527 Committees: Follow the Political Money
Updated August 18, 2008
Anyone with a television has likely noticed an uptick recently in political advertising as candidates vie to win their respective elections in November. While many of the ads are sponsored by the candidates themselves, the influence of outside organizations is increasing as independent “527 Committees” queue up to join in the fun.
So what are 527 Committees anyway, and who’s behind them?
A 527 committee is a tax-exempt organization structured under section 527 of the Internal Revenue Code (IRC 26 U.S.C. § 527) as an alternative to Political Action Committees (PACs), which are targeted toward support or opposition of specific candidates to public office. Contributions to a 527 committee are tax-free, and the money may be used for political activities including voter mobilization efforts and issue advocacy. Since 527 committees are not subject to regulation by the Federal Election Commission (FEC) or by a state elections officials, they’re not subject to the same contribution limits and other regulations as PACs.
While both PACs and 527 committees have been around for years, with the costs of political campaigns skyrocketing, limits placed on contributors to PACs and PAC expenditures have caused 527 Committees to flourish in the 21st century as an alternate method of raising funds for political advocacy. But 527 committees do not go without oversight entirely. They must report their activities to either the state or federal government, depending on the focus of their efforts.
The primary difference between 527 committees and regulated PACs, which are included in the same statute, lies in their relationship to specific elections. Unlike PACs, 527 committees may not make expenditures to directly advocate the election of any candidate for elective office. But as anyone who views the advertising put out by 527 committees knows, the line between issue advocacy and candidate advocacy is difficult to discern, leading to much legal debate and litigation. And while the Internal Revenue Service regulates all 527s, not all 527s are regulated by state & federal Elections Commissions. Because of that fine line (and the lack of FEC regulation), 527 committees have become mired in controversy. They are frequently run by special interest groups, which can raise unlimited "soft money." PACs, on the other hand, raise and spend limited "hard money” for the express purpose of electing or defeating political candidates.
In North Carolina, 527 committees came out of the gate with guns blazing for the 2008 elections. In July, a 527 committee known as the “Alliance for North Carolina” began an advertising campaign critical of Republican gubernatorial candidate Pat McCrory’s economic and educational policies. The ad purports to abide by the “issue advocacy” guidelines of 527s because it does not ask viewers directly to vote against McCrory. “Call Pat McCrory,” the ad implores viewers instead, “and tell him North Carolina needs higher wages, more jobs, and no more perks for politicians.”
Both the Raleigh News & Observer and the McCrory campaign called the Alliance “mysterious,” noting that addresses for the Alliance included a “Mail Boxes Etc” in Raleigh and “a law office in the District of Columbia.” But documents on file with the State Board of Elections indicate that the Alliance raised $500,000 from the Democratic Governors Association, $250,000 from the National Education Association, and $250,000 from the Service Employees International Union.
McCrory shot back, airing an ad which charges Perdue's "secret allies" of misleading the public. "We did feel like we need to let the public know that much of this ad was very ... inaccurate," he said (Under the Dome 08-13-08). The ad is running in advance of McCrory's original roll-out date for advertising, which was scheduled for after Labor Day.
Aditionally, the McCrory campaign may be considering taking legal action to quash the Alliance ads. A lawyer for McCrory sent a letter to state broadcasters asking them to stop running the ads “because elements of the ads are either false or made in wanton and willful disregard of the truth.”
Meanwhile, also in July, Majority Action, a liberal 527 group created and funded by international investor George Soros ran a radio ad in July attacking US Sen. Elizabeth Dole's record on gasoline mileage standards. Dole is also in a competitive race for the US Senate. And though the party would not confirm the numbers, the N&O reported that the Democratic Senatorial Campaign Committee reserved more than $7 million worth of airtime in North Carolina after Labor Day. "If I'm Senator Dole I'd be worried about the money the DSCC is going to spend,” said Jennifer Duffy, a political analyst for the Washington, DC-based Cook Political Report (Under the Dome, 08/11/08).
All of this activity indicates that left-leaning 527 Committees are targeting North Carolina’s competitive Republicans in 2008 in an effort to win seats which have historically been won by Republicans. But that doesn’t mean that 527 Committees are the exclusive domain of Democrats. Both liberal and conservative groups have formed 527s to advocate for their causes.
According to Open Secrets.org, the top five 527 money givers in 2008 are the Service Employees International Union ($20.7 million), Soros Fund Management ($4.7 million), Oak Spring Farm ($3.5 million), Shangri-La Entertainment ($3.3 million), and Las Vegas Sands ($3.3 million).
The proliferation of 527 Committee activity in recent years has led to increased investigations by both the Federal Elections Commission and the State Board of Elections, indicating that political activity of all types is drawing more scrutiny now than ever before. Recent stringent enforcement efforts have diminished the ability to operate as a 527 committee and remain unregulated by election laws. Recently concluded FEC investigations of 527 committees, which included the Swift Boat Veterans, the League of Conservative Voters, and the MoveOn.org Voter Fund, all resulted in significant fines. On January 31, 2007, the FEC issued a Supplemental Explanation and Justification to clarify federal rules relating to groups that attempt to influence federal elections without complying with federal election law.
As the costs of campaigning continue to rise, so does the growth of 527 committees. And since a 527 committee can be formed by almost anyone, would-be contributors seeking to engage in political or quasi-political activity should carefully consider state and federal election laws and tax laws. Whether dealing with hard dollars and direct candidate contributions, or soft money and political speech, each organization should be acutely aware of campaign finance law and regulation when forming the group and transmitting its message to the public.
In North Carolina, increased 527 committee activity is likely to be more pronounced than ever before during the 2008 election season. Viewers must scrutinize political advertising with a discerning eye to determine whether each came from a 527 committee or directly from the candidate. If an ad is generated directly by a political candidate, that candidate must verbally approve the ad within its content. But since 527 committees are forbidden from coordinating their efforts with candidates, you won't see candidates endorsing 527 committee ads. Instead, information about of the 527 committee appears in small print at the close of the ad, along with the declaration that the committee paid for the ad.
Voters who want to check out the source of the money behind each particular 527 committee ad will need to dig a little deeper, and Open Secrets.org is a good place to start.
Jesse M. Unruh, who served as speaker of the California State Assembly from 1961-69 became famous for his quote, “money is the mother’s milk of politics.” In order to understand politics in America, one must follow the political money.
But try not to become disillusioned. For it was also Speaker Unruh who, on his death bed, said this about disillusionment, “Who knows, who cares, why bother.”
