Posted July 11, 2008 by Paul S. Ryan

527s in 2008: The Past, Present, and Future of 527 Organization Political Activity Regulation

In 2004 and 2006, political organizations with tax-exempt status under section 527 of the Internal Revenue Code spent hundreds of millions of dollars to influence federal elections without registering with the Federal Election Commission (FEC) as political committees and abiding by the federal campaign finance regulations (e.g., reporting requirements, contribution amount limits, contribution source prohibitions, etc.) that go along with political committee status.  More than two years after the 2004 election, the FEC began announcing settlement agreements with and collecting fines from numerous 527 organizations active in 2004—having concluded that these organizations violated federal law.  Complaints filed with the FEC regarding 527 activity in 2006 remain unresolved.

Only time will tell if 527 organizations refusing to abide by federal campaign finance laws will play as significant a role in this year’s presidential election as they did in 2004.  In short, 527 organizations remain a wildcard in federal elections.  This month the Harvard Journal on Legislation published an article I wrote entitled 527s in 2008: The Past, Present, and Future of 527 Organization Political Activity Regulation .  The article examines the FEC’s approach to regulating 527 organizations to date, as well as some efforts made by states to address 527 activity in state elections.  The article goes on to examine recent court decisions concerning the relevance of federal tax status to political committee status and concludes by making the case that the FEC’s approach is badly flawed and that Congress, as well as state and municipal legislative bodies, should enact legislation to clarify the relationship between section 527 tax status and political committee status.