527 Organizations: Legislation in the 109th Congress

Publication Date: March 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

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Abstract:

The 109th Congress is examining the role of groups organized under section 527 of the Internal Revenue Code (IRC) that are involved in federal elections, but are not operating under the requirements and restrictions of federal election law. While such groups only recently emerged into public awareness, in 2004, they were widely seen as major players in the presidential election, with more than $400 million spent seeking to influence the outcome.

Strictly speaking, the term "527" refers to a section of the Internal Revenue Code, which was added in 1975 to provide tax-exempt status to federal, state, and local political organizations, as defined in that statute. While most 527s operating today are also political committees operating under federal and state election law, certain groups with 527 status are arguably not being so regulated because their public communications do not contain express advocacy language which had generally been held to be the standard for election law regulation. The controversy over these 527 groups arises from two factors: the different definitions used in federal election law and tax law as to what constitutes election-related activity and, further, the lack of certainty as to what election law itself regulates or may permissibly regulate.

Eight bills have been proposed in the 109th Congress to address the 527 issue: H.R. 471, H.R. 513, H.R. 914, H.R. 1316, H.R. 1942, H.R. 2204, S. 271, and S. 1053. Two of these -- S. 1053 (McCain-Feingold-Lott) and H.R. 1316 (PenceWynn) -- have been ordered reported by the respective Senate and House committees. These bills reflect vastly different approaches to the 527 issue and to campaign finance regulation in general.

This report will be updated as further developments so warrant.