Shays Advocates for 527 Reform Act

Shays Advocates for 527 Reform Act

Washington, D.C. - Today, Congressman Christopher Shays (R-CT) testified before the House Administration Committee in support of H.R. 513, the 527 Reform Act. Shays and Congressman Marty Meehan (D-MA) are sponsors of H.R. 513, which seeks to ensure 527 organizations are brought under campaign finance law in light of the Federal Election Commission's failure to adequately enforce the law.

Mr. Shays' testimony follows:

"Chairman Ney, Ranking Member Millender-McDonald, thank you for allowing me the opportunity to testify in support of H.R. 513, the 527 Reform Act. I also appreciate your holding this hearing on an issue that is crucial to the integrity of our elections.

"On December 10, 2003, the Supreme Court upheld nearly all elements of the Bipartisan Campaign Reform Act (BCRA), agreeing with Congress that the law complies with the First Amendment.

"We wrote this law banning unlimited soft money contributions and closing the sham ‘issue ad' loophole to help end a campaign finance system in which corporate treasury and union dues money was drowning out the voice of individual Americans.

"I am particularly pleased to report on the success of the BCRA. The national parties raised $1.2 billion in hard money in 2004, more than they raised in combined hard and soft money in 2000. The parties were able to recruit more donors than ever before and increased the cash they raised overall. A few large donors were replaced by hundreds and hundreds of thousands of smaller donors. BCRA played an essential role in this upsurge in participation.

"Hearing of BCRA's success may be more convincing coming from those who initially questioned the law, so I would note an opinion from David Broder's February 3 column, in which he stated, ‘As one who has been skeptical of the claimed virtues of the McCain-Feingold campaign finance law, I am happy to concede that it has, in fact, passed its first test in the 2004 campaign with flying colors.'

"As Supreme Court Justice Sandra Day O'Connor predicted in upholding BCRA, money did, in fact, find a way back into the political system, in the form of 527 organizations. According to a report by the Committee for Economic Development, 97 527 groups raised $323.4 million. And according to the Campaign Finance Institute, $142 million of this funding came from just 25 individual donors. Among the largest 527s were: The Media Fund, Americans Coming Together, Swift Boat Veterans for Truth, and Progress for America Voter Fund.

"Section 527 of the Internal Revenue Code provides tax-exempt status for political groups such as candidate campaigns, party committees, political action committees (PACs), and other political committees. Under current law, section 527 organizations disclose their receipts and expenditures to the Internal Revenue Service, not to the FEC, even though many spend huge sums of money to influence federal races. And the disclosure they make to the IRS is far less than the disclosure which political committees are required to make to the FEC.

"527 groups by definition are in the business of influencing campaigns and have voluntarily sought the tax advantages conferred on such political groups. They are "political organizations" under the tax code which are defined as groups "organized and operated primarily" to influence candidate elections. These groups cannot be allowed to shirk their responsibilities to comply with federal campaign finance laws when they are spending money to influence federal elections.

"Some claimed the 527 organizations proved that BCRA didn't work. This is not so. The use of soft money by 527 groups to pay for ads attacking and promoting the 2004 presidential candidates was not legal. Federal campaign finance laws enacted in 1974, as construed by the Supreme Court in Buckley v. Valeo, require any group whose "major purpose" is to influence federal elections, and which spends $1,000 or more to do so, must register with the Federal Election Commission as a "political committee," and be subject to the contribution limits, source prohibitions and reporting requirements that apply to all political committees. The FEC, however, has repeatedly and completely failed to enforce this law as to 527 groups. It is clear that Congress must correct this misinterpretation and close this loophole.

"While all other groups participating in the 2004 federal elections were spending money subject to federal contribution limits, the 527 groups were operating outside the law and collecting unlimited soft money to influence the federal races.

"Your committee is hearing testimony on two very different solutions to this problem. Congressman Meehan and I, as well as our colleagues Senators McCain and Feingold, propose requiring 527 groups to register as political committees with the FEC and comply with federal campaign finance laws, unless they raise and spend money exclusively in connection with non-Federal candidate elections, or state or local ballot initiatives. I believe this is the proper course of action, and would ensure the future success of the reforms enacted in BCRA. It is essential that federal election law is fully implemented and fairly enforced. It is imperative that the FEC execute the will of Congress with respect to all campaign law, but they have consistently failed to do so.

"This proposal would not shut down 527s. It would simply force them to live by the same rules by which all other political groups, such as our own campaign committees, are forced to live. Like other campaign organizations, they can use hard money, not soft money; no corporate money; no union dues money; and no unlimited money from individuals.

"I think it is crucial to have the support of people like Senator Lott, who opposed BCRA but is a cosponsor of the Senate companion to H.R. 513. In our press conference to announce the bill's introduction, Senator Lott rightly referred to 527 money as "sewer money" and promised action from the Senate Rules Committee, which has already held one hearing on this issue.

"On the other hand, Mr. Pence and Mr. Wynn propose rolling back several features of BCRA and the 1974 reform law. Instead of bringing 527s under the campaign laws, they would entirely repeal the aggregate limit on federal contributions by individuals, thus ensuring the return of the million dollar donor - precisely the problem that BCRA was enacted to address. We strongly oppose any efforts to undermine or weaken BCRA. We also will not support any efforts to turn this bill into a Christmas tree of legislative proposals designed to alter the current system.

"I would also like to note that due to concerns expressed by state election officials, we are considering modifying the bill to ensure 527s that do not impact federal elections are not affected by this legislation. As modified, the bill will not require a 527 group to register as a federal political committee if the group's activities relate exclusively to non-federal elections, that is, the group does not make public communications that promote or attack a federal candidate, and the group meets certain standards to ensure its voter drive activities are only for state and local candidates.

"In addition to Mr. Meehan, H.R. 513 is cosponsored by Congressmen Bass, Becerra, Boyd, Castle, Frank, Lewis, McNulty, and Simmons. I appreciate all of their support.

"Once again, Mr. Chairman, I appreciate your holding this hearing today. I urge your support, and the Congress' support, of H.R. 513 and would be happy to take any questions."

http://www.house.gov/shays/news/2005/april/aprilreform.htm