Campaign-related activity by entities commonly referred to as 527 groups or 527s has increased over the past several election cycles. These groups are a subset of the political organizations that qualify for tax-exempt status under Section 527 of the Internal Revenue Code (IRC). Beginning in earnest in the late 1990s, 527 groups have funded broadcast communications that discuss the position of federal candidates on public policy issues, but carefully avoid expressly advocating for or against a candidate. Although these "issue advocacy" communications are widely viewed as intending to influence elections, some argue that they are not regulated—and cannot be constitutionally regulated—by the Federal Election Campaign Act (FECA) due to an interpretation of the Supreme Court's campaign finance law jurisprudence only permitting regulation of communications expressly advocating for the election or defeat of a clearly identified candidate. It was also in the late 1990s that the Internal Revenue Service (IRS) issued several private rulings indicating that some issue advocacy activities qualify as "exempt function" activities under IRC § 527, thereby permitting these groups to qualify for § 527 status. As a result, 527 groups have been able to utilize this "regulatory gap" between the IRC and FECA: while their issue advocacy and campaign activities are sufficient to qualify for § 527 tax-exempt treatment, arguably, they are not sufficiently election-related to trigger regulation under FECA. By the 2000 election cycle, as the campaign activity of 527s continued to grow, they were often referred to as "stealth PACs" because they were not reporting to the Federal Election Commission (FEC), and only had contact with the IRS if they had to file a tax return. In response, Congress amended IRC § 527 in 2000 and 2002 to generally require that most § 527 political organizations report information to the IRS, the FEC, or a state. Section 527 political organizations that are not FEC-regulated political committees are generally required to report to the IRS their existence within 24 hours of formation and periodically disclose information on contributors who have given at least $200 during the year and expenditures made to persons who have received at least $500 during the year, in addition to annual information and tax return requirements. There are exceptions for small organizations, state and local candidate political committees, and state and local political party committees, among others. Following enactment of the Bipartisan Campaign Reform Act of 2002 (BCRA), which amended FECA and eliminated the flow of unregulated money to political parties, the prominence of 527 groups continued to increase. As unregulated political party soft money was no longer available, there was greater reliance on 527 groups to help candidates compete in increasingly expensive election campaigns. FECA regulates "political committees," which it defines to include "any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1,000 during a calendar year or which makes expenditures aggregating in excess of $1,000 during a calendar year." In addition, FECA defines both "contribution" and "expenditure" as monies or anything of value "for the purpose of influencing any election for Federal office." Under FECA, a registered political committee is required to raise and spend funds subject to FECA contribution limits, source restrictions, and disclosure requirements. IRC § 527 provides beneficial tax treatment to qualifying "political organizations." These are any organization, including a party, committee, association, or fund, that is organized and operated primarily to directly or indirectly accept contributions and/or make expenditures for an "exempt function." An "exempt function" is the "influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any Federal, State, or local public office or office in a political organization, or the election of Presidential or Vice-Presidential electors.... " It is immediately apparent that the IRC definition of "political organization" is broader than that of FECA's definition of "political committee" because it includes organizations intending to influence state and local campaigns and non-elective offices. With respect to federal election activities, the two terms, based purely on their statutory definitions, nonetheless appear to encompass the same types of groups. However, there is a disconnect between them that stems from the Supreme Court's campaign finance jurisprudence establishing the constitutional limitations on Congress's ability to regulate election activity. In order to preserve FECA's regulation of contributions and expenditures against invalidation for constitutional vagueness, the Supreme Court in its 1976 landmark decision, Buckley v. Valeo, construed the terms "contribution" and "expenditure" to encompass only funds donated for or spent for express advocacy (that is, voter communications using explicit phrases and words such as "vote for," "vote against," "elect," and "defeat"). Likewise, the Court construed the term "political committee" to include only "organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate." In so doing, the Buckley Court established the "major purpose test," which determines whether or not an organization, if it raises more than $1,000 in "contributions" or makes more than $1,000 in "expenditures," is subject to regulation under FECA as a "political committee." Neither FECA nor the Supreme Court, however, has yet defined precisely how to ascertain the major purpose of an organization. Indeed, how the major purpose test works, and to what groups it applies, are at the heart of a debate concerning the circumstances under which non-party organizations and non-candidate committees can constitutionally be considered FECA-regulated "political committees." Some observers proffer that it is relevant to examine an organization's activities beyond express advocacy to ascertain its major purpose, while others maintain that Supreme Court precedent still limits FECA regulation through the designation of "political committee" status to only those organizations engaging in express advocacy. These same constitutional concerns do not arise under the IRC. In other words, the "express advocacy" and "major purpose" tests developed under the Supreme Court's campaign finance jurisprudence do not apply in determining whether an entity is a § 527 political organization under the tax laws. Thus, an "exempt function" does not necessarily involve explicitly advocating for or against a candidate. In 2004, after considering but not adopting several approaches for classifying 527 groups as political committees under FECA, the FEC adopted a regulation relevant to political committees. The rule provides that political groups are regulated under FECA based on whether they conduct fundraising with solicitations that include appeals to "support or oppose" the election of a federal candidate. Funds or anything of value collected as a result of such solicitations are considered a contribution under FECA. Therefore, any organization with $1,000 or more in such contributions is subject to FECA regulation. Notably, it was reported that the FEC acknowledged that the new rule failed to address the key question of, if and when, based on their solicitation messages, nonparty groups—such as 527s—are required to register with the FEC as political committees. In 2007, the FEC issued a "Supplemental Explanation and Justification" to more fully explain the basis for its 2004 rule and the reasons it declined to revise the regulatory definition of "political committee" in such a manner to specifically regulate 527 groups. According to the FEC, § 527 status is insufficient evidence alone to determine whether an organization is a political committee under FECA. It found that an organization's § 527 status does not necessarily satisfy FECA and the Supreme Court's contribution, expenditure, and major purpose requirements. In addition, the FEC determined that the IRS's requirements for granting tax exemptions under § 527 are based on "a different and broader set of criteria" than is used by the FEC in determining political committee status. Pursuant to FECA and Supreme Court precedent, the FEC stated that it will continue to determine political committee status based on whether an organization received contributions or made expenditures over $1,000 in a calendar year and whether the organization's "major purpose" was campaign activity. To that end, the FEC noted that it will consider whether any of the organization's solicitations resulted in contributions "because the solicitations indicated that any portion of the funds received would be used to support or oppose the election of a clearly identified Federal candidate," and will analyze whether any of the organization's expenditures for communications, made independently of a candidate, "constituted express advocacy" under its regulations. The FEC concluded that its case-by-case enforcement actions and guidance—provided through publicly available advisory opinions and filings in civil enforcement cases—constitute a "very effective mechanism for regulating organizations that should be registered as political committees under FECA, regardless of that organization's tax status." In its first significant 527 enforcement action, in late 2006, the FEC imposed civil penalties totaling approximately $630,000 on three 527 organizations that had been active during the 2004 election cycle: MoveOn.org Voter Fund, the League of Conservation Voters 527, and the Swiftboat Veterans and POWs for Truth, finding that they were required to register and be regulated as political committees under FECA. Proponents of 527 regulation criticized the ruling as "too little, too late," while the anti-regulatory community argued that the FEC enforcement action was an unconstitutional infringement on First Amendment rights of speech and association. Because of this tension, this may be an area of law that is ripe for litigation. In the 110 th Congress, the 527 Reform Act of 2007 ( H.R. 420 and S. 463 ) would have amended FECA to define "political committee" to include any committee, club, association, or group of persons that has given notice to the IRS of its status as a § 527 political organization.