527 Groups and Campaign Finance: The Language, Logic, and Landscape of Campaign Finance Regulation

In 2004 the country witnessed the first presidential election since the passage of the Bipartisan Campaign Reform Act of 2002 (BCRA). A major purpose of BCRA was to end two of the worst abuses of the federal campaign finance law-sham issue ads and soft money raised by political party committees. The BCRA amendments, like existing federal campaign finance law, were designed first and foremost to prevent corruption or the appearance of corruption resulting from large contributors' requesting favors from or gaining influence with the public officials whose campaigns their contributions benefited, regardless of whether the contributor or the lawmaker initiated the mutually beneficial process. As many foresaw at the time of BCRA's passage, individuals and groups with considerable assets would seek and probably find new campaign finance vehicles for achieving most of the benefits of the system prior to BCRA. Nonetheless, the swiftness with which 527 groups have threatened to replace political parties as the soft-money middlemen in federal campaigns surprised and angered many - from members of Congress to ordinary citizens. Since the 2004 election saw one of the most polarized campaigns on record and since 527 groups, both Democratic and Republican, were especially active in funding attack ads and other highly visible forms of campaign activity, they emerged as the arch villains of the process. Bills have been introduced in Congress to compel almost all 527 groups engaged in federal campaigns to register as political committees subject to federal campaign finance law (FECA). In addition, lawsuits have been filed to force the Federal Election Commission (FEC) to impose sanctions on 527 groups that failed to register as political committees in the last election. Lawsuits were also filed challenging some of the FEC's regulations on the grounds that they emasculated the provisions of BCRA, thereby contributing to the failure of reform efforts the agency is charge with implementing. As a result, some of the regulations were invalidated, some rewritten, and some are being appealed. In short, campaign finance reform is still in flux. The purpose of this Article is to analyze the legal issues that must be resolved before the validity of efforts to rein in 527 groups can be established. Most of these issues are constitutional because, by its nature, campaign finance regulation intrudes upon political speech, part of the core of First Amendment speech entitled to the most vigorous protection by the courts. My contribution to an area of the law where so many others have preceded me is to integrate the constitutional election law analysis with a technical analysis of what 527 groups really are and how they actually operate under the Internal Revenue Code. I also develop a new paradigm for understanding the conceptual foundations of specific constitutional doctrines that can and, in my view, do reveal a relatively coherent election law jurisprudence across the Supreme Court's campaign finance decisions, even taking into account the recent decision in McConnell v. FEC, which most commentators agree broke new ground. I divide the constitutional issues at stake into different categories and conclude that in some areas the precedents are difficult to square with the 527 reform proposals, whereas in other areas mainstream Court precedents tend to support the validity of the reform proposals. In conclusion, I raise some policy questions that, if faced squarely, should give lawmakers pause before painting all 527 organizations with the same legislative brush.