Reform Supporters Urge FEC to Narrow Its Rulemaking to Critical "527 Group" Issues to Avoid Agency "Gridlock" and "Inaction"

In a letter submitted to the FEC on March 16, 2004, the Campaign Legal Center, Democracy 21 and the Center for Responsive Politics expressed serious concern that the Commission is attempting to resolve far too many issues in its expedited rulemaking concerning 527 groups -- and is thus risking gridlock and inaction. To ensure that the rulemaking succeeds and prevents the most serious and prevalent federal campaign finance law circumvention schemes, the reform groups urged the FEC to narrow the focus of the rulemaking to address allocation rules for 527 groups and when such groups should have to register as federal political committees and use hard money for advertising. By contrast, the reformers argued that issues "relating to section 501(c) groups raise a number of questions that do not need to be addressed at this stage and, in fact, need to be resolved by Congress."

Click here to view a copy of the letter submitted to the FEC.

FEC Draft Notice of Proposed Rulemaking on Political Committee Status

On Thursday, March 4th, 2004, the FEC adopted a Notice of Proposed Rulemaking (NPRM) on Political Committee Status by a vote of five to one. Comments on the NPRM are due on April 5th (for those who wish to testify at public hearings on April 14th and 15th) or April 9th (for those who do not wish to testify).

Click here to view the Political Committee Status NPRM in its entirety.

FEC Adopts ABC Advisory Opinion

On Wednesday, February 18, 2004, the FEC adopted an Advisory Opinion in response to the request from the 527 organization known as "Americans for a Better Country" (ABC). The Advisory Opinion marks the beginning of the FEC's efforts this year to resolve questions about the legality of plans by some 527 organizations to participate in federal election campaigns using extensive amounts of soft money. The Commission will comprehensively address these questions in a coming rulemaking.

The Advisory Opinion adopted by the FEC addressed only 527 political organizations that have registered a federal account with the FEC. In key part, it indicated that these organizations:

* must use exclusively hard money to finance public communications which promote, support, attack or oppose only clearly identified federal candidates;

* may spend a mixture of hard and soft money to finance public communications which promote, support, attack or oppose both clearly identified federal and non-federal candidates; and

* may finance generic voter drives ( i.e. , voter drives that mention political parties or issues but not candidates) according to the "allocation" formula for such activity appearing in the FEC's regulations.

The Advisory Opinion, however, did not address a number of other important questions which have emerged concerning 527 political organizations with clear plans to raise and spend soft money to influence federal elections. For example, it did not address whether 527 political organizations which have not registered a federal account with the FEC may spend soft money on public communications promoting or attacking federal candidates - or, more broadly, the circumstances under which 527 organizations must register as federal political committees with the FEC.

The Advisory Opinion also did not address the adequacy of the FEC's existing allocation regulations for "generic voter drive" activity - which can readily be gamed to permit 527 political organizations to use an "allocation" ratio that is extraordinarily tilted towards soft money. Indeed, Americans Coming Together (ACT) - a 527 political organization which registered a federal account with the FEC and will focus its efforts on "generic voter drives" - claimed an allocation ratio for such activity of 98 percent soft money and but 2 percent hard money in its year-end filings with the FEC.

The FEC has indicated that it will commence a rulemaking to comprehensively address issues relating to the involvement of 527 political organizations in federal elections. The questions left unresolved by the ABC Advisory Opinion, and potentially even the decisions actually made by the Opinion, will be evaluated in that rulemaking. In January, the FEC's Commissioners (by a four-to-two vote) adopted a plan calling for the completion of this rulemaking by May.

The FEC adopted the ABC Advisory Opinion by a vote of four-to-two - with Vice-Chair Ellen Weintraub and Commissioners Danny McDonald, Scott Thomas and Michael Toner voting in favor, and Chair Bradley Smith and Commissioner David Mason in opposition. The final Advisory Opinion adopted by the FEC was based on a draft prepared by Vice-Chair Weintraub, which was itself based on a prior draft prepared by the FEC's Office of General Counsel (with some modifications).

In employing the "promote, support, attack or oppose" standard for spending on public communications by a federal political committee, the final Advisory Opinion rejects the notion that the statutory definition of "expenditure" in federal campaign finance law is limited to "express advocacy" in all contexts. Campaign Legal Center President and General Counsel Trevor Potter applauded this aspect of the Advisory Opinion - while also cautioning that the Opinion "was only the first step in the FEC's review of activity to influence federal elections by 527 political organizations" and urging the Commission to use the upcoming rulemaking "to ensure that the door to unlimited use of soft money for federal elections by partisan 527's is firmly closed."

To view the ABC Advisory Opinion, please click here.

To view the various draft opinions and amendments submitted by the FEC's Commissioners and Office of General Counsel, please click here.

To view the reaction of Campaign Legal Center President and General Counsel Trevor Potter to the ABC Advisory Opinion, please click here.

To view a transcript of the FEC's Open Meeting on February 18th on the ABC Advisory Opinion, please click here.

527's and the 2004 Federal Elections

On January 15, 2004 , the Campaign Legal Center joined Democracy 21 and the Center for Responsive Politics in filing a complaint with the FEC alleging that certain newly formed "527 organizations" created to spend soft money on the upcoming federal elections have violated campaign finance law.

According to media reports, these groups -- Americans Coming Together (ACT), The Media Fund and The Leadership Forum -- have been created expressly to spend large sums on partisan voter mobilization drives or "issue advocacy" designed to influence the coming federal elections, and have a major purpose of influencing federal candidate elections. Federal election law requires organizations with such a major purpose, and that spend more than $1,000 to influence federal elections, to register as political committees with the FEC. Federal political committees may only accept "hard money" -- limited contributions from individuals and other federal political committees.

In particular, these groups have set up purportedly "non-federal" accounts which will accept corporate and labor funds and large contributions from individuals -- soft money -- and use them to finance partisan voter drives or "issue advocacy" aimed at the coming federal elections. The complaint alleges that these accounts are, in fact, clearly federal political committees that must be registered with the FEC, and must operate within the normal "hard money" source and amount restrictions. More broadly, it notes that "[i]n pursuing these schemes, these section 527 groups are attempting to replace the political parties as new conduits for injecting soft money into federal campaigns."

Click here to view the FEC complaint.
Click here to view Exhibits A-J.
Click here to view Exhibits K-T.
Click here to view Exhibits U-EE.

The issue of permissible activities for "527 organizations" was also placed before the FEC through the filing of an Advisory Opinion request by ACT on January 13, 2004 . The ACT Advisory Opinion request, which has not yet been deemed complete by the Commission, inquires about (and argues for the legality of) ACT's voter mobilization plans. It also suggests that a prior Advisory Opinion request filed by a Republican organization known as Americans for a Better Country (ABC) -- a request inquiring about activities similar to those which press accounts have indicated ACT will undertake -- "does not generally present questions pertinent to ACT's activities."

The ACT request also takes issue with comments filed by the Campaign Legal Center and Democracy 21 in response to the prior Advisory Opinion request from ABC. These comments argue that corporate and labor treasury funds cannot be "indirectly" expended through 527 organizations for partisan voter drives to influence federal elections which are aimed at the general public. The Center for Responsive Politics separately endorsed this argument.

Meanwhile, the Republican National Committee also filed comments on the ABC request, concurring in the reform groups' conclusion about the impermissibility of "indirect" corporate and labor expenditures for partisan voter drives aimed at the general public. The RNC also expressed concern about large contributions from individuals to 527 organizations undertaking electioneering efforts with the express purpose of electing or defeating federal candidates, as well as the "apparent funneling of foreign money" through some 527s into federal elections.

Click here to view the ACT Advisory Opinion request.

Click here to view the ABC Advisory Opinion request.

Click here to view comments from the Campaign Legal Center and Democracy 21 on the ABC Advisory Opinion request.

Click here to view comments from the Center for Responsive Politics on the ABC Advisory Opinion request.

Click here to view comments from the RNC on the ABC Advisory Opinion request.

Moreover, on January 15, 2004 , the FEC endorsed a plan to commence a rulemaking on the issue of 527's, particularly to examine when such organizations would be treated as federal political committees that must raise and spend only hard money. Four FEC Commissioners -- Chairman Bradley Smith and Commissioners David Mason, Michael Toner and Scott Thomas -- voted in favor of the plan to undertake this rulemaking, while Vice Chair Ellen Weintraub and Commissioner Danny McDonald dissented. Hearings in conjunction with this rulemaking would be held in April; the objective is to adopt regulations in May.

The FEC was slated to begin considering a draft response to the ABC request - prepared by its Office of General Counsel - at its public meeting on Thursday, February 5. However, it decided to defer considering that draft response until its public meeting on February 18. The Commission had received extensive comments on the draft after it was made public on January 29. According to news accounts, Democratic Commissioners asked for additional time to review these comments before the FEC considered the draft.

The General Counsel's draft response to the ABC request would require political committees to use "hard money" to finance public communications promoting or attacking clearly identified federal candidates. However, although ABC indicated that its purpose is to reelect President Bush and defeat the Democratic presidential nominee, the draft does not treat ABC in its entirety as a federal "political committee" limited to receiving and spending hard money. Rather, it allows the group to operate a "non-federal" account which would raise and spend soft money to defray at least part of the costs of its generic partisan voter drive activity and communications mentioning particular federal and non-federal candidates.

The Campaign Legal Center , Democracy 21 and the Center for Responsive Politics filed joint comments with the FEC on the draft response to the ABC request. These comments applauded the draft's conclusion that spending by political committees for communications which promote or attack federal candidates must be financed with hard money. In response to comments filed by some section 501(c) non-profits expressing concern that this ruling would apply to their spending, the reform groups emphasized that this was not the case, stating:

The general counsel's discussion of the "promote support" test is explicitly limited to the communications by political committees . . . Nothing in the opinion purports to apply this standard to section 501(c) nonprofit corporations. The opinion makes no reference at all to such groups, and provides no basis for concluding that it would be applicable to such groups.

At the same time, the reform groups criticized the draft for failing to treat ABC in its entirety as a federal political committee limited to raising and spending hard money - noting that the organization's overriding purpose is to influence the election or defeat of particular federal candidates. They also argued that the allocation approach favored by the draft "can readily be 'gamed' in order to work absurd results that will, for instance, allow funding of generic partisan voter mobilization activity to influence federal elections with entirely soft money."

The reform groups amplified some of the themes contained in their comments on the draft response to the ABC request in their subsequent comments to the FEC on the ACT Advisory Opinion request. In particular, these comments explained why the "promote, support, attack or oppose" standard properly applied to political organizations would not, under prevailing federal campaign finance statutes and case law, extend to Section 501(c) non-profits. They also set forth evidence in support of the argument that ACT's "overriding purpose . . . is to engage in partisan voter mobilization activities aimed at the general public, and public communications, for the purpose of defeating President Bush." Thus, the organization's activities "should be funded exclusively with federal funds."

To view the General Counsel's draft response to the ABC Advisory Opinion request, please click here.

To view other comments on the General Counsel's ABC draft, please click here.

To view the comments of the Campaign Legal Center, Democracy 21 and the Center for Responsive Politics on the ABC draft, please click here.

To view the comments of the Campaign Legal Center, Democracy 21 and the Center for Responsive Politics on the ACT Advisory Opinion request, please click here.

FEC Issues Advisory Opinion 2003-36 on Fundraising for RGA

On January 12, 2004 , the FEC issued an Advisory Opinion concerning permissible participation of federal candidates and officeholders in fundraising events, and in written fundraising solicitations, for the Republican Governors' Association (RGA). In its request, the RGA indicated that it does not anticipate engaging in "Federal election activity."

Pursuing a framework adopted in a prior Advisory Opinion addressing permissible fundraising for state and local candidates, the Commission indicated that mere attendance at RGA fundraising events (including those that raise non-federal funds) by federal officeholders and candidates would not violate the Reform Act's soft money fundraising restraints. If a federal officeholder or candidate gives a speech at that event generally soliciting funds for the RGA, it must be made clear that he or she is soliciting only federally permissible funds. This clarification can be achieved either through the clear and conspicuous display of written notices at the event, indicating that the federal candidate or officeholder is soliciting only federally permissible funds, or a statement by the federal officeholder or candidate to similar effect. The Advisory Opinion also sets forth rules for RGA written solicitations of funds featuring federal candidates and officeholders, among other things clarifying that RGA solicitation materials in which a federal officeholder or candidate has authorized his or her appearance may not ask for donations from federally impermissible sources or exceeding federal amount limitations ( e.g. , the solicitation cannot ask for a $50,000 contribution from individuals but then indicate that the federal officeholder is only asking for $5,000 donations from individuals).

The Advisory Opinion also indicated that solicitations of funds by federal officeholders and candidates for a "Conference Account" maintained by the RGA are fully subject to the Reform Act's soft money fundraising restraints. The Conference Account is used to pay for the administrative and events costs associated with the RGA's Annual Conference, as well as Governors Forums conducted throughout the country. In ruling that federal officeholder and candidate solicitations for the Conference Account are subject to the Reform Act's soft money fundraising restraints, the Commission noted the RGA's status as a 527 organization and the Supreme Court's characterization of such organizations as engaging in partisan political activity "by definition" in McConnell v. FEC . The Campaign Legal Center had filed comments on this particular issue, urging the Commission to conclude that federal officeholder and candidate solicitations for the RGA's "Conference Account" were in fact subject to the Reform Act's soft money fundraising restraints, in light of the RGA's status as a 527 political organization.

Click here to view Advisory Opinion 2003-36.

Click here to view the request for Advisory Opinion 2003-36.

Click here to view the Campaign Legal Center's comments on drafts of Advisory Opinion 2003-36.

FEC Decision on Leadership Forum and Democratic State Parties Organization

On April 25, 2003, the FEC notified the Legal Center and other public interest organizations of the outcome of their November, 2002 complaint filed against the Democratic National Committee, the National Republican Congressional Committee, and two "shadow groups" associated with the respective national party committees. By a vote of four-to-two, the Commissioners accepted the FEC Office of General Counsel's recommendations that the DNC and two shadow groups had not violated the Bipartisan Campaign Reform Act's national party soft money ban, and that no enforcement action beyond an admonition was warranted with respect to the NRCC. The General Counsel's report, however, cautioned both "shadow groups" about their future activities and potential consequences under the Reform Act.

Click to read full text

Comments of the Campaign Legal Center on NAHB Advisory Opinion Request

The Campaign Legal Center submitted preliminary comments to the FEC in response to the NAHB's Advisory Opinion Request. The Legal Center's comments outlined the framework under the Bipartisan Campaign Reform Act for evaluating solicitations of funds for section 501(c) tax-exempt organizations by Federal officials.

Click here to view the Advisory Opinion Request in its entirety.

Click here to view the Legal Center's comments on this Advisory Opinion request in their entirety.

FEC Requests More Information from The Leadership Forum

On December 2, 2002 , the FEC responded to the Leadership Forum's request for an advisory opinion. It asked the Leadership Forum to provide information and documents relating to potential ties to the National Republican Congressional Committee (NRCC), current and planned uses of the $1 million soft money transfer from the NRCC, and other aspects of the organization's activities, plans, and funding. The Leadership Forum must provide such information to the Commission for its advisory opinion request to be eligible for consideration.

Click here to view the FEC's letter in its entirety.

Request for FEC Advisory Opinion from The Leadership Forum

On November 21, 2002 , the Leadership Forum submitted a request to the FEC for an advisory opinion which would indicate that the organization was not directly or indirectly established, financed, maintained or controlled by the National Republican Congressional Committee (NRCC) for purposes of the Bipartisan Campaign Reform Act of 2002.

Click here to view the Leadership Forum's letter in its entirety.

Comments of Legal Center General Counsel Trevor Potter at Press Conference Announcing FEC Complaint Challenging Illegal Soft Money Schemes

Legal Center General Counsel Trevor Potter delivered remarks at a press conference on November 21st, 2002 announcing the filing of a complaint with the FEC challenging schemes by both major political parties to violate the new campaign finance law's soft money restrictions. Attached to the press release containing Mr. Potter's comments and explaining the complaint is a chart listing known 'Shadow Soft Money Committees' and their links to the national parties.

Click here to view the comments in their entirety.

FEC Complaint Filed by The Campaign and Media Legal Center, Democracy 21, Common Cause, and the Center for Responsive Politics Challenging Illegal Soft Money Schemes

On November 21, 2002, the Legal Center joined other public interest organizations in filing a complaint with the FEC challenging schemes by both major political parties to violate the new campaign finance law's soft money restrictions.

Click here to view the complaint in its entirety.