December 13, 2006
Major Development in the FEC's Treatment of 527s
As recently hinted, the FEC (before the departure of FEC Chair Michael Toner) has made a major move toward regulating 527 organizations as political committees. The FEC has just issued a press release, FEC COLLECTS $630,000 IN CIVIL PENALTIES FROM THREE 527 ORGANIZATIONS (link via Bob Bauer). The press release begins: "The Federal Election Commission announced today that it has reached settlements with three 527 organizations accused of violating the federal campaign finance laws during the 2004 presidential election. The League of Conservation Voters 527 and 527II, MoveOn.org Voter Fund, and Swiftboat Veterans and POWs for Truth have collectively paid almost $630,000 to settle charges that they failed to register and file disclosure reports as federal political committees, and accepted contributions in violation of federal limits and source prohibitions. The Commission approved all three conciliation agreements by a vote of 6-0." You can find the Swift Vets conciliation agreement here.
In essence, what happened is this: these groups engaged in significant election-related activity in connection with the 2004 presidential election (anyone who paid attention to that election will remember the role that the Swift Boat ads played in eroding support for John Kerry). The groups, which registered with the IRS as "527 organizations" claimed they did not need to register as "political committees" with the FEC because they did not engage in express advocacy, such as by running advertising that says "Vote for Bush" or "Vote against Bush." There would be at least two major consequences of treating these groups as political committees: individuals would be limited to contributing no more than $5,000 to the group for such ads, and the groups could not take corporate or union treasury money. The SwiftVets, for example, took individual contributions over the limit and took over $700,000 in corporate money.
The FEC, in these conciliation agreements, has taken the position that even though these groups did not engage in express advocacy, they still constituted political committees because their "major purpose" was the election or defeat of candidates for federal office. The FEC reached that conclusion on grounds that the unambiguous and unmistakable purpose of these ads was to influence the outcome of the election.
The SwiftVets conciliation agreement says that the group does not admit to any intentional wrongdoing, in part because of the group's belief that this major purpose test was unconstitutional. But to end the matter it accepted the FEC's judgment on these issues.
What is likely to happen next is the following. First, as Bob Bauer suggests, the FEC will bring this matter to the current litigation over the FEC's failure to engage in 527 rulemaking to argue that such rulemaking is unnecessary. Second, either now or closer to the 2008 election, I have little doubt that someone wishing to raise unlimited individual and corporate or union contributions to fund a 527 organization will sue the FEC (or defend in an action brought by the FEC) making the constitutional claim that the SwiftVets group raised in the conciliation letter. I also expect the constitutional argument to reemerge (which I've discussed in the past) that it is unconstitutional to regulate contributions even to political committees engaged in express advocacy if the groups make only independent expenditures. I think these are both serious constitutional arguments and at this point I'm not sure how the courts will resolve them.
Certainly there is more to come on this issue as we turn to the 2008 election season.
UPDATE: I think a part of the analysis above of the FEC's reasoning is not quite right. I have heard from a number of knowledgeable sources who say that the theory of the FEC here is that these groups engaged in express advocacy by making "expenditures" of at least $1,000 and receiving "contributions" in response to a solicitation that "leaves no doubt that the funds contributed would be used to advocate [a candidate's election or] defeat at the polls, not simply to criticize his policies during the election year." FEC v. Survival Education Fund, 65 F.3d 285, 295 (2d Cir. 1995). Once the groups made such expenditures, its further communications were subject to the express advocacy test of 11 C.F.R. 100.22(b), which codifies the Furgatch test for express advocacy---a test which is based on what reasonable minds would conclude about the purpose of the ad, and not the presence or absence of magic words. Bob Bauer has more here. As Bob notes: "The cases do not, notably, rest on 'coordination,' that is, on conspiracies with candidates and parties to skirt the law. Liability in these matters followed an inquiry--described by the FEC's General Counsel as a 'thorough investigation'--into intent ('purpose') and the meaning and effect of speech."
I think I've got it right now but I welcome further responses. One of the perils of blogging in real time is missing some nuance. It is an occupational hazard.