March 17, 2005

TO:
  Members of the U.S. Senate
FROM:
  Kay J. Maxwell, President
RE:
  Campaign Finance Reform, S. 271

The League of Women Voters urges you to support S. 271, the “527 Reform Act of 2005.” This legislation will close the major loophole in campaign finance rules that was exploited in 2004 to allow millions of dollars of unlimited “soft money” to influence federal elections. Unless this loophole is closed, our nation will once again face the corrupting influence of these huge contributions.

The 2004 elections saw unprecedented fundraising by political groups that are tax-exempt under Section 527 of the Internal Revenue Code. Many proudly announced their actions in raising incredibly large sums from unions, corporations, and wealthy individuals to elect or defeat federal candidates. Because the Federal Election Commission failed to enforce existing law, these “527” organizations escaped applicable campaign finance regulations designed to prevent corruption or the appearance of corruption by limiting the source and size of political contributions.

The proposed legislation would remedy this situation. It requires all 527s to register as political committees with the FEC unless they raise and spend money solely in connection with non-federal candidate elections, state or local ballot initiatives, or the nomination or confirmation of individuals to non-elected offices. This would bring such organizations within the limitations of current law, which apply to all other campaign contributions. Organizations with annual receipts of less than $25,000 would not be required to register. Neither would organizations that are tax-exempt under Section 501(c) of the Internal Revenue Code.

Some have suggested that regulation of 527s may have a partisan political effect. However, the record on campaign finance reform demonstrates that both major political parties and their allies quickly exploit any loophole to the maximum extent of their capabilities. Only the public interest loses when loopholes are created. We can expect this loophole to grow exponentially if Congress fails to act.

Section 527 groups are self-declared political organizations. They should be regulated as political organizations. They should register as a federal political committee and abide by federal campaign finance laws. Such groups should not be operating free from the federal campaign finance laws that apply to candidates, political parties and others that participate in federal elections.