, 

to allow for appropriate regulation either by the IRS or by the 

FEC, based on a whole body of current applicable law. So I hope 

you will appreciate that we are hoping to be vigilant in that area 

if the case arises. 

Mr. LARSON. Well, I think the reason I raise that and there 

strictly in looking at the broader picture, and again this is a task 

that you have as well, but it does occur to me that in this article 

that I have asked to be introduced for the record, they talk about, 

well, look let’s be honest about this. If you really pare down these 

issues, aren’t we talking, you know, the term ‘‘shadow Democratic 

party,’’ the shadow Democratic party and shadow Republican party, 

I suppose you could apply to 527s or 501(c)s, depending upon how 

you look at these organizations and their intent. 

I want to read you a comment that the author makes. I thought 

it was kind of profound. He said should the Republican shadow 

party give Bush the extra artillery he needs to prevail against 

Kerry, the newspaper editorialists and good government activists 

may someday regret the fact that they decried the Democratic 

shadow party while blankly ignoring the Republican version. Not 

because it may get Bush elected, but because it will drive the whole 

soft money political economy deeper underground. Should Kerry 

lose the democratic operatives running 527s may conclude that 

there is little value in declaring themselves openly as electioneering outfits. Instead, they will likely—that is a good word—transmogrify their groups into 501(c)s. 

Nobody will be able to see how much money George Soros gave 

this quarter under that scenario, or figure out who sponsored that 

$500,000 ad campaign in the St. Louis suburbs. Soft money would 

disappear, or rather it would just become invisible. And isn’t that 

the equally troubling problem that we face that will probably require legislation. My broad question is, what kind of remedy and 

I am particularly sensitive to the fact that both the chairman and 

vice chairman have said from a definitional standpoint what do we 

have to be working at in terms of definition that will both be broad 

enough to not want to override or prevent the free speech concepts 

that we have talked about, but one that will provide more disclosure, more light shedding on both 527s and 501(c)(3)s. 

Ms. Weintraub. 

Ms. WEINTRAUB. Congressman, if I knew the answer to that 

question, we could have passed a regulation last week. I think it 

is in part because it is such a difficult task of line drawing that 

our counsel asked for another 90 days in participate to take a stab 

at it. We—the 501(c) issue raises, I think, some very troubling 

129 

issues that are the ones that you alluded to. That there is—if we 

pass this kind of a regulation, there is going to be real pressure to 

push a lot of this activity into 501(c)s, and there will be no disclosure. Congress acted to obtain disclosure from 527s and we would 

be defeating that purpose by sort of pushing that whole area underground. And people say oh, no, no that is got going to happen 

for this reason or that reason. 

We had testimony from some sophisticated players, political players and they said, you know, we have complicated organizations. 

We have 501(c) aspects. We have 527 aspects. We have been using 

the 527s, but you know if that doesn’t turn out to be a good deal 

anymore, we will just shift as much of this as we can into the 

501(c)s and there won’t be that kind of disclosure. At the same 

time, we have to be very sensitive to the advocacy needs of nonprofit community who are clearly very alarmed at some of the proposals that were put forward, as well as the sort of voter registration activities that the chairman alluded to earlier, which I am 

equally concerned about. 

The Congressional Hispanic Caucus sent us a letter expressing 

are their concern about the need to mobilize voters in their communities and how that is affected by 501(c) organizations, and they 

don’t want to see limits to that activity and frankly, beyond what 

is in the current law, I don’t either. We have barely a majority of 

people who vote now who are eligible to vote, and that is a very 

troubling phenomena in and of it self. I would like to raise one 

other point on the fire issue, though, on how big the fire is. I think 

to some degree a lot of this has been hyped. And you don’t have 

to take my word for it. 

Read Tom Mann and Tony Corrado in today’s Roll Call. Hundreds of millions of dollars are being raised in perfectly legal disclosed hard money contributions to the two major presidential candidates and to their parties. Hundreds of millions of dollars. It is 

a fund-raising operation, the likes of which has never been seen before. It is clearly going to be the most expensive election ever 

known in the history of the world. Some people think that is a good 

thing. Some people think that is a bad thing. But the amount of 

money that is being raised in the few organizations that people 

seem to be most concerned about I think is really going to be a 

drop in the bucket. And that was the perspective of Professor Mann 

and Corrado as well. 

Mr. LARSON. I did read the article and I thank you. Yes. 

Mr. TONER. Mr. Ranking Member, just two brief points. I think 

it is a critical question you raise. There is no doubt under the 

MCFL rulings that a 501(c)(4) organization under extraordinary 

circumstances could be a political committee. The Supreme Court 

there was dealing with a plaintiff group that was a (c)(4). The 

upshot of the opinion was if that organization did enough campaign-related activities, that it became its major purpose, the Court 

indicated it could become a political committee. 

So I think you are absolutely right, that the law has not precluded a 501(c) from becoming a political committee. I think that 

being said, it would be extraordinary because the primary purpose 

of those types of organizations cannot be politics. If they do cross 

the line, I think the MCFL decision makes clear that jurisdiction 

130 

could exist. But I think it would be extraordinary. The other thing 

I want to note for the record is that Mr. Larry Norton, the FEC’s 

general counsel, did not oppose the proposal that Commissioner 

Thomas and I advanced. I think he really adopted a stance of neutrality. He didn’t oppose the proposal, nor did he advocate its passage, but instead indicated that he would like to have some more 

time, he and his staff, to examine the factual record, read the comments and then come back to us with recommendations. So I think 

it really is a stance of neutrality in terms of our general counsel 

in terms of this proposal. 

Mr. LARSON. Is it neutrality or caution? 

Mr. TONER. I think it is probably both. And I think rightfully so. 

These are major issues that we are dealing with here. My fundamental point is that the test that we have used for determining political committee status has turned on express advocacy. I think 

the law has changed after McConnell. Before McConnell, I think a 

very strong argument existed that the express advocacy test was 

required in this area and I respected that for many, many years. 

But I don’t believe that is the law any longer, and I think we either 

engage in this issue and develop a new framework that could actually be effective or we push on based on how we have handled this 

in the past. I don’t think that is a pathway for effective action. 

Mr. LARSON. Well, I know the chairman is going to—want everyone to ask some more questions. I am not an attorney, but I am 

so impressed by what all of you had to say and the sharpness of 

your arguments. I am just reminded of Judge Leonard Hand’s comment that liberty and freedom is that which leaves you not too sure 

you are right. 

The CHAIRMAN. The gentleman from Florida, Mr. Mica. 

Mr. MICA. Just a couple of quick questions. If, in 90 days, I guess 

there is an 90-day review period, is there a likelihood of—if the 

counsel comes back and says that we can go down this path, of further regulating, is that still possible? The two dissenting—I saw an 

affirmative head, Ms. Weintraub. 

Mr. SMITH. Well, it seems as chairman, perhaps it would be most 

appropriate for me to answer that I guess. 

Mr. MICA. Well, she already nodded in the affirmative. I want 

her to say it on the record. Would you say that on the record, Ms. 

Weintraub? 

Ms. WEINTRAUB. Yes, absolutely. 

Mr. MICA. Okay. Sir, you are recognized. 

Mr. SMITH. I think there would be a possibility, but I would add 

a couple of caveats on that. First, I think even had we acted on 

May 13 it would have been highly unlikely, given the legislative 

calendar and the procedures for enacting regulations that any regs 

would have had effect for much of this cycle. If we act in August, 

I think it is highly unlikely that any regulation could be effective 

in the 2004 election. 

Secondly, speaking for me, I have pretty much reached a conclusion. I am open if somebody comes up with an argument. But the 

sense I have got is I have heard their best shot, and I just can’t 

find anything that suggests to me that when Congress passed 

BCRA, they thought—you thought—the majority that voted for it 

thought—and the minority that didn’t vote for it thought that this 

131 

was a good idea to regulate 527s in this way or that the bill would. 

I think the legislation, the legislative history is overwhelming that 

it was understood that if BCRA passed these 527 groups would remain largely unregulated, as I noted in my opening comments, and 

that it is not really appropriate for us then to jump in and suggest 

that you should have done something else. 

Mr. MICA. But if the majority of you voted to get into this area 

you could do that. 

Mr. SMITH. If my colleagues were to reach that decision or something came that were to convince me that, you know, things have 

been wrong, but, you know, that is something we will have to see. 

Mr. MICA. All right. Sounds like, Ms. Weintraub, you were influenced by this 119. I have looked through this. I didn’t see any Republicans. It looks like all Democrats. If I send you a letter with 

120 Republicans, will that influence you? 

Ms. WEINTRAUB. It might. But I have to—I am not sure you 

could find 120 who actually voted for the law that could tell me 

what their intent was on that. 

Mr. MICA. Well, here’s the sponsors. Today Senators McCain and 

Feingold issued this statement on FEC. Today the FEC proved 

once again why it is necessary to fundamentally restructure that 

ineffective and irresponsible bureaucracy. I am quoting him. I 

didn’t say that. 

Ms. WEINTRAUB. I appreciate that. 

Mr. MICA. By refusing to take action today on the soft money activities of 527 groups, the Commission has failed to close a loophole 

that dangerously undermines the purpose of the Federal Election 

Campaign finance laws. I didn’t write the bill. It is authored by— 

I thought—maybe we are not in the same world because we are 

maybe not watching the same TV that has all this stuff on it dealing with Federal elections. But this is McCain and Feingold. I 

think they were involved. Then I have got this statement with 

Shays because I have heard sometimes Shays mentioned as a sponsor, regardless of what side of the campaign finance reform debate 

you are on, everyone agrees that the FEC decision will only encourage the continued proliferation of so-called 527 groups and the soft 

money will continue to influence—he goes on here. 

So you know, maybe I will get 120 Republicans. And you have 

heard from these two. And, I mean, and, you know, we try to put 

faith in institutions to act in the best interest of the public in the 

elections process. And subjectively, you could go forward and do 

something about a situation that is obviously out of control. Where 

do you live Ms. Weintraub? 

Ms. WEINTRAUB. Maryland. 

Mr. MICA. Okay. Well maybe I just—I turn the TV on in Orlando 

and it is day and night, night and day and has been so. I have seen 

them up here too, but—— 

Ms. WEINTRAUB. I am not in a swing State. I guess I don’t get 

that much advertising. 

Mr. MICA. Somehow I believe that these folks are, in some way, 

trying to influence the Federal elections process. 

Ms. WEINTRAUB. Congressman, I think that it would be a mistake and an effort to, you know, put a finger in the dike to go forward with the regulation that I think is fundamentally flawed. I 

132 

really don’t know how people would comply with the regulation as 

drafted by my colleagues. I know they gave it their best shot. I 

think some of the terms in there are undefined because they 

couldn’t agree amongst the two of them as to what should go into 

a major purpose test for example. If we are going to look—we put 

forward four different proposals in the notice of proposed rulemaking, and none of them are incorporated in this proposal. I have 

been told that it would use a 51 percent test, but I don’t know what 

goes into the 51 percent. 

Mr. MICA. Well, that is why we have you all to figure it out and 

to try to make the process work and try to keep faith in the Federal elections process. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. The gentleman from California. 

Mr. DOOLITTLE. Thank you, Mr. Chairman. Let me express to the 

commissioners in person what I did in my press release. Thank you 

for following the law in your decision. You see, it is my belief that 

McCain and Feingold and others wanted to regulate 527s when 

they passed their horrid law, but they didn’t have the votes to include them within their law and have the law pass both Houses. 

So they had to leave them out, and then they are hoping you will 

be dumb enough to get a letter signed by 127 or whatever it is, and 

use that as congressional intent. 

I mean, congressional intent has got to be discerned from the 

statute itself, first and foremost. I mean if you give any weight 

whatsoever to extraneous matters, and if you do, it should be very 

carefully considered because people are doing all kinds of things to 

achieve a certain result, and the truth sort of falls by the board 

sometimes. 

When I first came here to the Congress, I was elected in 1990 

and it was the ridiculous position the Republican party at that 

time, at least in the House, that we should ban PAC contributions. 

Why? Because Democrats were in the majority and they got more 

PAC contributions than Republicans did. Now, there’s a great principle. And that is the problem with this law, with the whole history 

of campaign finance regulation in my opinion. Principle or truth 

has almost no bearing whatsoever. The law has been used right 

from the beginning as a way by one partisan group to gain advantage over the other. 

Right now the Democrats succeeded in hood winking a few Republicans into voting for this disastrous McCain-Feingold that has 

become the law. And they should feel good about that. I congratulate them. They have always been great at acquiring and maintaining power. They are better than we are at that, and you know, you 

must have had a good laugh behind the scenes about how dumb 

we were. You know, we control, as the Republicans, the House and 

the Senate, and yet Congress put this law out and a Republican 

president signed it. I mean, is this a wonderful world or what? I 

deliberately put out that press release and I am complimented you 

quoted from it, Mr. Larson. 

And I meant what I said. It was a fair-minded decision. And anything other than that, in my opinion, would have been making law. 

It is quite clear, this is 30-some pages of relative fine print in this 

McCain-Feingold 527s aren’t in here. And I tell you why I believe 

they are not in there. There was no—they didn’t forget about it. 

133 

You heard somebody quote Mr. Shays earlier that you know he 

openly acknowledged that they were not intending to include 527s. 

So you did the right thing. I guess what I would like to ask you 

is a question, just as an American, with a particular familiarity 

with how all this stuff works, since you are FEC commissioners, do 

you really believe that our campaign law has reduced the influence 

of special interests in the election? I would invite any of to you respond. 

Mr. SMITH. Well, Congressman Doolittle, I—I think sometimes it 

is important to go back and perhaps look at first principle. Sometimes this debate gets so tied up that nobody stops and says is 

what we are doing working. I won’t try to answer that question directly, but I will say this. I sometimes note that some states, for 

example, Maryland, have fairly complex laws, versus Virginia 

which allows unlimited corporate contributions, they just have to 

be disclosed. New Mexico allows corporate contributions. Arizona 

has all taxpayer-funded campaigns pretty much now. 

I don’t know anybody that thinks that when you drive across the 

Potomac going south, all of a sudden the mountains are barren of 

trees, or everything’s been strip-mined, people have their teeth falling out from scurvy. I mean, I don’t see anything that indicate that 

States that do not apply these rigorous regulations are more poorly 

governed as a general matter or more prone to political scandal 

than others. Now that is a very simplistic analysis. But I just think 

on the face of it, one might look and not see, if we look at the 

States as laboratories, where we are gaining a whole lot by the 

general approach. Obviously, however, our job at the Commission 

is to enforce what Congress passes. But I think it is always good 

for Congress to go back and not try to keep building on what is 

there, but sometimes look back and say do we want this edifice at 

all and consider starting over. 

Ms. WEINTRAUB. Congressman—— 

Mr. DOOLITTLE. Please. 

Ms. WEINTRAUB. In the first place, thank you for your comments, 

I think about our decision. You know, I think that BCRA had some 

laudable goals, but I echo what Congressman Larson said. The goal 

was to sever the link between office holders and raising these huge 

chunks of money, this soft money. Does that solve all the problems? 

No, it doesn’t, but I think a lot of people think that is does serve 

a good purpose and it creates at least—it serves at least the goal 

of eliminating the appearance that Congressmen or other office 

holders are being influenced by those very, very large dollar contributions. 

I also think that the electioneering communications provision is 

simple. It is clear, it is going to be a dream to enforce. I am really 

looking forward to it. And I am looking forward to seeing how it 

works. I think it is too soon to tell whether exactly what BCRA accomplished because we haven’t even been through one whole cycle 

with it yet. And I think maybe we ought to wait until the end of 

the cycle at least before we decide. 

Mr. DOOLITTLE. Yes, but do you believe—and I don’t just mean 

BCRA, but I mean the campaign—you could even answer without 

reference to BCRA. Do you believe personally, based on your 

knowledge and experience that campaign finance regulation law 

134 

has reduced the influence of special interests? I don’t mean the appearance of this or that. That is such a phony absurd standard in 

Buckley versus Vallejo. Throw that out completely. I just want to 

know your personal opinion. When you go home at night and talk 

to your family, you know, do you feel like you are more—we are 

more secure in our republic because of all this campaign regulation, 

that it has somehow reduced the influence of special interests? 

Ms. WEINTRAUB. I try not to talk to my family about things like 

this. 

Mr. THOMAS. Well, Congressman, briefly, I come from the perspective that these campaign finance laws are effective. They do 

really improve the body politic. I think my philosophy has always 

been that we are all sort of weak soldiers. If you dangle something 

that we really want in front of us, chances are we will be willing 

to do a favor for you down the road. And that is natural human 

nature. 

And so I think these laws, to the extent they do put some reasonable limits and prohibitions on sources of huge amounts of money, 

will insulate elected officials and other players in the political process from that natural human kind of, set of transactions. And so 

I do think that these laws are making things, in essence, better 

than they would be without them. I think that the prohibitions on 

corporate and union contributions do stop some folks from putting 

money into the process, the election process and I think that BCRA 

restraints on Federal officials being involved in raising soft money 

are helpful. My view. My philosophy. 

Mr. DOOLITTLE. My time is up, but I would love to ask you why 

you think it is better under the present system than it would be 

if corporations and unions got directly involved. Let’s really go 

back. Let’s go right back to good old Republican Teddy Roosevelt, 

who signed the first piece of campaign regulation. Why is that such 

a great hallmark of wisdom? What is the matter with corporations 

and unions getting involved? 

Mr. THOMAS. Well, again, my view is that it sets up that awkward situation where those folks who are trying to get something 

accomplished through government will use their ability to influence 

elections or to help elected leaders get elected, to basically secure 

those kinds of governmental ends. And—— 

Mr. DOOLITTLE. And they are not doing that now? 

Mr. THOMAS. Well, they are certainly restrained significantly by 

the current set of laws in my opinion. 

Mr. DOOLITTLE. I really wish we could have. I would love to have 

a lengthy discussion, but I will be infringing on the other members’ 

time. 

Mr. SMITH. Congressman, if I may just briefly add, since you 

brought it up—— 

The CHAIRMAN. We will have to hurry because I do want to get 

to Mr. Ehlers, and then we will go through another round. 

Mr. SMITH. I do note that Teddy Roosevelt was elected with large 

corporate contributions, unlike, say, George Wallace, who was 

elected with small individual contributions. 

The CHAIRMAN. Mr. Ehlers. 

Mr. EHLERS. Thank you, Mr. Chairman. I am sorry that my colleague from California was so restrained in his comments. If I said 

135 

what I really thought, I might be more outspoken, Mr. Doolittle. 

But—and I will be honest. I voted against the law. I voted for all 

the alternatives that were presented to us because I thought they 

were better. But I knew that what has happened would happen 

under the law that we passed. And I think it is the height of idiocy 

that we prohibit these types of contributions going to political parties, which for centuries have been the political force in this country, and have the responsibility to do this precisely, to express 

opinions and to get people elected. You say no, you can’t do that. 

But at the same time we have this back door open, the back doors 

I should add. 

There are other ways of doing it, which we knew existed and 

which, in fact, now have come into play. And I am very sorry that 

we passed the law. I felt that way when it passed. I voted against 

it as I said, because I knew it was unworkable. It would not accomplish the goals and I thought it was a reasonable goal to limit soft 

money. I think everything should be accounted for and traced. And 

that is fine with me. 

But what a cobbled up mess we have ended up with now. The 

law, per se, I think, might work well in certain areas, but certainly 

restricting the ability of political parties to do what political parties 

are supposed to do, I thought was terrible. But we did it. And then 

we opened back doors, as I said, which would allow people to do 

other things. I would also mention that one of you in the comments 

a moment ago, mentioned the Arizona law, which provides public 

financing. And I find it fascinating that that proposal was a referendum by the people. That was going under big time until Mr. 

Soros anteed up huge amounts of money, using the existing campaign law and solely because of that, it was passed. 

And that seems to be precisely counter to what the advocates, including Mr. Soros, are trying to do when they passed that law. So 

he certainly doesn’t have clean hands on this matter either. I just 

think it is most unfortunate. I hope that we have the ability and 

the sense to pass another law clarifying this, whether it is Mr. 

Doolittle’s approach of anyone can contribute anything they want 

as long as they report it, or an approach I have suggested, that we 

have some limits on contributions, but no cash, everything reported, names addresses phone numbers, everything and so that 

we have a detailed record of who contributes to what. 

And I would also impose the limits, whether it is contributions 

to the 527s or the—any other form or to the political parties. We 

have got a horrible animal out there now and it is an artifice that 

seems to mislead people into thinking that they have accomplished 

their goals and they haven’t. They have made the situation worse 

with this law that has been passed. With that, Mr. Chairman, I 

will yield back. 

The CHAIRMAN. Thank you. We will go to a second round of questions. I wanted to answer Mr. Doolittle’s question for a second real 

quickly. And the most disturbing thing is we can pretend that—the 

question of influence and money, and I understand, under the 

United States Constitution, you can’t tell a person with independent wealth that they can’t spend their money. I understand 

that. But we have told people they can’t counter that. So what we 

are creating is a millionaires club; and you are a self-funder and 

136 

you can put in 50 million. You know what, money is money is 

money in the elections. So somebody can put in 50 million dollars 

of their own money, but you know, you can’t go out and, you know, 

have union or corporate contributions. In my opinion, it has done 

nothing except consolidate power in this country into the hands of 

a few. Right now, it happens to be that there are a couple of Democrats leaning toward supporting 527s. Hopefully we will find a Republican like George Soros who can do so as well. But anyway, I 

think it consolidates power into the hands of a few. And it really 

guts the fairness in our election system—and I think what you are 

seeing happen has happened. 

So to answer your question, I think BCRA just took influence 

and said here it is for a few people at the table. Also, I still think 

that clarifications will be needed down the road. I still think that 

it will be needed, because now it is a winding road where we have 

the money in our campaign accounts (all of us do) to have the necessary assets and tools to ask the questions of the attorneys. 

Now, if you are a regular challenger to a member of Congress, 

you know, you’d better get an attorney, an accountant and a bail 

bondsman. I think that is what this system has evolved to, so I just 

want to express my answer, I think to your question: it is consolidated power in the hands of a few. I have got a quick question on 

legality of 527 activities. In February of this year, the FEC approved an advisory opinion, I think you call it the ABC advisory 

opinion, that related to Federal political committees that also have 

527s that raise to spend soft money. I just want to ask a few questions about that advisory opinion. 

First of all, the group that requested that opinion was a political 

committee, with both Federal and non-Federal, in other words, soft 

money accounts. That is correct, right? 

Ms. WEINTRAUB. Well, that is what it said. It actually has not 

yet raised or spent any money so we are not exactly sure. 

Mr. SMITH. But that was the condition of the—— 

The CHAIRMAN. That was the condition. 

Mr. SMITH. It would not apply in a group that was not in that 

situation. 

The CHAIRMAN. Is the scope of that opinion limited to other political committees that also have both Federal and non-Federal accounts? 

Mr. SMITH. It is limited to committees that are Federal—that are 

already Federal political committees. It is not an opinion that is 

relevant to the determination of whether you become a Federal 

committee. 

The CHAIRMAN. Whether you become one. In its advisory opinion 

request, ABC asked whether it could use soft money to pay for 

voter registration and get-out-the-vote public communications that 

promote, support, attack or oppose a Federal candidate. I believe 

the Commission answered that only hard money could be used to 

fund those communications. Is that correct? 

Mr. SMITH. Yes. 

The CHAIRMAN. Okay. That is correct. I believe the Commission 

also concluded that solicitations that promote, support, attack or 

oppose a Federal candidate may not be used to raise soft money 

even if the voter drive activities eventually financed by those funds 

137 

do not mention a Federal candidate. I think that is correct, isn’t 

it? 

Mr. THOMAS. That was—yes on the contribution side that was 

the analysis. 

Ms. WEINTRAUB. I believe that the opinion said that if the solicitation stated that it was going to be used for promoting, supporting, attacking, or opposing that candidate, that there was a 

sort of a fine legal point, that they had to actually say that in the 

solicitation. 

The CHAIRMAN. In the solicitation. The reason I am asking this 

is because, ironically, part of Belmont County, Ohio where I live, 

is the 18th district, and part is the sixth district. And in the sixth 

district, America Coming Together has a horrific controversy, 

which I had nothing to do with. These are all Democrats. And they 

are raising questions about the organization. ACT has now fired 

one set of the coordinators. They then turned around and fired another coordinator, and specifically, two former employees are claiming that they were required to sign a confidentiality agreement 

stating they would not reveal any information they learned as part 

of the job. 

But one of the employees said that ACT’s attacks were partisan 

and they were asked to do political activity that they couldn’t talk 

about because they signed that they wouldn’t. Based on the conclusions the FEC reached in its ABC advisory opinion, I am concerned 

that maybe we will find out that ACT Ohio may be funding, almost 

exclusively with soft money, particular vote drive activities that 

should be funded, frankly, with hard money. Now, if someone were 

to file a complaint about this matter, would it be before the FEC 

or the Justice Department? That is my question. Where would they 

file the complaint, FEC or Justice Department? 

Mr. SMITH. You would normally file the complaint at the FEC. 

If the FEC determined that it was a knowing and willful violation 

at the appropriate juncture based on the evidence as it became 

available to us, we could defer it to the Justice Department for 

criminal prosecution as well. But the FEC is the primary enforcement agency. 

The CHAIRMAN. Are there any normal time frames by which this 

would be resolved, or is there an expedited procedure, or is there 

a certain time frame? 

Mr. SMITH. We don’t have any formal expedited procedure. The 

commission activates cases as resources allow. You know we talked 

about that last fall. We continue to make great progress in that 

area. And you know, if a case seems important enough, it will be 

activated more quickly. Typically the median case now is activated 

within 23 days, so it would happen fairly quickly, much, much faster than it was just a few years ago. 

Ms. WEINTRAUB. Mr. Chairman, if I might qualify something 

that we said before. It occurs to me that the rule that you have to 

use, that a political committee has to use hard money for a communication that promotes, supports, attacks, or opposes a clearly identified Federal candidate is modified by the principle that that is 

only the case if that Federal candidate is the only person mentioned. So if it promotes, supports, attacks, or opposes a number of 

candidates, some of whom are Federal and some of whom are nonVerDate May 21 2004 23:41 Jul 26, 2004 Jkt 094496 PO 00000 Frm 00139 Fmt 6633 Sfmt 6602 E:\HR\OC\A496.XXX A496
138 

Federal, then the expenses could be allocated between Federal and 

non-Federal accounts. 

The CHAIRMAN. Soft money and hard money, you mean? 

Ms. WEINTRAUB. Yeah. 

The CHAIRMAN. Well, Ohio’s case would be—the State doesn’t 

allow soft money, corporate contributions. Or would it be allowed 

in this case, because they were going to use it for voter registration? Is that what you are saying, depending on the State law? 

Mr. THOMAS. Depending on State law, yes. The non-Federal 

share would be subject to whatever restrictions State law had. 

The CHAIRMAN. Okay. Yes. Mr. Larson. 

Mr. LARSON. Thank you very much, Mr. Chairman. I feel compelled to say a good word about my colleague, Mr. Shays. And you 

guys still including McCain as one of yours? But I do feel inclined 

to say that at the heart of their proposal, would it be that any piece 

of legislation was handed down to us from Mt. Sinai and might be 

different than legislation constructed by humans intent in the kind 

of atmosphere that we exist in in coming to compromise. Or as Mr. 

Bismarck is quoted as saying, two things shouldn’t be observed; 

sausage being made and a bill becoming law. That is our job, to 

perfect as we go forward. Mr. Thomas, I appreciated your comments as well. 

And I do think that there is a corrosive nature of the influence 

of money in government. And if we go back to the first attempt to 

regulate this, it was called the corrupt policy act, again, trying to 

eliminate the corrosive nature and the impact that that has in the 

potential for that impact it has on legislation. It is certainly a debate that is rich and one that we should have more often. And I 

agree with Mr. Doolittle on that. I want to ask just a few quick 

questions here. One is just a practical one. 

In your dealings, and that is what is the practical implication of 

adopting a new rule mid cycle for these organizations? Care to respond? We will start with the chairman and work right down. 

Mr. SMITH. Well, let me—I will let those who supported that notion I guess respond to how it practically would have worked out. 

I think it would have, at least for some groups, at least caused 

some chaos because they would have been allocating expenses for 

example over a lengthy period of time, and some would have to 

shift some of those allocation rules. But I want to use that concern 

to address something that I think hasn’t really been made clear. 

And Congressman Ehlers mentioned a little bit about clarity, and 

Congressman Mica was talking about could we come back in August and do something. I voiced my opinion that nothing that 

would be done would be effective this cycle. And I think it might 

be worthwhile for the point of clarity that everybody seems to want 

to get at to see if my colleagues agree with me that nothing is 

going to change in this cycle, just as nothing changed on May 13. 

The rules that everybody understood were going to be in effect 

right up to December or January. 

Mr. LARSON. That is an excellent point. Is that the agreement of 

the—— 

Mr. THOMAS. I think as a practical matter we are now basically 

stuck, for lack of a better word, with the mish mash of the law as 

it exists without the Toner-Thomas proposal. 

139 

Mr. TONER. And I think that is a very important point because 

I believed it was critical that the agency make an affirmative decision on what the law will be for 2004 and we have done that. I 

didn’t agree with the decision, but I accept it and respect it. And 

so now, I think in the 90-day period that has been alluded to, we 

are going to have to take up what the law is going to be for the 

2005–2006 cycle. And I think that is what we are working on now. 

Mr. LARSON. And you say that that holds true for both 527s and 

501(c)s? 

Mr. TONER. Yes, I believe the legal status quo will be in place 

for this cycle, yes. 

Mr. LARSON. Madam Vice Chair. 

Ms. WEINTRAUB. I agree with that, and I appreciate the opportunity to clarify that, because I said in response to an earlier question that we could pass a regulation in 90 days when our counsel 

comes back with a recommendation. But I don’t believe from a 

practical standpoint that we could put it into effect for this election 

cycle. I mean, if you count the days, we would have to let it sit for 

30 or 60 legislative days, after we approved it, and after it was 

published in the Federal Register. And I think, given the congressional calendar, you just can’t get there from here. And for myself, 

I am not terribly troubled by that because I think that the regulated community needs notice. They need to be able to make plans. 

They need to know what the rules are in advance of when they are 

enacted. 

That is why BCRA didn’t go into effect until the next—the beginning of the next cycle and it wasn’t because the people who voted 

for it were happy with the status quo then. But you do need to provide notice to the regulators. 

Mr. LARSON. I am struck by how all of you are struggling with 

definitions. And if minds of your capability are struggling with 

these definitions, and I mean no disrespect to the minds assembled 

up here, then in terms of making—and I understand in 90 days 

you are going to take another shot at it, but I take it from the 

Chair’s comment, that even in taking a shot like that, given the 

cycle that we are in and given the practical application of that, that 

any recommendation would probably be put off for legislative consideration in the next session. Is that the intent of this? 

Mr. SMITH. I think that is right. And Congressman, if I may use 

the opportunity to go on a bit. Nobody, prior to December or January past, was saying that any changes here were required. Everybody understood that 527s were going to run wild in this campaign. 

That was known. And when this issue first came up, we have 

moved very, very quickly to handle it. We have had, in 3 months, 

to get comments. People need time to submit comments as you well 

know. They had—we had—over 150,000 comments. We had a 2-day 

hearing with over 30 witnesses, the vast majority of whom argued 

that these rules were improper and should not be enacted. 

I mean, we have moved very rapidly on this as it is, and I want 

to point out that this has not come up all of a sudden because the 

Commission was just sitting around for 2 years. It has come up all 

of a sudden because until January nobody—you know, Shays 

wasn’t saying anything. Senator McCain wasn’t saying anything. 

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140 

ple were sitting there saying, ‘‘why you are not addressing the 527 

issue,’’ and they weren’t saying that because Congress did not address it in BCRA, and everybody understood that. 

The CHAIRMAN. But they are saying it now, are they not? 

Mr. SMITH. They are saying it now. But it is a January 2004 invention. 

Mr. TONER. And if I might, I think Chairman Smith makes a 

very good point about the fact that this agency considered these 

major issues on an expedited basis. And any suggestion that the 

agency didn’t use due diligence, didn’t aggressively look at these 

issues, so it could make a decision on time, I just don’t share. I 

didn’t agree with the decision on May 13, but I really appreciate 

all the effort that was made within the agency to make a decision 

in an expedited manner as these issues required. 

Mr. LARSON. And I share that. I share your opinion. I want you 

to know that. I do. I think that you have given it due deliberation, 

and I am impressed. 

Mr. THOMAS. Well, Congressman, I was just going to add that I 

think there would have been some folks who would perhaps have 

had some difficulty feeling comfortable with imposition of what I 

refer to as the ‘‘promote, support, attack or oppose’’ test. That was 

really the heart of the proposal. But I would just note that the 

Commission already adopted that approach in the advisory opinion. 

And four of us at least felt comfortable back then saying, look, the 

Supreme Court’s indicated this is pretty clear. 

And we are talking about groups, the major purpose of which is 

to influence elections. So although there might have been some 

folks who would have kicked and screamed, I think most of the 

players out there we are aware of that are in the news all the time, 

could have fairly quickly adhered to ‘‘promote, support, attack or 

oppose’’ standards. So I would have been willing to give it a go. 

Mr. LARSON. Madam Vice Chair. 

Ms. WEINTRAUB. Thank you. I would like to address that point 

because I introduced the draft that we—with some amendments 

from Commissioner Toner that we ultimately ended up adopting in 

that advisory opinion. It wasn’t my first choice, but it was the best 

choice that I thought we could get four votes for. And in response 

to that, there was an outcry, not just from, you know, whiny people 

that didn’t want to have to comply with it, from people who are dispassionate observers of the process, George Will on the right, Rich 

Hazen who is a fairly liberal law professor in Los Angeles. 

Mr. SMITH. I think I know Rick better than you do. He is very 

liberal. 

Ms. WEINTRAUB. You probably do. I won’t contest that. And I 

don’t think he would be insulted by the appellation either. But people on both sides of the political spectrum who were dispassionate 

observers of the process said that advisory opinion did not give 

clear guidance. So now that we know that and we have heard this 

from a wide, wide range of people, I think it would be irresponsible 

for us to just glom onto that and say okay, we already voted for 

one thing that we have been told is confusing to people. 

Now let’s put it into a regulation without giving it further clarification. I am not opposed to codifying it, but I think we have to 

define it and clarify it. 

141 

Mr. LARSON. Thank you. 

The CHAIRMAN. Before we go on to Mr. Mica, Mr. Doolittle and 

Mr. Ehlers, I do want to say one thing about the FEC. I think 

Commissioner Weintraub and Commissioner Smith have been attacked and I know we have heard statements from the authors of 

the bill and the Senator and the House Member, and I know people 

fought for your appointment that might not be happy with you 

now, but might be more happy with you and your decision, Commissioner Toner. So it is a strange, wild world. You have an R and 

a D, and an R and a D in opposite directions. So I guess it is kind 

of good at the end of the day. But on this reform bill—and I just 

want to go on the record on this. If you looked at it, I think most 

of you couldn’t serve, although, I think Commissioner Smith could 

serve, although you didn’t—you—— 

Mr. SMITH. Well, had the law been—had this bill been in effect 

when I was nominated, I would have been eligible for appointment, 

whereas I think Commissioner Weintraub would not, Commissioner Toner would not have been. I think that is—— 

The CHAIRMAN. But you didn’t agree with the author of the bill 

on their terms and they have been attacking you. But I guess with 

the reformation bill, you would be the only one sitting here. So I 

find this all ironic. I, in no way, think that this whole, now, movement, because of a decision you made or you didn’t make or by not 

making the decision you made a decision on an obviously bipartisan basis, it is nonsense to think that you have to have a reformation bill of the FEC because you had your own free thoughts. 

I just wanted to state for the record, I think that is all nonsense, 

and after all, the only one who would be here is the one they are 

mad at for not making a certain decision. So I just thought I would 

add that. 

Mr. Mica. 

Mr. MICA. Well, I don’t really have a question. I will just wind 

it up. I am disappointed because I can be as partisan as anybody. 

I will show you some of my wild partisan statements and—but I 

think that we empower certain individuals and here the Federal 

Election Commission to put in place the rules for conducting the 

Federal elections. And maybe Congress did not address this properly. But at least two of the commissioners could subjectively determine and maybe they didn’t have all of the approaches that needed 

to be taken, everything defined. But I think there are things that 

transcend politics, and I think there are things that should be done 

for the good of the political process and for the country. 

And I think that people in your position don’t have to listen to 

the George Wills or the others, or the Members of Congress, but 

just to do the right thing. I disagreed with the law. I knew there 

would be loopholes. But I don’t think you did the right thing. I 

think two of you did, and—in this case, but this whole mess, again, 

the worst part of this is that it further undermines people’s faith 

in this electoral process because it has gotten worse instead of better. The whole purpose everyone thought of making Feingold or 

Shays-Meehan, whatever you call it, was to regulate soft money 

and to try to get this process out of control under some control and 

make some sense out of it. 

142 

So I am saddened really that again there is further loss of faith 

in this most important process, and I just think that people need 

to do the best thing, regardless of who is saying what when you 

are given a charge as important as yours. No question, just sort of 

my final comment. 

Mr. EHLERS [presiding]. The gentleman from California, Mr. Doolittle. 

Mr. DOOLITTLE. Thank you. Well, Justice Scalia, I think in his 

dissent in the McConnell case said it pretty well. This is the first 

act, referring to BCRA, of a long series of acts in a tragedy. I mean 

it is only going to continue to get worse. Look at this. Mr. Larson’s 

party figured out early on that the 527s couldn’t be in this. They 

were going to organize, get those up and running and they are 

ahead of us, way ahead of us in this election. So that is a shortterm advantage for the Dems. 

We have gotten clarification today from all of you, which I appreciate. It is clear that in 90 days, nothing is going to change for this 

election. I hope everyone listening to this hearing on the Republican side will immediately instruct their lawyers to form 527s and 

to raise as much money as possible. And by the way, the testimony 

we heard today was that we are spending more money in this election than in any election before. 

So I mean it is not like all this wonderful regulation we have already got has reduced the influence of special interests. It is greater than ever. And we will get our 527s and we will be ready for 

the election where it is really going to count, which is 2006 where 

we won’t have our own incumbent president running, we will be 

naked, carrying the load by ourselves and it will really be an interesting test of the process, whether the Republican party can survive or not. I predict they will, but we are going to have to work 

hard to catch up with the Democrats. We have got to quit using 

the law as a partisan club against each other. We have got to base 

this on principle. 

And the principle ought to be, in my judgment, that free speech 

is important in this country and should be encouraged and rewarded, not discouraged by regulation like we have now. This 

should be unconstitutional. But it isn’t. And I think increasingly it 

won’t be. Some day, somebody’s going to go after 527s and after 

they go after 527s and the decision makers go for that, they will 

go after the 501(c)s and they will keep going in this quixotic pursuit of perfection, trying to weed out this special interest money. 

The problem is, as long as we have any semblance of a constitution, you will never achieve that utopia that they desire and you 

will just drive the so-called unregulated money, or soft money, you 

will drive it deeper and deeper and deeper into the system. I would 

just like to observe and then get your reaction for my question on 

this, increasingly, the effect of campaign regulation is to move 

speech away from the candidates and the parties, the entities that 

have the most accountability, shall we say in our system and to 

push it farther and farther out into less accountable groups. We 

are not talking about 527s. 

Down the road, if those are regulated it will be something else. 

Is this desirable in your minds? Why isn’t it better to have the candidate doing the speaking? It is the candidate that wants your vote. 

143 

He has some self-imposed constraints because he can’t offend the 

voter as he seeks your vote. So truth will be a little more important 

and not saying the horrible things that can’t be verified will be a 

little more important. When some funny 527 over here that nobody’s heard of starts doing its thing and making these claims, 

they are not asking for anybody’s vote really. Doesn’t this trouble 

you that we are basically creating incentives and moving the focus 

of the campaign away from candidates and parties and more into 

these third party special interest groups? 

Ms. WEINTRAUB. I will take a stab at that one. I think that I disagree with some of your premises. I think that if your premises 

were correct, then you would be right to be very troubled by that 

and I would share that. But there is—I think if anything this election cycle is proof that candidates have a lot of money available to 

them to get their message out. It is hard for me to imagine that 

there is any group out there that could drown out the $200 million 

that the President has raised in absolutely legal hard money contributions fully disclosed to get his message out. And Senator Kerry 

has also raised, last—I haven’t looked at the numbers lately, but 

I read it was in the range of $100 million. That is an awful lot of 

money to get a message out. 

Mr. DOOLITTLE. What happens, do you think, next time though, 

after this election, when we don’t have a presidential election? 

Then how do you think it is going to work? 

Ms. WEINTRAUB. Well, I think that there could be a little bit of 

a shift there. I think you are right. I think the presidential election 

does normally draw a lot more contributions than perhaps congressional candidates would have available to them. But I do think that 

when the electioneering communications provisions there is going 

to be more disclosure of all communication. So if there is an organization out there that is running ads within 60 days of the election, 

you are going to know who is running it and you are going to know 

who their backers are because that information is going to have be 

disclosed. And that is a positive affect of BCRA. 

Mr. SMITH. Congressman if I could—obviously I share more of 

your premises, but at some level, of course, that is not that important, at least to my job. If you are asking me, as an expert witness 

like I used to come before this and other committees as a law professor, I would say one thing. But now my job is to enforce what 

you and your colleagues, your colleagues over your objection, enact 

into law. 

Mr. DOOLITTLE. It is a very sad job. I am sorry for you. 

Mr. SMITH. I do think though it is a matter of considering the 

proposal that was before us on 527s. You raise an important issue 

because to the extent that 501(c)(3)s would have been given more 

play—and by the way, they would not have been excluded by the 

proposal—I think they would have had potential problems and a 

great deal of uncertainty. But to the extent that they would have 

been driving activity into 501(c)s I don’t think we would be accomplishing anything. We would keep continuing to drive it one step 

further at each stage. 

I also want to mention or comment on just one other issue that 

you raised and that your colleague from Florida had raised just in 

144 

his last comments relating to the loss of faith and certain levels of 

partisanship and I do think it is a problem. 

One thing that has caused some loss of faith here from the thousands of comments we got was a lot of people viewed this as a blatantly partisan effort to silence their political opponents. Now that 

is something I have said is often a problem with campaign finance 

regulation, but in this particular case—and there may have been 

some truth to that. I do want to point out that it was a bipartisan 

majority, a majority of both the Republican and Democratic commissioners that voted against the Toner-Thomas proposal. I also 

would note that the proposal that was there, that was being urged 

on us by the RNC, for example, would not only hit Democratic 

groups. 

I mean, it would have impacted Republican groups like the Republican Lawyers Association and the College Republicans and the 

Federation of Republican Women. It would have affected all kinds 

of conservative groups as well and limited their ability to participate in politics as well. And sometimes that wasn’t being put out 

there. Some of the folks who were supporting it, I think, were actually trying to drum up partisan passions. I think it is worth noting 

that in the end, the Commission, I think, did not act on partisan 

grounds and I think, you know, we—I think we pushed those to the 

background and I think all of us including those of my colleagues 

with whom I disagreed on this issue attempt to do what we think 

is right and correct as a matter of interpreting the law and where 

we have leeway as a matter of good policy. 

Mr. TONER. Congressman, if I might, I agree with Chairman 

Smith. I think he makes a very important point. It was a bipartisan two of us who offered the proposal and it was a bipartisan 

four of us who voted against it. I think that is important. This is 

not a situation in which three Republicans were opposing three 

Democrats which has occurred over the years occasionally at our 

agency. I think that is an important point. But in terms of the partisan fallout, if the proposal would have been adopted, I thought 

that that was one important reason why I wanted to make clear 

that I would vote for the regulations for this cycle. 

But I would also vote for them for the 2006 cycle, not knowing 

whether the George Soroses of the world are going to be out there, 

or the Republican equivalent of George Soros, doesn’t really concern me. I viewed this approach to the law to be the appropriate 

approach for 2004 and for 2006, and not based on short-term political gain perceived one way or the other. [But I think the other 

point you made was a very fundamental one concerning the fragmentation of our politics. There is no question it is occurring.] 

And so we have national parties that are financed by hard dollars. And they are doing fairly well raising those types of funds. 

But now we have parallel organizations that are doing the exact 

same things the national parties used to do with unlimited soft 

money funds run by operatives who are very sophisticated, such as 

Mr. Ickes and others who used to work at the Democratic National 

Committee and now interestingly are not working there, but are 

doing a lot of the same things that used to occur there. 

And so I think you are absolutely right. You are seeing a fragmentation of politics and the question is when organizations are 

145 

doing the exact same things that national committees used to do, 

what type of money is appropriate for them to underwrite their activities? I think it is a major issue. It obviously is something that 

we are grappling with at the agency. It may be something that 

Congress decides that they want to try to address. But I think your 

point is absolutely right. We are seeing a fragmentation of politics. 

Mr. LARSON. Would the gentleman yield? 

Mr. DOOLITTLE. Yes, sir. 

Mr. LARSON. Just for a quick comment. Only that it seems in listening to you, that only Democratic operatives are—have this expertise and strategy that somehow Republicans are babes in the 

woods, and that they have not applied any of these strategies, 

whatsoever. Or is it outrage that Democrats discovered 527s because 501(c)(3)s have been in effect for so long and so successful. 

I mean, that is what, you know—— 

Mr. TONER. I think you make a very good point and I think Republicans are hardly babes in the woods, and I think they have 

been and will get into this arena aggressively, given how we have 

come out on this. And I think you are going to see a dramatic escalation of Republican-oriented organizations you mentioned and you 

read into the record an organization that is out there. And that is 

why I think it is critical to be clear that under current law, and 

under the Supreme Court precedent, 501(c)(4)s can be political 

committees. And to argue that they should be exempt as a matter 

of law from being a political committee, I don’t think adds up under 

Supreme Court precedent. 

Admittedly that might be an extreme case. But you make a very 

good point. Republicans, I believe, will aggressively be in this 

arena. Who could blame them if there is going to be wide running 

room here, I think it is only to be expected. 

Mr. LARSON. This isn’t a place to make wagers, but if I were a 

wagering man, which I am not, I think if we totalled up what the 

501(c)s have been able to raise, but of course we wouldn’t know 

that because of disclosure, I think you would find the Democrats 

dramatically dwarfed, but that is a discussion for another day. 

The CHAIRMAN. Well just to comment before we move to Mr. 

Ehlers. You know, I think after no decision, which is in a sense a 

decision, fortunately the babes are going to mature into adults very 

quickly. Mr. Ehlers. 

Mr. EHLERS. Thank you, Mr. Chairman. I was going to make a 

remark something to the same effect. And the issue, Mr. Larson, 

I just want to get this in quickly before I make my comments. The 

issue is not that so much as the perceived duplicity of the party 

that fought very hard to get this passed and the majority of whose 

members voted for it, immediately began forming the 527s, whereas the party that I think was more responsible on this thought it 

was improper and waited for a ruling. So I guess I resent the aspersion that somehow your hands are perfectly clean. Let me just 

comment—— 

Mr. LARSON. If I made that, I didn’t mean to. 

Mr. EHLERS. I am not yielding time. We have spent enough time 

on that. I do have to respond to a couple of things first and then 

a question. Several times, including your comments, Madam Vice 

Chair, about the money raised by the presidential candidates imVerDate May 21 2004 23:41 Jul 26, 2004 Jkt 094496 PO 00000 Frm 00147 Fmt 6633 Sfmt 6602 E:\HR\OC\A496.XXX A496
146 

plied somehow that money is evil. And I am a charter member of 

Common Cause, and it has always bothered me that they seem to 

regard campaign money as illegal. And I hear it from the public, 

too. All that money. All that money. And I simply remind them 

that if you add together all the campaign money spent by every 

candidate in the United States, from dog catcher through President 

in an election campaign, it is less money than is spent advertising 

aspirin, Tylenol and other pain killers. 

Mr. EHLERS. You have to keep this into perspective. General Mo- tors, when they try to sell a car, they spend an average of $300 for 

every car that they sell on advertising. Multiply that by the 15 

some million cars sold per year, you realize what kind of money is 

spent on advertising. 

The point is political advertising is a very small part of the mix, 

and it is not a corrupting part. And that is, again, where I disagree 

with Common Cause. 

I have been a charter member and sometimes I am ashamed of 

the membership because of the information they send out. But I 

have stuck with it, and I am just curious why we haven’t heard 

more of them, at least I haven’t, about the use of 527s, which I 

think totally negates what they were trying to achieve and what 

the sponsors of the bills were trying to achieve through the passage 

of the law, which is to get rid of soft money. 

It is the lack of accountability that is the issue. It is not the 

amount of money that is out there, and that is what is disappointing about your opinion, simply because there is a—there 

was a possibility there of saying, look, the bill intended to impose 

accountability, and we now have some organizations that are not 

accountable, you don’t know where the money is coming from and 

how much was given. And I understand the legal arguments, and 

as Mr. Toner said, I accept your decision, but unlike him, I cannot 

respect it because I think it was contrary to the intent of the law. 

I hope that we can write another law, and I just want to comment, too, about the sponsors of the bill. Their names have been 

pulled into this fairly regularly, and I think they are very disappointed with what happened to the law. At the same time, I 

know from conversations with them during the course of it that 

they were very disappointed at how the law emerged, and they just 

had to give to this group and to this group and to that group in 

order to get the law passed and they thought it would be better to 

have something passed than nothing. 

I just frankly think it is a disappointment for all of us, including 

myself, who really wanted to get rid of soft money. That was the 

real objective, and we should have centered in on that and not done 

some of the other foolish things. 

I would just like to ask you—and this does not—you can just 

take off your FEC hats, if you will, and just express your opinion 

as citizens. What is the best means by which we can bring full accountability and get rid of soft money? Just bring—full accountability of the money, both for the benefit of the candidates or parties and for the citizens of this country. What approach would you 

take? You know a lot about campaign law, so take your FEC hats 

off and say what—if you wanted us to write a law, what do you 

think it should emphasize? 

147 

Mr. THOMAS. Well, I will start if you would like, Congressman. 

I think that this approach that Commissioner Toner and I were 

working toward was an effort to try to really put a clearer standard 

out there so that people would know what should be deemed political activity and what should not, and the idea would be that only 

the political activity should fall subject to these limits and prohibitions and campaign finance disclosure requirements. 

I think that would be very helpful, because we do need to make 

these kinds of distinctions, it seems. We do have to acknowledge 

that there are some organizations that are going to be very interested in an upcoming piece of legislation and they are going to put 

out ads that say, ‘‘This is a very terrible bill that is going to be very 

harmful to us as Americans. Call your elected Representative and 

tell him to vote no.’’ We have got to allow that kind of communication, but we have got to find a way, maybe, the ‘‘promote, support, 

attack or oppose’’ standard, to make that delineation. But once you 

come up with a clear standard like that I think that you can apply 

it pretty much across the board, and people will know. And you can 

apply the limits, the prohibitions and the disclosure requirements 

based on that one clear standard. 

We have a mess right now, I will concede. We have got language 

in the statute that talks about whether something is ‘‘in connection’’ with an election. We have got language that turns on whether 

it is ‘‘for the purpose of influencing’’ an election. We have got the 

‘‘electioneering communications’’ standard now that talks about 

whether it makes reference to a Federal candidate within flat time 

frames before the elections. I think it would be very helpful, ultimately, if Congress wanted to back up and take another run to try 

to develop one clear objective standard and apply it across the 

board. 

Mr. EHLERS. That is a very important comment, I really resent 

a law that puts incredible restrictions on my ability to endorse colleagues or individuals in my State or to work on their behalf, 

which is what this law does, and yet someone else can give $20 

million to influence that election. 

I can in fact go to jail under this law for misbehavior, and George 

Soros certainly has not gone to jail. Anyone else want to respond? 

Ms. Weintraub. 

Ms. WEINTRAUB. I would like to respond to what you had initially 

said, because if I conveyed the impression to you that I think that 

a lot of money being spent on political advertising is evil, that was 

not my intent. My point was just to convey that the amount of 

money that is being raised by these 527s has to be seen in the context of how much other money there is in the system. 

I think that a lot of people have gotten more involved in politics 

this year. There has been an awful lot of new donors created, and 

that is a good thing. It is good to have people involved in politics. 

I hope we are going to see a lot more voters this year, too, but it 

is certainly not my position that a lot of people making legal hard 

money contributions is in any way a bad thing. 

I take issue with what my colleague said. If I thought that his 

proposal provided clarity I might have voted for it. Unfortunately, 

I didn’t think that it did. I thought it would muck it up even more 

and confuse people even more, but people can disagree on that. I 

148 

think that the more disclosure that we have, the better, and we 

have to make sure that we don’t do—take actions that would have 

the effect that Congressman Doolittle alluded to of driving the 

money underground to where it is not disclosed at all. I think that 

would be the worst possible result. 

Mr. EHLERS. Any other comments? 

Mr. SMITH. I would say only, Congressman, that I have written 

a book on it, literally. 

Mr. EHLERS. Maybe we should send copies to the sponsors. 

Mr. SMITH. I think people have, and I don’t think they got much 

attention. My general sense in the end is that to some extent this 

is just a dog chasing its tail. You say what can we do to get rid 

of soft money. People always ask me what is soft money, and I say, 

well, soft money is just unregulated money. Any money that is not 

regulated is soft money, because that is the only way you can really 

define it. That is why it has been—you know, when people say the 

purpose of BCRA was to get rid of soft money, well, soft money to 

whom? Just to political parties? To State political parties? That 

was spent by 527s? That is spent by individuals? 

Nobody has even talked about the fact that if we ban 527s 

George Soros could just go hire all these guys, put them on his personal payroll and keep doing the same thing. And at some level 

again, you know, people have to participate in politics, and it could 

be that there is some limit. I mean, I have argued that we 

shouldn’t have limits on contributions, but I am not unduly concerned about certain limits on contributions if they are set at high 

enough levels. 

I am concerned now we have ridiculous parts of the law, like if 

a wife gives money to the husband, that is considered corrupting 

and we can’t have that, and, you know, there are a lot of elements 

like that. We have disclosure requirements so low that if the college Republicans have a couple of car washes and raise $300 and 

run some radio ads in your district supporting you, they have got 

to start filing reports with the Federal Election Commission. I 

think that kind of thing suffocates grassroots politics. So I don’t 

think anybody is going to be corrupted by a $2,500 corruption. 

Maybe you are. I don’t think you are. 

I like to note to students that their parents will spend $80,000 

to send them to college, but if 3 years after graduating from college 

they decide to run for Congress and their parents offer to give them 

$5,000 they can go to jail. I think we could address some of those 

things that would sort of loosen the rules for true grassroots politics, while maybe still keeping caps on the really big donors. It 

would be something, perhaps, not dissimilar along the lines suggested by the Ney-Wynn bill but also maybe loosening some of the 

disclosure requirements. 

Sometimes people say we need to know every penny, instantly on 

the Internet. Well, we don’t. We don’t need to know every penny 

spent. We don’t need to know it instantly. We don’t need to know 

if some kid gives some money. You know, one thing—one of the few 

parts of McCain-Feingold that was struck down was the ban on minors giving. Kids now can give money, and I think that is a much 

more important first amendment right than adults giving money, 

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149 

sume it was intended to be taken literally, had the court upheld 

that ban would have meant that if, for example, the county Democratic Party set up a booth at the county fair selling cotton candy 

it would have made it illegal for a child to go buy cotton candy 

from them. It had to be an adults-only zone, you know. 

So I think we need to go back and look at these laws and quit 

taking this approach that everything is a loophole and start looking 

at it as, you know, let’s be realistic here and talk about what is 

really creating a potential problem. 

Mr. EHLERS. I very much appreciate that comment, because I 

think that is the real issue here, and that is why I was so disappointed in this bill. We strained so mightily at it for several 

many years and came out with something that is a long ways from 

what you have just described. 

And I want to add something I have observed in the last 5 years. 

We are developing a new generation of young people who have a 

much deeper interest in politics than the previous generation, 

whether it is the generation X or something, and I hope we can encourage that because that is really the future of our country. These 

are good kids, well-meaning kids, really working hard, and for the 

first time in my life it looks like I am going to have as many volunteers as I need on my campaign, largely of young people, and I 

think that is absolutely wonderful. 

I shouldn’t say this publicly, I am not sure I even need that 

many volunteers, but I am very happy to put them to work and 

make them part of the process, and that is what America is really 

all about. And I wish we could develop—and maybe this committee 

has to develop it jointly, jointly develop a bill that would help encourage that and regulate the things that we really believe have 

to be regulated. 

And I just want to thank you very much for being here. I hope 

we didn’t beat up on you too much because we shouldn’t do it. You 

are trying hard to do a difficult job, and I am sorry we handed you 

a law that is so hard to administer. Thank you. 

I yield back, Mr. Chairman. 

The CHAIRMAN. Other questions or comments? 

Mr. LARSON. Thank you, Mr. Chairman, and again thank you for 

your insight and leadership in this area and my other colleagues 

as well. I have enjoyed immensely the discussion this afternoon, especially thanks to the panelists. There is much work to be done always in a democracy that needs constant pruning and attention. 

Mr. Chairman, I would ask that the—because two of my colleagues had conflicts with legislative business of their own, if the 

record could be kept open to enable them to send questions to the 

Commissioners so that you might be able to respond to their questions and other questions that any member may not have had a 

chance to get to. I know that is always your practice and procedure, 

and I just again wanted to thank you and the Commissioners for 

your thoughtful deliberation. 

The CHAIRMAN. With that, I would ask unanimous consent that 

members and witnesses have 7 legislative days to submit material 

into the record and for those statements and materials to be entered in the appropriate place in the record. Without objection, the 

material will be entered. 

150 

I want to thank Congressman Larson, his staff, our staff, members that participated in this and, most importantly, the Commissioners. And also I would like to ask unanimous consent that staff 

be authorized to make technical and conforming changes on all 

matters considered by the committee in today’s hearing. Without 

objection, so ordered. 

Having completed our business, the committee is adjourned. 

Thank you. 

[Whereupon, at 6:40 p.m., the committee was adjourned.] 

ADDITIONAL STATEMENTS FOR THE RECORD

TESTIMONY OF CONGRESSMAN CHRISTOPHER SHAYS

The Federal Election Campaign Act of 1974 (FECA) requires 527 groups whose 

major purpose is to influence federal elections, and who spend more than $1,000 for 

this purpose, to register as federal political committees and comply with federal 

campaign finance laws. 

The Federal Election Commission (FEC), however, has for 30 years improperly interpreted FECA to allow 527 organizations to spend millions of dollars to influence 

federal elections without complying with federal campaign finance laws. 

Since the Bipartisan Campaign Reform Act (BCRA) was passed and signed into 

law in 2002, certain 527 groups have actively exploited the loophole created by the 

FEC’s interpretation of FECA, spending millions of dollars to influence federal 

races. 

This upsurge of outside groups expressly created to support or oppose candidates 

for federal office has magnified the long-standing lack of regulation that has allowed 

527 groups to operate beyond the realm of federal campaign finance law, and has 

underscored the need to substantially reform the FEC. 

On May 13, the FEC met to consider new regulations for 527 groups. They had 

an opportunity to bring 527 groups under federal election law by adopting a proposal put forward by Commissioners Michael Toner and Scott Thomas to correct 

long-standing misinterpretations of the 1974 FECA, but instead they voted to do 

nothing. 

The Commission had a clear obligation to act on this issue and it failed. 

Their inaction tacitly endorsed continued abuses of federal election law and 

opened the flood gates for the raising and spending of millions of soft money dollars 

to influence this year’s federal elections. 

Commissioner Toner got it right when he said, ‘‘Delaying a decision is making a 

decision—namely, that we are not going to issue any regulations for the 2004 elections. We are going to see a new ‘soft money’ arms race for the 2004 election.’’ 

During our seven-year battle to pass BCRA, most Democrats supported our law 

and many Republicans resisted reform—but, until last week, the Democrats were 

operating outside the law and the Republicans were trying to abide by it. Justified 

by last week’s decision, Republican groups will now use the same tactics in seeking 

to defeat Democratic candidates for federal office. 

We will see huge amounts of soft money flow back into the political process, despite the intent of Congress in passing the Bipartisan Campaign Reform Act 

(BCRA), President Bush’s intent in signing it, and the Supreme Court’s intent in 

upholding the law. 

To ensure free and fair elections, it is essential that federal election law is fully 

implemented and fairly enforced. It is imperative that the FECA execute the will 

of Congress with respect to all campaign law, but they have consistently failed to 

do so. 

The bottom line is, groups on both sides of the aisle primarily seeking to influence 

federal elections should be regulated by federal election law. 

We need to overhaul the inefficient, ineffective FEC and replace it with a reliable 

enforcement body, and we have introduced legislation to do so. 

The Federal Election Administration Act would replace the existing six-member 

Commission with a three-member Federal Election Administration. By improving 

the way the campaign law enforcement body operates, this legislation will ensure 

federal election law is fairly implemented and fully enforced. 

The FEC is charged with enforcing election law, but has failed to do so. It is time 

to rethink their fitness for the job. 

151 

1 147 Cong. Rec. S2140 (daily ed. Mar. 20, 2002) (Statement of Sen. McCain) (emphasis 

added). See also id. (‘‘Finally, the purpose of section 323(e)(4) is to permit only individual candidates or officeholders to assist, in limited ways, section 501(c) organizations. This permission 

does not extend to an officeholder or candidate acting on behalf of an entity—including a political party.’’) 2 ‘‘BCRA’s sponsors and the same public interest commenter also pointed out the proposed 11 

CFR 300.52(b)(2) . . . did not make clear that the specific solicitations permitted for Federal 

election activity or organizations principally engaged in such activities applies only to 501(c) organizations and not to other tax exempt organization, such as 527 organizations. The Commission agrees. Accordingly, the introductory language in the final rule specifically states that the 

requirements for solicitations in the rule apply to 501(c) organizations.’’ Final Rules on Prohibited and Excessive Contributions: Non-Federal Funds or Soft Money, 67 Fed. Register 49081, 

49109 (Jul. 29, 2002). 

ANSWERS OF CHAIRMAN BRADLEY A. SMITH, VICE CHAIR ELLEN L. WEINTRAUB, COMMISSIONER SCOTT E. THOMAS, AND COMMISSIONER MICHAEL E. TONER TO WRITTEN

QUESTIONS SUBMITTED JUNE 1, 2004 

We are in receipt of your letter dated June 1, 2004, and appreciate the opportunity to clarify further some of the issues that we discussed during our oversight 

hearing before the House Committee on Administration. We will address each of 

your questions in turn. 

527 Fundraising by Federal Officeholders and Candidates 

You have asked whether the FEC’s regulations should be amended to reflect statutory language that you believe indicates that federal officeholders and candidates 

may solicit up to $20,000 from individuals on behalf of 527s. 

You correctly note that 2 U.S.C. § 441i(e)(4)(B) provides that officeholders and candidates may make explicit solicitations for donations aggregating up to $20,000 per 

donor per year for funds to carry out voter registration, voter identification, get-outthe-vote, and generic campaign activity or for an entity whose principal purpose is 

such activity. As you further note, FEC regulations at 11 C.F.R. § 300.52 contemplate such solicitations only where the funds are for entities organized under 

501(c) of the tax code. Although not explicitly excluded by the regulation, entities 

organized under § 527 of the Internal Revenue Code are not included. Your concern 

is that the Commission’s regulations may misinterpret that statute. 

Your question arises out of a discrepancy in the statutory language between paragraphs (A) and (B) of § 441i(e)(4). Paragraph (A), permitting certain general solicitations, is specifically limited to 501(c) organizations, while paragraph (B), permitting 

certain specific solicitations, is not. It can be argued, therefore, that the Commission’s regulation, in restricting the specific solicitation provision to 501(c) organizations, is inconsistent with the plain language of the statute. 

Alternatively, the regulation can be seen as giving effect to Congressional intent 

that the 501(c) restriction be read to encompass both paragraphs. This intent is evidenced by floor statements during the BCRA debates by Senator McCain, who said: 

‘‘Proposed new section 323(e)(4)(B) of the Federal Election Campaign Act authorizes the only permissible solicitations by Federal candidates or officeholders for donations to a 501(c) organization whose principal purpose is to engage in get-out-thevote and voter registration activities described in new section 301(20)(A)(i)&(ii) of 

the Federal Election Campaign Act. The new section also authorizes the only permissible solicitations for a 501(c) organization that can be made by Federal candidates or officeholders explicitly for funds to carry out such activities. 

‘‘In these instances, a Federal candidate or officeholder may solicit only individuals for donations and may not request donations in an amount larger than $20,000 

per year. Section 323(e)(4)(B) applies only to 501(c) organizations. The section does 

not authorize any such solicitations for other entities, and it does not authorize solicitations for funds to be spent on so-called ‘issue ads.’ 1’’ 

The apparent tension between the regulation and the statute is addressed in the 

Commission’s Explanation & Justification for the regulation, which states that the 

Commission intended for the regulation to be read to limit the described solicitations to 501(c) organizations, citing the views of BCRA’s sponsors and one other 

commenter.2 Regardless of one’s view as to whether the regulation represents the 

best possible interpretation of the statute, officeholders are put on notice that the 

Commission did construe both paragraphs (A) and (B) of § 441i(e)(4) as limited to 

solicitations for 501(c) organizations. 

You also expressed concern that only 527s appear to fit the description of an entity whose principal purpose is to conduct voter-drive activities. However, a 501(c) 

would qualify as long as its voter-drive activity were non-partisan. 

152 

Coordination 

We have not seen a copy of the memorandum written by Larry Gold which you 

reference as a predicate for your second question. We cannot and do not draw any 

inferences as to the legality of any activities of the ‘‘Grassroots Democrats.’’ 

As a general matter, our coordination regulations are set forth at 11 C.F.R. 

§ 109.20(a) et seq. These regulations set forth both conduct and content standards 

that must be met for a communication to be considered a ‘‘coordinated’’ communication. Assuming all other criteria for finding illegal coordination are met, coordination is generally defined, in pertinent part, as activity that is made ‘‘in cooperation, 

consultation, concert with, or at the request or suggestions of a candidate, candidate’s authorized committee, or their agents, a political party committee, or its 

agents.’’ More specifically, 11 C.F.R. § 109.21(e)(1)(ii) states that a communication 

may be deemed to be coordinated it it ‘‘is created, produced, or distributed at the 

suggestion of a person paying for the communication and the candidate, authorized 

committee, political party committee, or agent of any of the foregoing, assents to the 

suggestions.’’ (Emphasis added.) 

The Commission’s investigation into coordinated activity have been legally complex and highly fact intensive. Whether or not a candidate, authorized committee, 

or political party, or agent of the foregoing, had ‘‘assented’’ to a suggestion would 

have to be determined based on specific facts. 

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