Mar 8, 2005 -- Legal Center Tax Expert Fran Hill Testifies on 527 Reform

FOR IMMEDIATE RELEASE
Press Contact: Mark Glaze, 202-271-0982

Washington , DC -- Professor Frances Hill, the director of the tax program at Campaign Legal Center, testified before the Senate Rules and Administration program today on pending legislation to reform tax law treatment of so-called 527 political committees. Prof. Hill, a leading national authority on non-profit groups, also directs the Graduate Tax Program at the University of Miami School of Law.

Under the Internal Revenue Code, a 527 group is defined as a "political organization" that is "organized and operated primarily" to influence candidate elections or appointments to public office. A group must meet this standard in order to qualify as a 527 organization and obtain the tax-exempt status provided by the Code.

The pending legislation - S. 271, the 527 Reform Act of 2005 - is based on the principle that 527 groups that spend money to influence federal elections should be required to register as federal political committees and abide by federal campaign finance laws. Such groups should not be operating free from the same laws that apply to candidates, political parties and others that participate in federal elections.

Professor Hill's testimony explained how organizations had made intense efforts to bring their activities within the exemption provisions of section 527 by arguing that such activities as legislative lobbying or issue advocacy would be undertaken for the purpose of influencing the outcome of elections. The same groups then argue to the Federal Election Commission that they should not be treated as political committees because the activities were not political activities. Calling this approach " classic statutory arbitrage, " Professor Hill said that S. 271 provided a " reasoned and principled approach to coordinating tax law and election law. " This approach would take organizations at their word so that they could not make inconsistent arguments to the Internal Revenue Service and the FEC.

S. 271 explicitly excluded section 501(c) organizations. Professor Hill noted that a section 501(c)(4) organization cannot be organized and operated for the primary purpose of influencing elections and so would not be treated as a political committee.

To read Professor Hill's testimony, click here.

To view all the statements from the hearing on the 527 legislation, click here.