House Report 109-146 - 527 FAIRNESS ACT OF 2005

[House Report 109-146]
[From the U.S. Government Publishing Office]

109th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 109-146

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527 FAIRNESS ACT OF 2005

_______

June 22, 2005.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

_______

Mr. Ney, from the Committee on House Administration, submitted the
following

R E P O R T

together with

MINORITY VIEWS

[To accompany H.R. 1316]

[Including cost estimate of the Congressional Budget Office]

The Committee on House Administration, to whom was referred
the bill (H.R. 1316) to amend the Federal Election Campaign Act
of 1971 to repeal the limit on the aggregate amount of campaign
contributions that may be made by individuals during an
election cycle, to repeal the limit on the amount of
expenditures political parties may make on behalf of their
candidates in general elections for Federal office, to allow
State and local parties to make certain expenditures using
nonfederal funds, to restore certain rights to exempt
organizations under the Internal Revenue Code of 1986, and for
other purposes, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``527 Fairness Act of 2005''.

SEC. 2. REPEAL OF AGGREGATE LIMIT ON CONTRIBUTIONS BY INDIVIDUALS.

(a) Repeal of Limit.--Section 315(a) of the Federal Election Campaign
Act of 1971 (2 U.S.C. 441a(a)) is amended by striking paragraph (3).
(b) Conforming Amendments.--
(1) Indexing.--Section 315(c) of such Act (2 U.S.C. 441a(c))
is amended by striking ``(a)(3),'' each place it appears in
paragraphs (1)(B)(i), (1)(C), and (2)(B)(ii).
(2) Increase in limits for senate candidates facing wealthy
opponents.--Section 315(i)(1)(C) of such Act (2 U.S.C.
441a(i)(1)(C)) is amended--
(A) by amending clause (i) to read as follows:
``(i) 2 times the threshold amount, but not
over 4 times that amount, the increased limit
shall be 3 times the applicable limit;'';
(B) by amending clause (ii) to read as follows:
``(ii) 4 times the threshold amount, but not
over 10 times that amount, the increased limit
shall be 6 times the applicable limit; and'';
and
(C) in clause (iii)--
(i) by adding ``and'' at the end of subclause
(I),
(ii) by striking subclause (II), and
(iii) by redesignating subclause (III) as
subclause (II).
(3) Increase in limits for house candidates facing wealthy
opponents.--Section 315A(a)(1) of such Act (2 U.S.C. 441a--
1(a)(1)) is amended--
(A) by adding ``and'' at the end of subparagraph (A);
(B) by striking subparagraph (B); and
(C) by redesignating subparagraph (C) as subparagraph
(B).

SEC. 3. REPEAL OF LIMIT ON AMOUNT OF PARTY EXPENDITURES ON BEHALF OF
CANDIDATES IN GENERAL ELECTIONS.

(a) Repeal of Limit.--Section 315(d) of the Federal Election Campaign
Act of 1971 (2 U.S.C. 441a(d)) is amended--
(1) in paragraph (1)--
(A) by striking ``(1) Notwithstanding'' and inserting
``Notwithstanding'',
(B) by striking ``expenditures or limitations on''
and inserting ``amounts of expenditures or'', and
(C) by striking ``Federal office, subject to the
limitations contained in paragraphs (2), (3), and (4)
of this subsection'' and inserting ``Federal office in
any amount''; and
(2) by striking paragraphs (2), (3), and (4).
(b) Conforming Amendments.--
(1) Indexing.--Section 315(c) of such Act (2 U.S.C. 441a(c))
is amended--
(A) in paragraph (1)(B)(i), by striking ``(d),''; and
(B) in paragraph (2)(B)(i), by striking ``subsections
(b) and (d)'' and inserting ``subsection (b)''.
(2) Increase in limits for senate candidates facing wealthy
opponents.--Section 315(i) of such Act (2 U.S.C. 441a(i)(1)) is
amended--
(A) in paragraph (1)(C), as amended by section
2(b)(2)(C), by amending clause (iii) to read as
follows:
``(iii) 10 times the threshold amount, the
increased limit shall be 6 times the applicable
limit.'';
(B) in paragraph (2)(A) in the matter preceding
clause (i), by striking ``, and a party committee shall
not make any expenditure,'';
(C) in paragraph (2)(A)(ii), by striking ``and party
expenditures previously made''; and
(D) in paragraph (2)(B), by striking ``and a party
shall not make any expenditure''.
(3) Increase in limits for house candidates facing wealthy
opponents.--Section 315A(a) of such Act (2 U.S.C. 441a--1(a))
is amended--
(A) in paragraph (1), as amended by section 2(b)(3),
by striking ``exceeds $350,000--'' and all that follows
and inserting the following: ``exceeds $350,000, the
limit under subsection (a)(1)(A) with respect to the
candidate shall be tripled.'';
(B) in paragraph (3)(A) in the matter preceding
clause (i), by striking ``, and a party committee shall
not make any expenditure,'';
(C) in paragraph (3)(A)(ii), by striking ``and party
expenditures previously made''; and
(D) in paragraph (3)(B), by striking ``and a party
shall not make any expenditure''.

SEC. 4. INCREASE IN CONTRIBUTION LIMITS FOR POLITICAL COMMITTEES.

(a) Contributions to Political Committees.--Section 315(a)(1)(C) of
the Federal Election Campaign Act of 1971 (2 U.S.C. 441a(a)(1)(C)) is
amended by striking ``$5,000'' and inserting ``$7,500''.
(b) Contributions Made by Multicandidate Committees.--Section
315(a)(2) of such Act (2 U.S.C. 441a(a)(2)) is amended--
(1) in subparagraph (A), by striking ``$5,000'' and inserting
``$7,500'';
(2) in subparagraph (B), by striking ``$15,000'' and
inserting ``$25,000''; and
(3) in subparagraph (C), by striking ``$5,000'' and inserting
``$7,500''.

SEC. 5. INDEXING OF ALL CONTRIBUTION LIMITS.

(a) In General.--Section 315(c)(1)(B) of the Federal Election
Campaign Act of 1971 (2 U.S.C. 441a(c)(1)(B)) is amended to read as
follows:
``(B) Except as provided in subparagraph (C)--
``(i) in any calendar year after 2002--
``(I) a limitation established by subsection
(a)(1)(A), (a)(1)(B), (b), or (h) shall be increased by
the percent difference under subparagraph (A),
``(II) each amount so increased shall remain in
effect for the calendar year, and
``(III) if any amount after the adjustment made under
subclause (I) is not a multiple of $100, such amount
shall be rounded to the nearest multiple of $100; and
``(ii) in any calendar year after 2006--
``(I) a limitation established by subsection
(a)(1)(C), (a)(1)(D), or (a)(2) shall be increased by
the percent difference under subparagraph (A),
``(II) each amount so increased shall remain in
effect for the calendar year, and
``(III) if any amount after the adjustment made under
subclause (I) is not a multiple of $100, such amount
shall be rounded to the nearest multiple of $100.''.
(b) Period of Increase.--Section 315(c)(1)(C) of such Act (2 U.S.C.
441a(c)(1)(C)), as amended by section 2(b)(1), is amended by striking
``subsections (a)(1)(A), (a)(1)(B), and (h)'' and inserting
``subsections (a) and (h)''.
(c) Determination of Base Year.--Section 315(c)(2)(B) of such Act (2
U.S.C. 441a(c)(2)(B)) is amended--
(1) by striking ``and'' at the end of clause (i);
(2) by striking the period at the end of clause (ii) and
inserting ``; and''; and
(3) by adding at the end the following new clause:
``(iii) for purposes of subsections (a)(1)(C),
(a)(1)(D), and (a)(2), calendar year 2005.''.

SEC. 6. PERMITTING TRANSFERS BETWEEN LEADERSHIP COMMITTEES AND NATIONAL
PARTY COMMITTEES.

Section 315(a)(4) of the Federal Election Campaign Act of 1971 (2
U.S.C. 441a(a)(4)) is amended--
(1) by striking ``(4)'' and inserting ``(4)(A)''; and
(2) by adding at the end the following new subparagraph:
``(B) The limitations on contributions contained in paragraphs (1)
and (2) do not apply to transfers between a leadership committee of an
individual holding Federal office and political committees established
and maintained by a national political party. For purposes of the
previous sentence, the term `leadership committee' means, with respect
to an individual holding Federal office, an unauthorized political
committee which is associated with such individual but which is not
affiliated with any authorized committee of such individual.''.

SEC. 7. INCREASE IN THRESHOLD OF CONTRIBUTIONS AND EXPENDITURES
REQUIRED FOR DETERMINING TREATMENT AS POLITICAL
COMMITTEE.

(a) In General.--Section 301(4)(A) of the Federal Election Campaign
Act of 1971 (2 U.S.C. 431(4)(A)) is amended by striking ``$1,000'' each
place it appears and inserting ``$10,000''.
(b) Local Political Party Committees.--
(1) Contributions received.--Section 301(4)(C) of such Act (2
U.S.C. 431(4)(C)) is amended by striking ``$5,000'' each place
it appears and inserting ``$10,000''.
(2) Contributions or expenditures made.--Section 301(4)(C) of
such Act (2 U.S.C. 431(4)(C)) is amended by striking ``$1,000''
each place it appears and inserting ``$10,000''.

SEC. 8. PROHIBITING CONTRIBUTIONS AND DONATIONS TO SECTION 527
ORGANIZATIONS BY FOREIGN NATIONALS.

(a) In General.--Section 319(a)(1) of the Federal Election Campaign
Act of 1971 (2 U.S.C. 441e(a)(1)) is amended--
(1) by striking ``or'' at the end of subparagraph (B);
(2) by redesignating subparagraph (C) as subparagraph (D);
and
(3) by inserting after subparagraph (B) the following new
subparagraph:
``(C) a contribution or donation to an organization
described in section 527 of the Internal Revenue Code
of 1986; or''.
(b) Conforming Amendment Regarding Solicitation of Funds.--Section
319(a)(2) of such Act (2 U.S.C. 441e(a)(2)) is amended by striking
``(A) or (B)'' and inserting ``(A), (B), or (C)''.

SEC. 9. REQUIRING SECTION 527 ORGANIZATIONS TO SUBMIT REPORTS UNDER
FEDERAL ELECTION CAMPAIGN ACT OF 1971.

Section 304(a) of the Federal Election Campaign Act of 1971 (2 U.S.C.
434(a)) is amended by adding at the end the following new paragraph:
``(13)(A) Except as provided in subparagraph (B), each organization
described in section 527 of the Internal Revenue Code of 1986 shall
submit a report under this section in the same manner, under the same
terms and conditions, and at the same times applicable to a political
committee which is not an authorized committee of a candidate or a
national committee of a political party.
``(B) Subparagraph (A) does not apply to an organization described in
section 527(j)(5)(B) of the Internal Revenue Code of 1986 (relating to
a State or local committee of a political party or political committee
of a State or local candidate).''.

SEC. 10. PERMITTING EXPENDITURES FOR ELECTIONEERING COMMUNICATIONS BY
CERTAIN ORGANIZATIONS.

(a) Permitting Organizations to Make Expenditures for Certain
Targeted Electioneering Communications.--Section 316(c) of the Federal
Election Campaign Act of 1971 (2 U.S.C. 441b(c)) is amended by striking
paragraph (6).
(b) Expanding Types of Organizations Eligible to Make Expenditures.--
(1) In general.--Section 316(c) of such Act (2 U.S.C.
441b(c)) is amended by striking ``section 501(c)(4)
organization'' each place it appears in paragraphs (2), (3)(B),
and (4)(A) (in the matter preceding clause (i)) and inserting
``section 501(c)(4), (5), or (6) organization''.
(2) Definition.--Section 316(c)(4)(A)(i) of such Act (2
U.S.C. 441b(c)(4)(A)(i)) is amended by striking ``section
501(c)(4) of the Internal Revenue Code of 1986'' and inserting
``paragraph (4), (5), or (6) of section 501(c) of the Internal
Revenue Code of 1986''.
(c) Clarification of Effect on Tax Treatment of Expenditures.--
Section 316(c)(5) of such Act (2 U.S.C. 441b(c)(5)) is amended by
striking the period at the end and inserting the following: ``, or to
affect the treatment under such Code of any expenditures described in
section 527(e) of such Code which are made by a section 501(c)(4), (5),
or (6) organization.''.

SEC. 11. EXPANDING ABILITY OF CORPORATIONS AND LABOR ORGANIZATIONS TO
COMMUNICATE WITH MEMBERS.

(a) Types of Communications Permitted.--Section 316(b)(4)(B) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 441b(b)(4)(B)) is
amended by striking ``only by mail addressed'' and inserting ``only by
communications addressed or otherwise delivered''.
(b) Solicitations by Trade Associations.--Section 316(b)(4)(D) of
such Act (2 U.S.C. 441b(b)(4)(D)) is amended by striking ``to the
extent that'' and all that follows and inserting a period.

SEC. 12. PERMITTING STATE AND LOCAL POLITICAL PARTIES TO USE NONFEDERAL
FUNDS FOR VOTER REGISTRATION AND SAMPLE BALLOTS.

(a) In General.--Section 301(20) of the Federal Election Campaign Act
of 1971 (2 U.S.C. 431(20)) is amended--
(1) in subparagraph (A), by striking clause (i) and
redesignating clauses (ii) through (iv) as clauses (i) through
(iii); and
(2) in subparagraph (B)--
(A) in clause (i), by striking ``subparagraph (A)(i)
or (ii)'' and inserting ``subparagraph (A)(i)'';
(B) by striking ``and'' at the end of clause (iii);
(C) by striking the period at the end of clause (iv)
and inserting a semicolon; and
(D) by adding at the end the following new clauses:
``(v) voter registration activities; and
``(vi) the costs incurred with the
preparation of a sample ballot for an election
in which a candidate for Federal office and a
candidate for State or local office appears on
the ballot.''.
(b) Conforming Amendments.--(1) Section 304(f)(3)(B)(iv) of such Act
(2 U.S.C. 434(f)(3)(B)(iv)) is amended by striking ``section
301(20)(A)(iii)'' and inserting ``section 301(20)(A)(ii)''.
(2) Section 323 of such Act (2 U.S.C. 441i) is amended--
(A) in subsection (b)(2)(A), by striking ``clause (i) or
(ii)'' and inserting ``clause (i)'';
(B) in subsection (e)(4), by striking ``clauses (i) and
(ii)'' each place it appears in subparagraphs (A) and (B) and
inserting ``clause (i)''; and
(C) in subsection (f)(1), by striking ``section
301(20)(A)(iii)'' and inserting ``section 301(20)(A)(ii)''.

SEC. 13. CLARIFICATION OF AUTHORIZATION OF FEDERAL CANDIDATES AND
OFFICEHOLDERS TO ATTEND FUNDRAISING EVENTS FOR
STATE OR LOCAL POLITICAL PARTIES.

Section 323(e)(3) of the Federal Election Campaign Act of 1971 (2
U.S.C. 441i(e)(3)) is amended by striking ``speak,'' and inserting
``speak without restriction or regulation,''.

SEC. 14. MODIFICATION OF DEFINITION OF PUBLIC COMMUNICATION.

(a) In General.--Section 301(22) of the Federal Election Campaign Act
of 1971 (2 U.S.C. 431(22)) is amended by adding at the end the
following new sentence: ``Such term shall not include communications
over the Internet.''.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect on the date of the enactment of this Act.

SEC. 15. TREATMENT OF CANDIDATE COMMUNICATIONS CONTAINING ENDORSEMENT
BY FEDERAL CANDIDATE OR OFFICEHOLDER.

(a) In General.--Section 315(a) of the Federal Election Campaign Act
of 1971 (2 U.S.C. 441a(a)) is amended by adding at the end the
following new paragraph:
``(9)(A) For purposes of paragraph (7)(C), a disbursement for an
electioneering communication which refers to a candidate for Federal
office shall not be treated as a disbursement which is coordinated with
such candidate solely on the ground that the communication contains a
State or local endorsement or (in the case of a communication
containing a State or local endorsement) that the candidate reviewed,
approved, or otherwise participated in the preparation and
dissemination of the communication.
``(B) In subparagraph (A), the term `State or local endorsement'
means, with respect to a candidate for Federal office--
``(i) an endorsement by such candidate of a candidate for
State or local office or of another candidate for Federal
office; or
``(ii) a statement of the position of such candidate on a
State or local ballot initiative or referendum.''.
(b) Conforming Amendment.--Section 315(a)(7)(C)(ii) of such Act (2
U.S.C. 441a(a)(7)(C)(ii)) is amended by striking ``such disbursement''
and inserting ``subject to paragraph (9), such disbursement''.
(c) Effective Date.--The amendments made by this section shall apply
with respect to elections occurring on or after the date of the
enactment of this Act.

SEC. 16. SEVERABILITY.

If any provision of this Act or any amendment made by this Act, or
the application of a provision or amendment to any person or
circumstance, is held to be unconstitutional, the remainder of this Act
and the amendments made by this Act, and the application of the
provisions and amendments to any person or circumstance, shall not be
affected by the holding.

SEC. 17. EFFECTIVE DATE.

Except as otherwise provided, the amendments made by this Act shall
take effect January 1, 2006.

Purpose of the Legislation

The Bipartisan Campaign Reform Act of 2002 (``BCRA'') threw
our federal campaign finance system out of balance when it
passed three years ago. The law's proponents claimed that BCRA
would ban soft money, but it didn't. Rather, it merely diverted
the flow of soft money. In the process, power and influence
were shifted away from our political parties and towards less
accountable, ideologically driven Section 527 organizations and
other outside groups. Furthermore, BCRA's tangled web of
onerous restrictions and harsh criminal penalties significantly
impeded the ability of citizens and associations to exercise
their First Amendment rights. Rather than add to the
labyrinthine set of rules and regulations already on the books,
the Committee opts to take a different, more productive
approach.
The purpose of H.R. 1316, the 527 Fairness Act of 2005, as
amended, is to restore some of the balance that was lost when
BCRA was enacted. H.R. 1316, co-authored by Representatives
Mike Pence (R-IN) and Albert Wynn (D-MD), accomplishes this
objective not by tearing down 527 organizations but by lifting
up party committees, political action committees (``PACs''),
and individuals so that they can compete on a more level
playing field with 527 organizations. Currently, 527
organizations are able to fund their political activities with
unlimited ``soft money'' contributions from labor unions,
corporations, and wealthy individuals. And there are already
reports that 527 organizations may ``have a bigger impact on
the [2006] midterm elections than they had on last year's
presidential race because . . . their spending would make up a
greater percentage of total political spending.'' \1\ Thus, it
is essential that the other entities involved in our campaign
system--namely, parties, candidates, committees, and citizens--
be able to raise the hard money resources they need to stay
afloat in a political environment flooded by 527 soft money.
And it is equally important that the American public receive
full and timely disclosure regarding the individuals and groups
that are financing the 527 organizations.
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\1\ Alexander Bolton, ACT to Spend $30 Million, The Hill, Jun. 14,
2005, at 1.
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When the Supreme Court upheld the constitutionality of most
of BCRA's provisions in McConnell v. FEC, it found that
Congress ``enjoys particular expertise'' with respect to
campaign finance regulation that warrants ``proper deference.''
\2\ So, although the constitutional questions regarding BCRA
have been largely resolved, at least for the moment, Congress
has an ongoing responsibility to use its expertise to evaluate
the efficacy of the nation's election laws and to make
modifications as necessary to improve the functioning of our
campaign finance system. In the Committee's estimation, H.R.
1316 is necessary to correct the deficiencies in BCRA and to
ameliorate the negative consequences that arose in the wake of
its passage.
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\2\ 540 U.S. 93, 95 (2003).
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Even before BCRA was passed, several Members predicted
that, contrary to the assertions of its supporters, BCRA would
do nothing to stem the tide of soft money. For instance,
Chairman Ney flatly stated on the House Floor that BCRA ``does
not ban soft money under any definition or under any stretch of
the imagination.'' \3\ Similarly, Senator Mitch McConnell said
at the time that ``under this bill, I promise you, if [BCRA]
becomes law, there won't be one penny less spent on politics--
not a penny less. In fact, a good deal more will be spent on
politics.'' \4\ So, an explosion of soft money spending by 527
organizations during the 2004 election was by no means
unanticipated.
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\3\ 148 Cong. Rec. H339 (daily ed. Feb. 13, 2002).
\4\ 147 Cong. Rec. S3105 (daily ed. Mar. 29, 2001).
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True to the predictions of these Members, as soon as BCRA
went into effect, plans were being hatched to steer soft
money--which party committees had previously been able to
accept but could no longer--towards 527 groups. Though 527s are
legally prohibited from expressly advocating the election or
defeat of a federal candidate, several sprung up that were
unabashed in stating that their mission was to defeat President
George W. Bush in the 2004 presidential election.\5\ The most
generous contributor to anti-Bush 527s was billionaire George
Soros, who donated over $27 million to these groups.\6\ In the
year leading up to the 2004 presidential race, Mr. Soros stated
that ``defeating President Bush'' was ``the central focus of my
life'' and ``a matter of life and death,'' and that he was
``willing to put my money where my mouth is.'' \7\ As
documented by the Washington Post,
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\5\ To be sure, there were 527 groups in the 2004 election cycle
that were Republican-leaning. However, the overwhelming majority of
soft money raised and spent during the most recent election was by
anti-Bush 527s. Studies indicate that Democrat-leaning 527s outraised
and outspent Republican-leaning 527s by about a margin of four-to-one.
See Steve Weissman & Ruth Hassan, BCRA and the 527 Groups, Campaign
Fin. Inst. Report, Table A-2, available at http:// www.cfinst.org/
studies/ElectionAfterReform/pdf/EAR_527Chapter.pdf.
\6\ See Large 527 Donors for Election Cycle 2004, Political Money
Line, available at http:// www.fecinfo.com/cgi-win/
irs_ef_top.exe?DoFn=DONOR&sYR=2004.
\7\ Laura Blumenfeld, Soros's Deep Pockets vs. Bush; Financier
Contributes $5 Million More in Effort to Oust President, Wash. Post,
Nov. 11, 2003, at A03.

[Mr. Soros's] campaign began last summer with the
help of Morton H. Halperin, a liberal think tank
veteran. Soros invited Democratic strategists to his
house in Southampton, Long Island, including Clinton
chief of staff John D. Podesta, Jeremy Rosner, Robert
Boorstin and Carl Pope.
They discussed the coming election. Standing on the
back deck, the evening sun angling into their eyes,
Soros took aside Steve Rosenthal, CEO of the liberal
activist group America Coming Together (ACT), and Ellen
Malcolm, its president. They were proposing to mobilize
voters in 17 battleground states. Soros told them he
would give ACT $10 million . . .
Before coffee the next morning, his friend Peter
Lewis, chairman of the Progressive Corp., had pledged
$10 million to ACT. Rob Glaser, founder and CEO of
RealNetworks, promised $2 million. Rob McKay, president
of the McKay Family Foundation, gave $1 million and
benefactors Lewis and Dorothy Cullman committed
$500,000.\8\
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\8\ Id. The entire article will be included in the appendix to this
report.

According to the Political Money Line, 527 groups expended
nearly $600 million during the 2004 election cycle.\9\ A number
of these organizations functioned as ``shadow'' political party
committees that, with the apparent stamp of approval of the
relevant federal officeholders and party officials, solicited
and spent soft money in support of the party's candidates and
agenda and took over, to a large extent, traditional party
functions, such as voter registration and get-out-the-vote
activities.\10\
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\9\ http://www.fecinfo.com/cgi-win/irs_ef_527.exe?DoFn=&sYR=2004.
\10\ ACT President Ellen Malcolm stated: ``We have to find ways to
come together to do lots of the pieces of the presidential campaign,
because the party will not have the soft money to use. We on the
Democratic side are looking for effective ways to do the work of
delivering the message and getting out the vote that used to be done by
the party.'' Julie Kosterlitz, On the Ropes? 35 Nat'l J., Sept. 6,
2003, at 36.
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Proponents of BCRA now argue that the new law's
effectiveness should be judged not by whether soft money still
thrives but by whether it has succeeded in severing the link
between federal elected officials and soft money. And on this
ground, BCRA's supporters declare that the new law is a rousing
success. While it may be true that federal officeholders and
candidates are no longer directly soliciting soft money, it
would be inaccurate to state that the link between soft money
organizations and federal officeholders, candidates, and top
party officials has been completely severed.
During the 2004 election cycle, there were numerous
connections between top party officials and major 527 groups,
and there was also steady movement between political campaigns
and 527s. For instance, Harold Ickes, former top advisor to
President Bill Clinton, functioned as both a member of the
Executive Committee of the Democratic National Committee (DNC)
while also serving as President of the Media Fund--a 527
dedicated to running anti-Bush and pro-Democrat ads--and Chief
of Staff to ACT, which focused on getting out the Democratic
vote.\11\ The dual and often interrelated roles played by Mr.
Ickes were on full display during the 2004 Democratic National
Convention in Boston. According to an article by the New York
Times, Mr. Ickes ``court[ed] some the Democrats' wealthiest
donors here at the Four Seasons'' during the day, soliciting
them for contributions to the Media Fund, and ``[t]hen, in the
evenings, this onetime White House deputy chief of staff throws
on his credentials as a Democratic Party superdelegate and
joins party functionaries gathered for the Democratic
convention at the FleetCenter as one of their own.'' \12\ The
article continued:

\11\ Jim Drinkard, ``Outside'' Political Groups Full of Party
Insiders, USA TODAY, Jun. 28, 2004, at 7A.
\12\ Jim Rutenberg & Glen Justice, A Delegate, a Fund-Raiser, and a
Very Fine Line, N.Y. Times, Jul. 29, 2004, at A1.

The scene at the Four Seasons this week has shown just how
close to the line of independence groups like The Media Fund--
which has been running advertisements against President Bush
since March--can come.
Just down the hallway from Mr. Ickes's second-floor suite
in the Wendell Phillips Room is the registration office in the
Winthrop Room, where fund-raisers pick up their special-access
passes. As Mr. Ickes mingled with passers-by outside of his
suite Wednesday afternoon, a parade of campaign and party
officials walked by, including Bob Shrum, Mr. Kerry's chief
strategist. Mr. Shrum and Mr. Ickes have worked on campaigns
together like the David N. Dinkins New York mayoral campaigns
of 1989 and 1993.
Mr. [Erik] Smith [Executive Director of the Media Fund] was
also right near longtime comrades-in-arms. While Mr. Smith sat
at a table in the Four Seasons lounge speaking with a reporter
on Tuesday, Steve Elmendorf, Mr. Kerry's deputy campaign
manager, who is staying at a nearby hotel, passed by the
window. Mr. Elmendorf was a senior adviser for the presidential
campaign of Representative Richard A. Gephardt of Missouri last
fall when Mr. Smith was its press secretary.
The proximity is hardly by chance. The hotel is not just
the base of operation for Mr. Smith, Mr. Ickes and yet another
group for which Mr. Ickes is raising money, America Coming
Together, but has also become a salon for top fund-raisers in
the Kerry campaign and the Democratic Party. . . .
But the intermingling of the avowed independent groups and
Democratic officials is not restricted to the Four Seasons
here. Environment 2004, an organization that runs a 527
committee held a reception to thank donors on Monday at the
Beacon Hill home of Cathy Douglas Stone, a Boston environmental
activist. Among those who spoke were the columnist Arianna
Huffington, the singer Carole King and Senator Maria Cantwell
of Washington.
On Monday Ms. Malcolm was on hand at an event honoring
Representative Nancy Pelosi of California, the House minority
leader, that drew dozens of lawmakers and major donors together
to drink lemonade and iced tea in a garden atrium of the
Isabella Stewart Gardner museum. Later that night, Ms. Malcolm,
like Mr. Ickes, was on the convention floor.
And Mr. Ickes is not the only official of a 527 group with
delegate status. Simon Rosenberg, head of the New Democrat
Network, a group running Spanish-language advertisements
against Mr. Bush since March, said he sits on the convention's
platform committee.\13\

\13\ Id. The entire article will be included in the appendix to
this report.

Other examples of top party officials who also played
formal roles in the operation of 527 groups included New Mexico
Governor Bill Richardson, who simultaneously served as
Convention Chair of the DNC Convention and as the Vice Chair of
Voice for Working Families, a Democrat-leaning 527 group that
spent over $7 million in 2004. And Jim Jordan went from being
John Kerry's campaign manager to serving as spokesperson for
the Media Fund and representing that group as well as ACT and
America Votes.
As for the flow of personnel from 527 groups to political
campaigns, Zach Exley transitioned from Director of Special
Projects for MoveOn.org to become the Director of Online
Communications and Organization for John Kerry's presidential
campaign. Similarly, Bill Knapp first served as an ad
consultant to the Media Fund before being hired by the Kerry
campaign. Whether any of the arrangements listed above
constituted illegal coordination in violation of federal
campaign finance law, the Committee offers no opinion. However,
these interactions do demonstrate that BCRA's wall separating
federal officeholders, candidates, and party officials from the
influence of soft money is unquestionably porous.
In the aftermath of the 2004 election, the interrelations
between the 527s and Democrat lawmakers and party officials has
only grown. House Democratic Leader Nancy Pelosi acknowledges
that she ``or her staff have calls and meetings `on a weekly
basis' with representatives of MoveOn'' \14\--one of the most
active Democrat-leaning 527s during the most recent election
cycle, and a group to which George Soros gave $2.5 million.\15\
The DNC has praised MoveOn for its efforts, stating that
``[o]bviously they are relaying the Democratic Party message.''
\16\ And in an e-mail sent out earlier this year to MoveOn
supporters, Eli Pariser, the executive director of the
organization, brazenly announced that the Democratic Party is
now ``our party: We bought it, we own it and we're going to
take it back.'' \17\ Thus, the prediction by BCRA's supporters
that soft money would be purged from the federal electoral
process and that the overall impact of money on politics would
be lessened has been proven false.
---------------------------------------------------------------------------
\14\ Chris Cillizza, MoveOn Goes Mainstream, Roll Call, Apr. 13,
2005.
\15\ See Political Money Line, 527 Donor: George Soros, available
at http://www.fecinfo.com/cgi-win/
irs_ef_inter.exe?DoFn=&sText=44919&sYR=2004.
\16\ Cillizza, supra note 11.
\17\ Id.
---------------------------------------------------------------------------
Those who allege that the continuing presence of soft money
in the federal electoral process is the fault of the FEC are
being disingenuous. For it was not only the opponents of BCRA
who pointed out that the law would not eliminate soft money but
merely redirect it to less accountable channels; the reformers
themselves acknowledged that soft money would still play a role
through its use by independent groups. For instance, Senator
Jim Jeffords, the author of a prominent section of BCRA, stated
flatly during the Senate debate that BCRA ``will not prohibit
groups like the National Right to Life Committee or the Sierra
Club from disseminating electioneering communications; It will
not prohibit such groups from accepting corporate or labor
funds; It will not require such groups to create a PAC or
another separate entity.'' \18\ Likewise, Senator Olympia Snowe
averred that ``[w]e are not saying they can't run ads. They can
run ads all year long. They can do whatever they want in that
sense. But what we are saying is, when they come into that
narrow window, we have the right to know who are their major
contributors who are financing those ads close to an
election.'' \19\
---------------------------------------------------------------------------
\18\ 147 Cong. Rec. S2812-13 (Mar. 23, 2001).
\19\ Id. at S3012 (Mar. 28, 2001).
---------------------------------------------------------------------------
BCRA has also had a harmful effect on the political parties
in this country. The reformers respond to this charge by
claiming that the fundraising for the national parties during
the 2004 election cycle is going better than ever. However,
this provides a very incomplete picture of the overall health
of the nation's party structure. As is typical of the reform
crowd, they focus exclusively on what is happening at the
federal level and basically view state and local parties as
nothing more than vehicles used by the national parties to
circumvent the federal campaign finance laws. A closer look at
the operations of state and local parties, though, reveals a
troubling situation.
A recent report by the Center for Public Integrity shows
that ``[c]ampaign finance reform took a bite out of the bottom
line for state parties in 2004.'' The report concludes that
``[t]he downturn is largely attributable to the Bipartisan
Campaign Reform Act.'' The report notes that ``state parties
drastically reduced their investment in political advertising
after the McCain-Feingold legislation eliminated transfers of
soft money from the national committees to their state
affiliates.'' The result was a drop of 74 percent in
advertising. However, the report found that despite the drastic
decline in state party advertising, BCRA did not result in less
money being spent on political ads, primarily because ``media
buys of 527 and 501(c)(4) non-profit organizations . . . made
up the difference.'' \20\ So again, it is clearly demonstrated
that BCRA did not reduce the amount of soft money in politics;
it just steered soft money to entities that are unaccountable
to the electorate.
---------------------------------------------------------------------------
\20\ Agustin Armendariz & Aron Pilhofer, McCain-Feingold Changes
State Party Spending, May, 26, 2005, available at http://
www.publicintegrity.com / partylines/report.aspx?aid=690&sid=300.
---------------------------------------------------------------------------
Comments recently submitted to the Federal Election
Commission by Mark Brewer, the President of the Association of
State Democratic Chairs, clearly and alarmingly demonstrate the
difficulties that state and local parties face in a post-BCRA
world. Mr. Brewer notes: ``State and local party committees
operate in a very complex regulatory environment. No other
political committees are asked to manage such Byzantine
rules.'' He goes on to say: ``An unfortunate consequence of
BCRA is that many state and local party committees are avoiding
participating in grassroots political activity because federal
law poses compliance challenges that are beyond their ability
to meet.'' He further states that BCRA's restrictions have left
many party committees, ``particularly [those] at the local
level and in states that [are] not Presidential targets,''
unable to raise ``sufficient federal funds to pay for voter
registration, voter identification and get-out-the-vote
programs . . . Instead of running the risk of violating federal
law,many committees simply [do] not engage in federal election
activity.'' Mr. Brewer rues the fact that burdensome regulations are
``accelerat[ing] the flow of [GOTV] activities out of the party into
less accountable political organizations.'' Mr. Brewer pungently
concludes his comments with the following remarks:

The Commission's regulations should reflect what state
and local committees actually do, rather than unfounded
fears of wholesale circumvention of the law. Facts
rather than wildly imagined corruptive schemes should
guide the Commission. Visit a few local party
committees and any fears will be allayed. Add to the
complexity of the regulation and there will be fewer to
visit.\21\
---------------------------------------------------------------------------
\21\ Comments of Mark Brewer on Proposed Regulations Defining
Federal Election Activity and on the Proposed Regulation Governing
Allocation of Salaries by State and Local Party Committees, submitted
to the Federal Election Commission, available at http://www.fec.gov/
pdf/nprm/fea_definition/comm_03.pdf. The entire comments will be
included in the appendix to this report.

As the above clearly demonstrates, state and local parties
are starved of resources and being suffocated by excessive
regulation, largely due to BCRA. This is not good for our
democracy. The political parties play a crucial role as
mediating institutions within our political system. The health
of our democracy is inseparably linked to the health of our
political parties. Consequently, changes need to be made to
ensure the continuing viability of our party structure at all
levels: federal, state, and local.
It is useful to examine what other promises were made by
BCRA's supporters and compare them against the actual results.
BCRA's supporters asserted that the new law would result in
fewer negative advertisements being broadcast during the course
of campaigns and, thus, usher in a new era of more honest, less
negative politics.\22\ But if anything, BCRA's passage has
actually led to an increase in negative, scorched-earth
politicking.\23\ The reason for this is two-fold:
---------------------------------------------------------------------------
\22\ ``Q. [Business Week]: Will elections be cleaner this year
because of McCain-Feingold reforms?
``A. [Senator McCain]: They're cleaner, and here's why: Sixty days
prior to the election, you will not see the flood of [negative]
advertising you saw before. And I approve of the 'stand by your ad'
clause. It has dramatically reduced the number of attack ads.'' McCain:
The FEC is a ``Total Disgrace,'' Bus. Wk. Online, Jun. 14, 2004,
available at http://www.businessweek.com/magazine/content/04_24/
b3887079.htm.
See also, 148 Cong. Rec. 2117 (daily ed. Mar. 20, 2002)(statement
of Sen. Cantwell)(asserting that BCRA ``is about slowing political
advertising and making sure the flow of negative ads by outside
interest groups does not continue to permeate the airwaves); 147 Cong.
Rec. 2692 (daily ed. Mar. 22, 2001) (statement of Sen. Wyden)(claiming
that BCRA's ``stand-by-your-ad'' provisions ``will help slow the
explosive growth of negative political commercials that are corroding
the faith of individuals in the political process).
\23\ ``[T]he 2004 election cycle . . . has evolved into one of the
most relentlessly negative political campaigns in memory, as attacks on
a candidate's character, patriotism and fitness for office, which once
seemed out of bounds, have become routine. More ads than ever focused
on discrediting an opponent rather than promoting a candidate,
independent analysts said. . . .
``Part of the negative tenor of the 2004 campaign can be traced to
the proliferation of independent political groups known as 527s, named
for the tax-code section that governs them.'' Janet Hook, Campaigns
Accentuate the Negative, L.A. Times, Oct. 17, 2004, at A1.
---------------------------------------------------------------------------
1. Money is being diverted away from the political
parties--which, as broad-based organizations, must
moderate their messages to appeal to the largest
audience possible--and is instead being given to
single-issue ideological groups whose stances are often
dogmatic, whose communication strategies are often
hard-edged, and who aren't accountable to the voters;
and
2. It is now an almost universal political tactic for
candidates and groups to file complaints against their
opponents alleging violations of a vague, complex, and
difficult-to-understand campaign finance law. Thus,
these laws encourage political actors to not only
attack the policy positions of their opponents but to
tar them as lawbreakers as well.
In this way, BCRA has contributed to a more negative, and
often poisonous, political environment.\24\
---------------------------------------------------------------------------
\24\ ``[I]t doesn't take a genius to realize that campaign finance
reform makes it easier and more convenient for both sides to run nasty
advertising while avoiding any accountability for toxic messages. . . .
Far from banishing money from politics, McCain-Feingold has merely
moved it out of the major parties and into the political shadows, where
it is less accountable. John Fund, Why We're Refighting Vietnam: Blame
McCain-Feingold, Wall St. J.
---------------------------------------------------------------------------
The reformers also argued that, upon BCRA's passage, public
cynicism about the political process would abate because
elections would now be free from the taint of soft money and
the appearance of improper influence.\25\ Actually, it is more
likely that the American people become more cynical when they
are told that a law will rid the political system of soft
money, see that it does not, and then have to listen to the
advocates of the law crow about what a success it is. And one
becomes even more incredulous upon learning that the same
groups that continually rail against the supposedly corrupting
effects of soft money themselves have no compunctions about
taking approximately $140 million in soft money as part of a
manufactured effort by a handful of liberal foundations to
create the false impression that a mass grassroots movement was
demanding campaign finance reform.\26\
---------------------------------------------------------------------------
\25\ See, e.g., 148 Cong. Rec. 1996 (daily ed. Mar. 18,
2002)(statement of Sen. Dodd)(``[A]dopting this moderate legislation [
] restores the proper balance of money to politics and restores the
American people's confidence in our current financing system.'').
\26\ See Political Money Line, Campaign Finance Reform Lobby: 1994-
2004, available at http://www.fecinfo.com/cgi-win/
cfg_summary.exe?DoFn=; see also Ryan Sager, Buying ``Reform, N.Y. Post,
Mar. 17, 2005, at 33 (``Campaign-Finance reform has been an immense
scam perpetrated on the American people by a cadre of left-wing
foundations and disguised as a `mass movement.' '').
---------------------------------------------------------------------------
Finally, we were told that BCRA would enable the average
person to have a greater influence on the political process.
However, that's not how things have turned out. BCRA's
complexities and ambiguities, combined with its harsh
penalties, have increasingly made the federal political process
the exclusive province of the rich, the sophisticated, and the
well-connected. And it is now becoming unclear whether the
Internet, which has been a revolutionary tool for engaging the
American citizenry in the democratic process, will remain a
dynamic, unfettered, and accessible medium forexchanging
political ideas if we do not act to prevent the heavy hand of
government from imposing burdensome regulations governing online
political speech. Thus, BCRA was supposed to enhance the voice of the
average citizen, but instead, it has increasingly frozen out the
average citizen from the political process.
In his dissent in the McConnell case, Justice Clarence
Thomas remarked about the self-perpetuating nature of campaign
finance regulation: ``Every law has limits, and there will
always be behavior not covered by the law but at its edges;
behavior easily characterized as `circumventing' the law's
prohibition. Hence, speech regulation will again expand to
cover new forms of `circumvention,' only to spur supposed
circumvention of the new regulations, and so forth. [This then
turns into a] never-ending and self-justifying process.'' \27\
The clamor of the reformers for additional legislation to plug
existing ``loopholes'' in BCRA provides further evidence of
Justice Thomas's main point: regulation begets further
regulation. Instead of blindly going down the path of more and
more regulation, much of which is counterproductive, H.R. 1316
seeks to--in the words of its co-author, Congressman Pence--
``inject[ ] more freedom into the campaign system.''
---------------------------------------------------------------------------
\27\ McConnell, 540 U.S. at 268-69.
---------------------------------------------------------------------------
H.R. 1316 strengthens our political parties by removing
unnecessary regulatory obstacles that hinder the parties'
ability to raise money and communicate with their candidates
and also buttresses the ability of state and local parties to
engage in traditional party functions, like voter registration
and distributing sample ballots. It updates and indexes
outdated limits. It sheds more sunlight on the activities of
527 groups, ensures that foreign nationals cannot influence
American elections through contributions to such groups, and
enables non-profit organizations to broadcast electioneering
communications on equal terms with 527s. It protects the
ability of our citizens to participate in the national
political dialogue using Internet web sites and blogs without
fear of being subject to complex regulation. And it bolsters
the First Amendment rights of federal officeholders and
candidates to fully participate in elections in their home
states and in the communities they represent.
It is also important to note what H.R. 1316 does not do. It
does not repeal the soft money ban in BCRA. It does not lift
the prohibition on federal officeholders and candidates
soliciting soft money. And it does not repeal the individual
limits on contributions to candidates, parties, and PACs. Thus,
H.R. 1316 is a narrowly tailored bill designed to correct
current deficiencies and distortions in our nation's campaign
finance system and to make it fairer and more balanced for
everyone.

Summary of the Legislation

Section 1.--Short Title: The ``527 Fairness Act of 2005.''
Section 2.--Repeal of Aggregate Limit on Contributions by
Individuals.
Repeals the limit on the total amount of
contributions that an individual may give to candidates
and committees during an election cycle.
Under current law, an individual is subject to a $101,400
aggregate contribution limit during a two-year election cycle.
This aggregate limit forces national, state, and local party
committees and PACs to compete against each one another for a
donor's dollars, since an individual is prohibited from giving
a maximum contribution to each group. This competition has been
especially harmful to state and local parties.
The removal of the ceiling on total contributions will
encourage more giving to party committees, candidates, and
other groups subject to disclosure and contribution limits and
less to unaccountable outside groups. In addition, the
unproductive competition among party committees and PACs will
cease.
Note: this provision affects only the aggregate
contribution limit and does not repeal the limits on what a
person may give to any one candidate or committee.
Section 3.--Repeal of Limit on Amount of Party Expenditures
on Behalf of Candidates in General Elections.
Repeals the limit on expenditures
coordinated between party committees and their
candidates.
Political parties are currently able to make unlimited
independent expenditures on behalf of their Senate and House
candidate but are limited in the amount of coordinated
expenditures they may make. This disparity is premised on the
untenable notion that candidates are potentially in danger of
being corrupted by their own parties. As FEC Commissioner
Michael Toner has pointed out, ``These Draconian party spending
limits are an anachronism and serve no legislative purpose. . .
. Given that every single dollar that a political party wishes
to spend on coordinated expenditures must be made out of hard
money, there is no anti-corruption rationale for continuing to
limit these party expenditures.'' \28\ Therefore, this
provision removes the wedge that's been driven between parties
and their own candidates.
---------------------------------------------------------------------------
\28\ Michael E. Toner, Pass Pence-Wynn So We Can Fix Coordinated
Expenditures, Roll Call, Jun. 15, 2005, at 4.
---------------------------------------------------------------------------
Section 4.--Increase in Contribution Limits for Political
Committees.
Increases the limit on contributions made to
or by PACs from $5,000 to $7,500.
Increases the limit on PAC contributions to
national party committees from $15,000 to $25,000, thus
putting PACs on equal footing with individuals.
The PAC contribution limits have not been raised since
1974; consequently, their value has been eroded by inflation.
In fact, had the PAC limit set in 1974 been indexed for
inflation, the current limit would be $19,716.\29\ Therefore,
the PAC contribution limits are long overdue for this very
modest increase.
---------------------------------------------------------------------------
\29\ This figure was reached using the inflation calendar available
on web site for the Department of Labor's Bureau of Labor Statistics <
http://www.bls.gov/cpi/home.htm> (accessed Jun. 15, 2005).
---------------------------------------------------------------------------
Section 5.--Indexing of All Contribution Limits.
Indexes the contribution limits for PACs.
Indexes the contribution limits for state
party committees.
BCRA permits the indexing of some contribution limits for
inflation but inexplicably leaves other limits unindexed. This
provision will ensure that all contribution limits are
periodically adjusted to account for inflation.
Section 6.--Permitting Transfers between Leadership
Committees and National Party Committees.
Permits unlimited transfers between
leadership PACs and national party committees.
Under current law, a candidate's authorized campaign
committee may make unlimited transfers to a national party
committee, but a candidate's leadership PAC may not. There is
no reason for this disparate treatment. Thus, this provision
puts leadership PACs at parity with authorized campaign
committees.
Section 7.--Increase in Threshold of Contributions and
Expenditures Required for Determining Treatment as Political
Committee.
Raises the political committee registration
threshold to $10,000.
This provision protects small political organizations from
the requirement of registering and reporting with the FEC.
Under current law, if a group raises or spends a mere $1,000 in
connection with a federal election, it has to register with the
FEC as a political committee. This $1,000 threshold has been in
place since 1974 and, thus, needs to be updated to account for
inflation.
Section 8.--Prohibiting Contributions and Donations to
Section 527 Organizations by Foreign Nationals.
Prohibits foreign nationals from making
contributions to 527 groups.
This provision strengthens the foreign money ban in 2
U.S.C. Sec. 441e by explicitly prohibiting foreign nationals
from making contributions to 527 organizations. Neither the
Federal Election Campaign Act nor the Internal Revenue Code
specifically bars foreign nationals from donating to 527
groups. This provision corrects that omission.
Section 9.--Requiring Section 527 Organizations to Submit
Reports under Federal Election Campaign Act of 1971.
Requires 527 groups to file reports with the
FEC in the same manner, under the same terms and
conditions, and at the same times applicable to federal
political committees.
Section 10.--Permitting Expenditures for Electioneering
Communications by Certain Organizations.
Permits incorporated 501(c)(4), (c)(5)
[labor organizations], and (c)(6) [trade associations]
to engage in electioneering communications provided
such communications are paid for with funds donated by
individual American citizens.
This provision repeals the Wellstone Amendment, which
restricted electioneering communications by incorporated
grassroots organizations. The Wellstone Amendment, which was
not included in the original version of BCRA and which Senators
McCain and Feingold voted against, prohibited incorporated
501(c) organizations from engaging in electioneering
communications on equal terms with 527 groups. This provision
ends this unfair treatment by permitting incorporated 501(c)
organizations to make electioneering communications so long as
they are funded by contributions from individuals.
Section 11.--Expanding Ability of Corporations and Labor
Organizations to Communicate with Members.
Allows corporate and labor union PACs to
solicit their ``restricted classes'' using fax machines
or e-mail.
Removes the ``prior approval'' restriction
on solicitations by trade association PACs.
Permits more than one trade association to
solicit the restricted class of a member company.
Under current law, trade associations may not solicit
contributions from the administrative personnel and
stockholders of a member company without prior written approval
from the company, and a member company may only grant approval
to one trade association. This provision removes this
unnecessary and burdensome restriction.
Moreover, current law permits corporations and labor unions
to solicit their rank-and-file employees twice a year but only
by mail. This provision updates the law to allow the use of
other common delivery methods (such as e-mail or fax).
Section 12.--Permitting State and Local Parties to Use
Nonfederal Funds for Voter Registration and Sample Ballots.
Permits state and local parties to use
nonfederal funds for voter registration activities and
the production, printing, and distribution of sample
ballots.
BCRA had the unfortunate effect of federalizing many
activities that had traditionally been carried out at the state
and local level, thus resulting in onerous restrictions being
placed on state and local parties. This provision allows
stateand local parties to use funds permitted under relevant state laws
to engage in voter registration activities and to print and distribute
sample ballots.
Section 13.--Clarification of Authorization of Federal
Candidates and Officeholders to Attend Fundraising Events for
State or Local Parties.
Permits federal officeholders and candidates
to attend and participate in state and local party
fundraisers without restriction or regulation.
BCRA included language regarding federal officeholders and
candidates participating in state and local party fundraisers.
This provision clarifies the original intent of that language,
which allows federal officeholders and candidates to attend and
speak at such fundraisers without restriction or regulation.
Section 14.--Modification of Definition of Public
Communication.
Excludes Internet communications from being
considered ``public communications.''
This provision protects citizens who engage in the nation's
political dialogue using Internet web sites and blogs from
regulation under the federal campaign finance laws.
Section 15.--Treatment of Candidate Communications
Containing Endorsement by Federal Candidate or Officeholder.
Allows federal officeholders and candidates
to endorse state, local, or other federal candidates
without such endorsements being considered coordinated
communications.
Permits federal officeholders and candidates
to state their positions on state or local ballot
initiatives or referenda.
BCRA places unfair and unreasonable restrictions on the
ability of federal officeholders to fully participate in
elections in their home states and in the communities they
represent. This provision allows federal officeholders to
endorse state and local candidates without such endorsements
being considered coordinated contributions that must be paid
for with federal hard dollars. It also permits federal
officeholders to declare their positions on state ballot
initiatives and to endorse other federal candidates.
Section 16.--Severability.
If any portion of the Act is found
unconstitutional, the other portions will remain in
effect.
Section 17.--Effective Date.
The provisions of the Act shall take effect
January 1, 2006.

Committee Consider of the Legislation

INTRODUCTION AND REFERRAL

On March 15, 2005, Mr. Pence and Mr. Wynn introduced H.R.
1316, the ``527 Fairness Act of 2005,'' which was referred to
the Committee on House Administration.

HEARINGS

The Committee on House Administration held a hearing on
H.R. 1316 on April 20, 2005.
Members present: Mr. Ney, Mr. Ehlers, Mr. Doolittle, Mr.
Reynolds, Ms. Miller, Ms. Millender-McDonald, Mr. Brady, and
Ms. Lofgren.
Witnesses: The Honorable Christopher Shays, Member of
Congress; The Honorable Martin Meehan, Member of Congress; The
Honorable Mike Pence, Member of Congress; The Honorable Albert
Wynn, Member of Congress; Cleta Mitchell, Partner, Foley &
Lardner LLP; Robert Bauer, Partner, Perkins Coie LLP; and
Laurence E. Gold, Associate General Counsel, AFL-CIO.

MARKUP

On June 8, 2005, the Committee met to mark up H.R. 1316.
The Committee favorably reported H.R. 1316, as amended, by a
record vote (6-3), a quorum being present.

Matters Required Under the Rules of the House

COMMITTEE RECORD VOTES

Clause 3(b) of House rule XIII requires the results of each
record vote on an amendment or motion to report, together with
the names of those voting for and against, to be printed in the
committee report.

Amendment in the nature of a substitute

Offered by Mr. Ney. The first vote during the markup came
on the amendment in the nature of a substitute offered by Mr.
Ney.
The amendment lifts the aggregate election-cycle
contribution limit; removes the limit on expenditures
coordinated between party committees and candidates; raises the
contribution limits for PACs; indexes all contribution limits
for inflation; permits unlimited transfers between leadership
PACs and national party committees; raises the political
committee registration threshold to $10,000; prohibits
contributions to 527 groups by foreign nationals; requires 527
groups to report to the FEC; repeals the Wellstone Amendment
that restricted electioneering communications by grassroots
organizations; expands the ability of corporations and labor
unions to communicate withmembers; allows state and local
parties to use nonfederal funds for voter registration activities and
sample ballots; clarifies the ability of federal officeholders to
attend and participate in state and local party fundraisers; amends the
Federal Election Campaign Act (``FECA'') to exclude Internet
communications from being considered ``public communications''; allows
federal officeholders to endorse state, local, and other federal
candidates; and contains a severability clause.
The vote on the amendment was 6-3 and the amendment was
agreed to.

------------------------------------------------------------------------
Member Yes No Present
------------------------------------------------------------------------
Mr. Ney................................ X -- --
Mr. Ehlers............................. X -- --
Mr. Mica............................... X -- --
Mr. Doolittle.......................... X -- --
Mr. Reynolds........................... X -- --
Ms. Miller............................. X -- --
Ms. Millender-McDonald................. -- X --
Mr. Brady.............................. -- X --
Ms. Lofgren............................ -- X --
--------------------------------
Total.............................. 6 3 --
------------------------------------------------------------------------

The Committee then voted on H.R. 1316, as amended. The vote
on the bill was 6-3 and the bill was agreed to.

The Committee then voted to favorably report H.R. 1316, as
amended. The vote to report favorably was approved by a
recorded vote (6-3).

Committee Oversight Findings

In compliance with clause 3(c)(1) rule XIII of the Rules of
the House of Representatives, the Committee states that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.

General Performance Goals and Objectives

The Committee states, with respect to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, that
the goal and objective of H.R. 1316 is to restore fairness and
balance to the federal campaign finance system.

Constitutional Authority

In compliance with clause 3(d)(1) of rule XIII, the
Committee states that Article 1, Section 4 of the U.S.
Constitution grants Congress the authority to make laws
governing the time, place and manner of holding Federal
elections.

Federal Mandates

The Committee states, with respect to section 423 of the
Congressional Budget Act of 1974, that the bill does not
include any significant Federal mandate.

Preemption Clarification

Section 423 of the Congressional Budget Act of 1974
requires the report of any committee on a bill or joint
resolution to include a committee statement on the extent to
which the bill or joint resolution is intended to preempt state
or local law. The Committee states that H.R. 1316 is not
intended to preempt any state or local law.

Congressional Budget Office Cost Estimate

In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, the following estimate and comparison
prepared by the Director of the Congressional Budget Office
under section 402 of the Congressional Budget Act of 1974:

U.S. Congress,
Congressional Budget Office,
Washington, DC, June 17, 2005.
Hon. Robert W. Ney,
Chairman, Committee on House Administration,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1316, the 527
Fairness Act of 2005.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Matthew
Pickford (for federal costs) and Paige Piper/Bach (for the
private-sector impact).
Sincerely,
Elizabeth M. Robinson
(For Douglas Holtz-Eakin, Director).
Enclosure.

H.R. 1316--527 Fairness Act of 2005

Summary: H.R. 1316 would make several amendments to the
Federal Election Campaign Act of 1971. In particular the bill
would:
Require certain political organizations, as
defined by section 527 of the Internal Revenue Code, to
file reports with the Federal Election Commission
(FEC);
Repeal the aggregate limit on campaign
contributions by individuals;
Raise the limits on transfers between
certain political action committees and national party
committees;
Remove spending limits on national political
parties;
Increase limits on contributions to
political action committees and index the limits to
inflation; and
Exempt Internet communications from campaign
finance rules.
CBO estimates that implementing H.R. 1316 would cost about
$1 million in fiscal year 2006, subject to the availability of
appropriated funds. In future years, we estimate that the
increased costs would not be significant. Enacting the bill
also could affect federal revenues by increasing collections of
fines and penalties for violating campaign finance laws, but
CBO estimates that any such increase would not be significant.
H.R. 1316 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments because the bill
would specifically exclude state and local elections. H.R. 1316
would impose a private-sector mandate as defined in UMRA on
certain political organizations.CBO estimates that the direct
cost of the mandate would fall well below the annual threshold
established by UMRA for private-sector mandates ($123 million in 2005,
adjusted annually for inflation).
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1316 is shown in the following table.
The costs of this legislation fall within budget function 800
(general government).

----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------
2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION \1\

Estimated Authorization Level...................................... 1 * * * *
Estimated Outlays.................................................. 1 * * * *
----------------------------------------------------------------------------------------------------------------
\1\ Enacting the bill could also increase revenues, but CBO estimates any such effects would be less than
$500,000 a year.
Note.--* = less than $500,000.

Basis of estimate: For this estimate, CBO assumes that the
bill will be enacted near the start of fiscal year 2006 and
that spending will follow historical patterns for similar
programs.
Based on information from the FEC and subject to the
availability of appropriated funds, CBO estimates that
implementing H.R. 1316 would cost the FEC about $1 million in
fiscal year 2006. This cost covers the one-time computer-
related expenses as well as writing new regulations to
implement the new provisions of the legislation. In future
years, the legislation would increase general administrative
and maintenance costs to the FEC, but we estimate that those
additional costs would not be significant.
Enacting H.R. 1316 would likely increase collections of
fines and penalties for violations of campaign finance law.
Such collections are recorded in the budget as revenues. CBO
estimates that the additional collections of penalties and
fines would not be significant.
Estimated impact on State, local, and tribal governments:
H.R. 1316 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on state, local, or tribal
governments.
Estimated impact on the private sector: H.R. 1316 would
impose a private-sector mandate as defined in UMRA on certain
political organizations. CBO estimates that the direct cost of
the mandate would fall well below the annual threshold
established by UMRA for private-sector mandates ($123 million
in 2005, adjusted annually for inflation).
The bill would require certain organizations registered
under section 527 of the Internal Revenue Code that are filing
financial reports with the Internal Revenue Service to file
periodic reports with the FEC as well. Based on information
from government sources, the direct cost of complying with the
mandate would be minimal.
Estimate prepared by: Federal Costs: Matthew Pickford.
Impact on State, Local, and Tribal Governments: Marjorie
Miller. Impact on the Private-Sector: Paige Piper/Bach.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):

FEDERAL ELECTION CAMPAIGN ACT OF 1971

* * * * * * *

TITLE III--DISCLOSURE OF FEDERAL CAMPAIGN FUNDS

DEFINITIONS

Sec. 301. When used in this Act:
(1) * * *

* * * * * * *

(4) The term ``political committee'' means--
(A) any committee, club, association, or other group
of persons which receives contributions aggregating in
excess of [$1,000] $10,000 during a calendar year or
which makes expenditures aggregating in excess of
[$1,000] $10,000 during a calendar year; or

* * * * * * *

(C) any local committee of a political party which
receives contributions aggregating in excess of
[$5,000] $10,000 during a calendar year, or makes
payments exempted from the definition of contribution
or expenditure as defined in section 301 (8) and (9)
aggregating in excess of [$5,000] $10,000 during a
calendar year, or makes contributions aggregating in
excess of [$1,000] $10,000 during a calendar year or
makes expenditures aggregating in excess of [$1,000]
$10,000 during a calendar year.

* * * * * * *

(20) Federal election activity.--
(A) In general.--The term ``Federal election
activity'' means--
[(i) voter registration activity
during the period that begins on the
date that is 120 days before the date a
regularly scheduled Federal election is
held and ends on the date of the
election;]
[(ii)] (i) voter identification, get-
out-the-vote activity, or generic
campaign activity conducted in
connection with an election in which a
candidate for Federal office appears on
the ballot (regardless of whether a
candidate for State or local office
also appears on the ballot);
[(iii)] (ii) a public communication
that refers to a clearly identified
candidate for Federal office
(regardless of whether a candidate for
State or local office is also mentioned
or identified) and that promotes or
supports a candidate for that office,
or attacks or opposes a candidate for
that office (regardless of whether the
communication expressly advocates a
vote for or against a candidate); or
[(iv)] (iii) services provided during
any month by an employee of a State,
district, or local committee of a
political party who spends more than 25
percent of that individual's
compensated time during that month on
activities in connection with a Federal
election.
(B) Excluded activity.--The term ``Federal
election activity'' does not include an amount
expended or disbursed by a State, district, or
local committee of a political party for--
(i) a public communication that
refers solely to a clearly identified
candidate for State or local office, if
the communication is not a Federal
election activity described in
subparagraph (A)(i) [or (ii)];

* * * * * * *

(iii) the costs of a State, district,
or local political convention; [and]
(iv) the costs of grassroots campaign
materials, including buttons, bumper
stickers, and yard signs, that name or
depict only a candidate for State or
local office[.];
(v) voter registration activities;
and
(vi) the costs incurred with the
preparation of a sample ballot for an
election in which a candidate for
Federal office and a candidate for
State or local office appears on the
ballot.

* * * * * * *

(22) Public communication.--The term ``public
communication'' means a communication by means of any
broadcast, cable, or satellite communication,
newspaper, magazine, outdoor advertising facility, mass
mailing, or telephone bank to the general public, or
any other form of general public political advertising.
Such term shall not include communications over the
Internet.

* * * * * * *

REPORTS

Sec. 304. (a)(1) * * *

* * * * * * *

(13)(A) Except as provided in subparagraph (B), each
organization described in section 527 of the Internal Revenue
Code of 1986 shall submit a report under this section in the
same manner, under the same terms and conditions, and at the
same times applicable to a political committee which is not an
authorized committee of a candidate or a national committee of
a political party.
(B) Subparagraph (A) does not apply to an organization
described in section 527(j)(5)(B) of the Internal Revenue Code
of 1986 (relating to a State or local committee of a political
party or political committee of a State or local candidate).

* * * * * * *

(f) Disclosure of Electioneering Communications.--
(1) * * *

* * * * * * *

(3) Electioneering communication.--For purposes of
this subsection--
(A) * * *
(B) Exceptions.--The term ``electioneering
communication'' does not include--
(i) * * *

* * * * * * *

(iv) any other communication exempted
under such regulations as the
Commission may promulgate (consistent
with the requirements of this
paragraph) to ensure the appropriate
implementation of this paragraph,
except that under any such regulation a
communication may not be exempted if it
meets the requirements of this
paragraph and is described in [section
301(20)(A)(iii)] section
301(20)(A)(ii).

* * * * * * *

LIMITATIONS ON CONTRIBUTIONS AND EXPENDITURES

Sec. 315. (a)(1) Except as provided in subsection (i) and
section 315A, no person shall make contributions--
(A) * * *

* * * * * * *

(C) to any other political committee (other than a
committee described in subparagraph (D)) in any
calendar year which, in the aggregate, exceed [$5,000]
$7,500; or

* * * * * * *

(2) No multicandidate political committee shall make
contributions--
(A) to any candidate and his authorized political
committees with respect to any election for Federal
office which, in the aggregate, exceed [$5,000] $7,500;
(B) to the political committees established and
maintained by a national political party, which are not
the authorized political committees of any candidate,
in any calendar year, which, in the aggregate, exceed
[$15,000] $25,000; or
(C) to any other political committee in any calendar
year which, in the aggregate, exceed [$5,000] $7,500.
[(3) During the period which begins on January 1 of an odd-
numbered year and ends on December 31 of the next even-numbered
year, no individual may make contributions aggregating more
than--
[(A) $37,500, in the case of contributions to
candidates and the authorized committees of candidates;
[(B) $57,500, in the case of any other contributions,
of which not more than $37,500 may be attributable to
contributions to political committees which are not
political committees of national political parties.]
(4)(A) The limitations on contributions contained in
paragraphs (1) and (2) do not apply to transfers between and
among political committees which are national, State, district,
or local committees (including any subordinate committee
thereof) of the same political party. For purposes of paragraph
(2), the term ``multicandidate political committee'' means a
political committee which has been registered under section 303
for a period of not less than 6 months, which has received
contributions from more than 50 persons, and, except for any
State political party organization, has made contributions to 5
or more candidates for Federal office.
(B) The limitations on contributions contained in paragraphs
(1) and (2) do not apply to transfers between a leadership
committee of an individual holding Federal office and political
committees established and maintained by a national political
party. For purposes of the previous sentence, the term
``leadership committee'' means, with respect to an individual
holding Federal office, an unauthorized political committee
which is associated with such individual but which is not
affiliated with any authorized committee of such individual.

* * * * * * *

(7) For purposes of this subsection--
(A) * * *

* * * * * * *

(C) if--
(i) * * *
(ii) subject to paragraph (9), such
disbursement is coordinated with a candidate or
an authorized committee of such candidate, a
Federal, State, or local political party or
committee thereof, or an agent or official of
any such candidate, party, or committee;

* * * * * * *

(9)(A) For purposes of paragraph (7)(C), a disbursement for
an electioneering communication which refers to a candidate for
Federal office shall not be treated as a disbursement which is
coordinated with such candidate solely on the ground that the
communication contains a State or local endorsement or (in the
case of a communication containing a State or local
endorsement) that the candidate reviewed, approved, or
otherwise participated in the preparation and dissemination of
the communication.
(B) In subparagraph (A), the term ``State or local
endorsement'' means, with respect to a candidate for Federal
office--
(i) an endorsement by such candidate of a candidate
for State or local office or of another candidate for
Federal office; or
(ii) a statement of the position of such candidate on
a State or local ballot initiative or referendum.

* * * * * * *

(c)(1)(A) * * *
[(B) Except as provided in subparagraph (C), in any calendar
year after 2002--
[(i) a limitation established by subsections
(a)(1)(A), (a)(1)(B), (a)(3), (b), (d), or (h) shall be
increased by the percent difference determined under
subparagraph (A);
[(ii) each amount so increased shall remain in effect
for the calendar year; and
[(iii) if any amount after adjustment under clause
(i) is not a multiple of $100, such amount shall be
rounded to the nearest multiple of $100.]
(B) Except as provided in subparagraph (C)--
(i) in any calendar year after 2002--
(I) a limitation established by subsection
(a)(1)(A), (a)(1)(B), (b), or (h) shall be
increased by the percent difference under
subparagraph (A),
(II) each amount so increased shall remain in
effect for the calendar year, and
(III) if any amount after the adjustment made
under subclause (I) is not a multiple of $100,
such amount shall be rounded to the nearest
multiple of $100; and
(ii) in any calendar year after 2006--
(I) a limitation established by subsection
(a)(1)(C), (a)(1)(D), or (a)(2) shall be
increased by the percent difference under
subparagraph (A),
(II) each amount so increased shall remain in
effect for the calendar year, and
(III) if any amount after the adjustment made
under subclause (I) is not a multiple of $100,
such amount shall be rounded to the nearest
multiple of $100.
(C) In the case of limitations under [subsections (a)(1)(A),
(a)(1)(B), (a)(3), and (h)] subsections (a) and (h), increases
shall only be made in odd-numbered years and such increases
shall remain in effect for the 2-year period beginning on the
first day following the date of the last general election in
the year preceding the year in which the amount is increased
and ending on the date of the next general election.
(2) For purposes of paragraph (1)--
(A) * * *
(B) the term ``base period'' means--
(i) for purposes of [subsections (b) and (d)]
subsection (b), calendar year 1974; [and]
(ii) for purposes of subsections (a)(1)(A),
(a)(1)(B), [(a)(3),] and (h), calendar year
2001[.]; and
(iii) for purposes of subsections (a)(1)(C),
(a)(1)(D), and (a)(2), calendar year 2005.
(d)[(1)] Notwithstanding any other provision of law with
respect to limitations on [expenditures or limitations on]
amounts of expenditures or contributions, the national
committee of a political party and a State committee of a
political party, including any subordinate committee of a State
committee, may make expenditures in connection with the general
election campaign of candidates for [Federal office, subject to
the limitations contained in paragraphs (2), (3), and (4) of
this subsection] Federal office in any amount.
[(2) The national committee of a political party may not make
any expenditure in connection with the general election
campaign of any candidate for President of the United States
who is affiliated with such party which exceeds an amount equal
to 2 cents multiplied by the voting age population of the
United States (as certified under subsection (e)). Any
expenditure under this paragraph shall be in addition to any
expenditure by a national committee of a political party
serving as the principal campaign committee of a candidate for
the office of President of the United States.
[(3) The national committee of a political party, or a State
committee of a political party, including any subordinate
committee of a State committee, may not make any expenditure in
connection with the general election campaign of a candidate
for Federal office in a State who is affiliated with such party
which exceeds--
[(A) in the case of a candidate for election to the
office of Senator, or of Representative from a State
which is entitled to only one Representative, the
greater of--
[(i) 2 cents multiplied by the voting age
population of the State (as certified under
subsection (e)); or
[(ii) $20,000; and
[(B) in the case of a candidate for election to the
office of Representative, Delegate, or Resident
Commissioner in any other State, $10,000.
[(4) Independent versus coordinated expenditures by
party.--
[(A) In general.--On or after the date on
which a political party nominates a candidate,
no committee of the political party may make--
[(i) any coordinated expenditure
under this subsection with respect to
the candidate during the election cycle
at any time after it makes any
independent expenditure (as defined in
section 301(17)) with respect to the
candidate during the election cycle; or
[(ii) any independent expenditure (as
defined in section 301(17)) with
respect to the candidate during the
election cycle at any time after it
makes any coordinated expenditure under
this subsection with respect to the
candidate during the election cycle.
[(B) Application.--For purposes of this
paragraph, all political committees established
and maintained by a national political party
(including all congressional campaign
committees) and all political committees
established and maintained by a State political
party (including any subordinate committee of a
State committee) shall be considered to be a
single political committee.
[(C) Transfers.--A committee of a political
party that makes coordinated expenditures under
this subsection with respect to a candidate
shall not, during an election cycle, transfer
any funds to, assign authority to make
coordinated expenditures under this subsection
to, or receive a transfer of funds from, a
committee of the political party that has made
or intends to make an independent expenditure
with respect to the candidate.]

* * * * * * *

(i) Increased Limit To Allow Response to Expenditures From
Personal Funds.--
(1) Increase.--
(A) * * *

* * * * * * *

(C) Increased limit.--Except as provided in
clause (ii), for purposes of subparagraph (A),
if the opposition personal funds amount is
over--
[(i) 2 times the threshold amount,
but not over 4 times that amount--
[(I) the increased limit
shall be 3 times the applicable
limit; and
[(II) the limit under
subsection (a)(3) shall not
apply with respect to any
contribution made with respect
to a candidate if such
contribution is made under the
increased limit of subparagraph
(A) during a period in which
the candidate may accept such a
contribution;
[(ii) 4 times the threshold amount,
but not over 10 times that amount--
[(I) the increased limit
shall be 6 times the applicable
limit; and
[(II) the limit under
subsection (a)(3) shall not
apply with respect to any
contribution made with respect
to a candidate if such
contribution is made under the
increased limit of subparagraph
(A) during a period in which
the candidate may accept such a
contribution; and
[(iii) 10 times the threshold
amount--
[(I) the increased limit
shall be 6 times the applicable
limit;
[(II) the limit under
subsection (a)(3) shall not
apply with respect to any
contribution made with respect
to a candidate if such
contribution is made under the
increased limit of subparagraph
(A) during a period in which
the candidate may accept such a
contribution; and
[(III) the limits under
subsection (d) with respect to
any expenditure by a State or
national committee of a
political party shall not
apply.]
(i) 2 times the threshold amount, but
not over 4 times that amount, the
increased limit shall be 3 times the
applicable limit;
(ii) 4 times the threshold amount,
but not over 10 times that amount, the
increased limit shall be 6 times the
applicable limit; and
(iii) 10 times the threshold amount,
the increased limit shall be 6 times
the applicable limit.

* * * * * * *

(2) Time to accept contributions under increased
limit.--
(A) In general.--Subject to subparagraph (B),
a candidate and the candidate's authorized
committee shall not accept any contribution[,
and a party committee shall not make any
expenditure,] under the increased limit under
paragraph (1)--
(i) * * *
(ii) to the extent that such
contribution, when added to the
aggregate amount of contributions
previously accepted [and party
expenditures previously made] under the
increased limits under this subsection
for the election cycle, exceeds 110
percent of the opposition personal
funds amount.
(B) Effect of withdrawal of an opposing
candidate.--A candidate and a candidate's
authorized committee shall not accept any
contribution [and a party shall not make any
expenditure] under the increased limit after
the date on which an opposing candidate ceases
to be a candidate to the extent that the amount
of such increased limit is attributable to such
an opposing candidate.

* * * * * * *

MODIFICATION OF CERTAIN LIMITS FOR HOUSE CANDIDATES IN RESPONSE TO
PERSONAL FUND EXPENDITURES OF OPPONENTS

Sec. 315A. (a) Availability of Increased Limit.--
(1) In general.--Subject to paragraph (3), if the
opposition personal funds amount with respect to a
candidate for election to the office of Representative
in, or Delegate or Resident Commissioner to, the
Congress [exceeds $350,000--
[(A) the limit under subsection (a)(1)(A)
with respect to the candidate shall be tripled;
[(B) the limit under subsection (a)(3) shall
not apply with respect to any contribution made
with respect to the candidate if the
contribution is made under the increased limit
allowed under subparagraph (A) during a period
in which the candidate may accept such a
contribution; and
[(C) the limits under subsection (d) with
respect to any expenditure by a State or
national committee of a political party on
behalf of the candidate shall not apply.]
exceeds $350,000, the limit under subsection
(a)(1)(A) with respect to the candidate shall
be tripled.

* * * * * * *

(3) Time to accept contributions under increased
limit.--
(A) In general.--Subject to subparagraph (B),
a candidate and the candidate's authorized
committee shall not accept any contribution[,
and a party committee shall not make any
expenditure,] under the increased limit under
paragraph (1)--
(i) * * *
(ii) to the extent that such
contribution, when added to the
aggregate amount of contributions
previously accepted [and party
expenditures previously made] under the
increased limits under this subsection
for the election cycle, exceeds 100
percent of the opposition personal
funds amount.
(B) Effect of withdrawal of an opposing
candidate.--A candidate and a candidate's
authorized committee shall not accept any
contribution [and a party shall not make any
expenditure] under the increased limit after
the date on which an opposing candidate ceases
to be a candidate to the extent that the amount
of such increased limit is attributable to such
an opposing candidate.

* * * * * * *

CONTRIBUTIONS OR EXPENDITURES BY NATIONAL BANKS, CORPORATIONS, OR LABOR
ORGANIZATIONS

Sec. 316. (a) * * *
(b)(1) * * *

* * * * * * *

(4)(A) * * *
(B) It shall not be unlawful under this section for a
corporation, a labor organization, or a separate segregated
fund established by such corporation or such labor
organization, to make 2 written solicitations for contributions
during the calendar year from any stockholder, executive or
administrative personnel, or employee of a corporation or the
families of such persons. A solicitation under this
subparagraph may be made [only by mail addressed] only by
communications addressed or otherwise delivered to
stockholders, executive or administrative personnel, or
employees at their residence and shall be so designed that the
corporation, labor organization, or separate segregated fund
conducting such solicitation cannot determine who makes a
contribution of $50 or less as a result of such solicitation
and who does not make such a contribution.

* * * * * * *

(D) This paragraph shall not prevent a trade association or a
separate segregated fund established by a trade association
from soliciting contributions from the stockholders and
executive or administrative personnel of the member
corporations of such trade association and the families of such
stockholders or personnel [to the extent that such solicitation
of such stockholders and personnel, and their families, has
been separately and specifically approved by the member
corporation involved, and such member corporation does not
approve any such solicitation by more than one such trade
association in any calendar year].

* * * * * * *

(c) Rules Relating to Electioneering Communications.--
(1) * * *
(2) Exception.--Notwithstanding paragraph (1), the
term ``applicable electioneering communication'' does
not include a communication by a [section 501(c)(4)
organization] section 501(c)(4), (5), or (6)
organization or a political organization (as defined in
section 527(e)(1) of the Internal Revenue Code of 1986)
made under section 304(f)(2)(E) or (F) of this Act if
the communication is paid for exclusively by funds
provided directly by individuals who are United States
citizens or nationals or lawfully admitted for
permanent residence (as defined in section 101(a)(20)
of the Immigration and Nationality Act (8 U.S.C.
1101(a)(20))). For purposes of the preceding sentence,
the term ``provided directly by individuals'' does not
include funds the source of which is an entity
described in subsection (a) of this section.
(3) Special operating rules.--
(A) * * *
(B) Exception under paragraph (2).--A
[section 501(c)(4) organization] section
501(c)(4), (5), or (6) organization that
derives amounts from business activities or
receives funds from any entity described in
subsection (a) shall be considered to have paid
for any communication out of such amounts
unless such organization paid for the
communication out of a segregated account to
which only individuals can contribute, as
described in section 304(f)(2)(E).
(4) Definitions and rules.--For purposes of this
subsection--
(A) the term ``[section 501(c)(4)
organization] section 501(c)(4), (5), or (6)
organization'' means--
(i) an organization described in
[section 501(c)(4) of the Internal
Revenue Code of 1986] paragraph (4),
(5), or (6) of section 501(c) of the
Internal Revenue Code of 1986 and
exempt from taxation under section
501(a) of such Code; or
(ii) an organization which has
submitted an application to the
Internal Revenue Service for
determination of its status as an
organization described in clause (i);
and

* * * * * * *

(5) Coordination with internal revenue code.--Nothing
in this subsection shall be construed to authorize an
organization exempt from taxation under section 501(a)
of the Internal Revenue Code of 1986 to carry out any
activity which is prohibited under such Code[.], or to
affect the treatment under such Code of any
expenditures described in section 527(e) of such Code
which are made by a section 501(c)(4), (5), or (6)
organization.
[(6) Special rules for targeted communications.--
[(A) Exception does not apply.--Paragraph (2)
shall not apply in the case of a targeted
communication that is made by an organization
described in such paragraph.
[(B) Targeted communication.--For purposes of
subparagraph (A), the term ``targeted
communication'' means an electioneering
communication (as defined in section 304(f)(3))
that is distributed from a television or radio
broadcast station or provider of cable or
satellite television service and, in the case
of a communication which refers to a candidate
for an office other than President or Vice
President, is targeted to the relevant
electorate.
[(C) Definition.--For purposes of this
paragraph, a communication is ``targeted to the
relevant electorate'' if it meets the
requirements described in section
304(f)(3)(C).]

* * * * * * *

CONTRIBUTIONS AND DONATIONS BY FOREIGN NATIONALS

Sec. 319. (a) Prohibition.--It shall be unlawful for--
(1) a foreign national, directly or indirectly, to
make--
(A) * * *
(B) a contribution or donation to a committee
of a political party; [or]
(C) a contribution or donation to an
organization described in section 527 of the
Internal Revenue Code of 1986; or
[(C)] (D) an expenditure, independent
expenditure, or disbursement for an
electioneering communication (within the
meaning of section 304(f)(3)); or
(2) a person to solicit, accept, or receive a
contribution or donation described in subparagraph [(A)
or (B)] (A), (B), or (C) of paragraph (1) from a
foreign national.

* * * * * * *

SEC. 323. SOFT MONEY OF POLITICAL PARTIES.

(a) * * *
(b) State, District, and Local Committees.--
(1) * * *
(2) Applicability.--
(A) In general.--Notwithstanding clause (i)
[or (ii)] of section 301(20)(A), and subject to
subparagraph (B), paragraph (1) shall not apply
to any amount expended or disbursed by a State,
district, or local committee of a political
party for an activity described in either such
clause to the extent the amounts expended or
disbursed for such activity are allocated
(under regulations prescribed by the
Commission) among amounts--
(i) * * *

* * * * * * *

(e) Federal Candidates.--
(1) * * *

* * * * * * *

(3) Fundraising events.--Notwithstanding paragraph
(1) or subsection (b)(2)(C), a candidate or an
individual holding Federal office may attend, [speak,]
speak without restriction or regulation, or be a
featured guest at a fundraising event for a State,
district, or local committee of a political party.
(4) Permitting certain solicitations.--
(A) General solicitations.--Notwithstanding
any other provision of this subsection, an
individual described in paragraph (1) may make
a general solicitation of funds on behalf of
any organization that is described in section
501(c) of the Internal Revenue Code of 1986 and
exempt from taxation under section 501(a) of
such Code (or has submitted an application for
determination of tax exempt status under such
section) (other than an entity whose principal
purpose is to conduct activities described in
[clauses (i) and (ii)] clause (i) of section
301(20)(A)) where such solicitation does not
specify how the funds will or should be spent.
(B) Certain specific solicitations.--In
addition to the general solicitations permitted
under subparagraph (A), an individual described
in paragraph (1) may make a solicitation
explicitly to obtain funds for carrying out the
activities described in [clauses (i) and (ii)]
clause (i) of section 301(20)(A), or for an
entity whose principal purpose is to conduct
such activities, if--
(i) * * *

* * * * * * *

(f) State Candidates.--
(1) In general.--A candidate for State or local
office, individual holding State or local office, or an
agent of such a candidate or individual may not spend
any funds for a communication described in section
[301(20)(A)(iii)] 301(20)(A)(ii) unless the funds are
subject to the limitations, prohibitions, and reporting
requirements of this Act.

* * * * * * *

APPENDIX A

----------

[From the Washington Post, Nov. 11, 2003]

Soros's Deep Pockets vs. Bush; Financier Contributes $5 Million More in
Effort To Oust President

(By Laura Blumenfeld)

New York.--George Soros, one of the world's richest men,
has given away nearly $5 billion to promote democracy in the
former Soviet bloc, Africa and Asia. Now he has a new project:
defeating President Bush.
``It is the central focus of my life,'' Soros said, his
blue eyes settled on an unseen target. The 2004 presidential
race, he said in an interview, is ``a matter of life and
death.''
Soros, who has financed efforts to promote open societies
in more than 50 countries around the world, is bringing the
fight home, he said. On Monday, he and a partner committed up
to $5 million to MoveOn.org, a liberal activist group, bringing
to $15.5 million the total of his personal contributions to
oust Bush.
Overnight, Soros, 74, has become the major financial player
of the left. He has elicited cries of foul play from the right.
And with a tight nod, he pledged: ``If necessary, I would give
more money.''
``America, under Bush, is a danger to the world,'' Soros
said. Then he smiled: ``And I'm willing to put my money where
my mouth is.''
Soros believes that a ``supremacist ideology'' guides this
White House. He hears echoes in its rhetoric of his childhood
in occupied Hungary. ``When I hear Bush say, `You're either
with us or against us,' it reminds me of the Germans.'' It
conjures up memories, he said, of Nazi slogans on the walls,
Der Feind Hort mit (``The enemy is listening''). ``My
experiences under Nazi and Soviet rule have sensitized me,'' he
said in a soft Hungarian accent.
Soros's contributions are filling a gap in Democratic Party
finances that opened after the restrictions in the 2002 McCain-
Feingold law took effect. In the past, political parties paid a
large share of television and get-out-the-vote costs with
unregulated ``soft money'' contributions from corporations,
unions and rich individuals. The parties are now barred from
accepting such money. But non-party groups in both camps are
stepping in, accepting soft money and taking over voter
mobilization.
``It's incredibly ironic that George Soros is trying to
create a more open society by using an unregulated, under-the-
radar-screen, shadowy, soft-money group to do it,'' Republican
National Committee spokeswoman Christine Iverson said. ``George
Soros has purchased the Democratic Party.''
In past election cycles, Soros contributed relatively
modest sums. In 2000, his aide said, he gave $122,000, mostly
to Democratic causes and candidates. But recently, Soros has
grown alarmed at the influence of neoconservatives, whom he
calls ``a bunch of extremists guided by a crude form of social
Darwinism.''
Neoconservatives, Soros said, are exploiting the terrorist
attacks of Sept. 11, 2001, to promote a preexisting agenda of
preemptive war and world dominion. ``Bush feels that on
September 11th he was anointed by God,'' Soros said. ``He's
leading the U.S. and the world toward a vicious circle of
escalating violence.''
Soros said he had been waking at 3 a.m., his thoughts
shaking him ``like an alarm clock.'' Sitting in his robe, he
wrote his ideas down, longhand, on a stack of pads. In January,
Public Affairs will publish them as a book, ``The Bubble of
American Supremacy'' (an excerpt appears in December's Atlantic
Monthly). In it, he argues for a collective approach to
security, increased foreign aid and ``preventive action.''
``It would be too immodest for a private person to set
himself up against the president,'' he said. ``But it is, in
fact''--he chuckled--``the Soros Doctorine.''
His campaign began last summer with the help of Morton H.
Halperin, a liberal think tank veteran. Soros invited
Democratic strategists to his house in Southampton, Long
Island, including Clinton chief of staff John D. Podesta,
Jeremy Rosner, Robert Boorstin and Carl Pope.
They discussed the coming election. Standing on the back
deck, the evening sun angling into their eyes, Soros took aside
Steve Rosenthal, CEO of the liberal activist group America
Coming Together (ACT), and Ellen Malcolm, its president. They
were proposing to mobilize voters in 17 battleground states.
Soros told them he would give ACT $10 million.
Asked about his moment in the sun, Rosenthal deadpanned:
``We were disappointed. We thought a guy like George Soros
could do more.'' Then he laughed. ``No, kidding! It was
thrilling.''
Malcolm: ``It was like getting his Good Housekeeping Seal
of Approval.''
``They were ready to kiss me,'' Soros quipped.
Before coffee the next morning, his friend Peter Lewis,
chairman of the Progressive Corp., had pledged $10 million to
ACT. Rob Glaser, founder and CEO of RealNetworks, promised $2
million. Rob McKay, president of the McKay Family Foundation,
gave $1 million and benefactors Lewis and Dorothy Cullman
committed $500,000.
Soros also promised up to $3 million to Podesta's new think
tank, the Center for American Progress.
Soros will continue to recruit wealthy donors for his
campaign. Having put a lot of money into the war of ideas
around the world, he has learned that ``money buys talent; you
can advocate more effectively.''
At his home in Westchester, N.Y., he raised $115,000 for
Democratic presidential candidate Howard Dean. He also supports
Democratic presidential contenders Sen. John F. Kerry (Mass.),
retired Gen. Wesley K. Clark and Rep. Richard A. Gephardt
(Mo.).
In an effort to limit Soros's influence, the RNC sent a
letter to Dean Monday, asking him to request that ACT and
similar organizations follow the McCain-Feingold restrictions
limiting individual contributions to $2,000.
The RNC is not the only group irked by Soros. Fred
Wertheimer, president of Democracy 21, which promotes changes
in campaign finance, has benefited from Soros's grants over the
years. Soros has backed altering campaign finance, an aide
said, donating close to $18 million over the past seven years.
``There's some irony, given the supporting role he played
in helping to end the soft money system,'' Wertheimer said.
``I'm sorry that Mr. Soros has decided to put so much money
into a political effort to defeat a candidate. We will be
watchdogging him closely.''
An aide said Soros welcomes the scrutiny. Soros has become
as rich as he has, the aide said, because he has a
preternatural instinct for a good deal.
Asked whether he would trade his $7 billion fortune to
unseat Bush, Soros opened his mouth. Then he closed it. The
proposal hung in the air: Would he become poor to beat Bush?
He said, ``If someone guaranteed it.''

APPENDIX B

----------

[From the New York Times; Jul. 29, 2004]

A Delegate, a Fund-Raiser, and a Very Fine Line

(By Jim Rutenberg and Glen Justice)

Boston.--Harold M. Ickes is a founder of an organization
created to help defeat President Bush this fall, a group that
he emphasizes operates wholly independently of the campaign of
Senator John Kerry and the Democratic National Committee.
But that has not stopped him from courting some of the
Democrats' wealthiest donors here at the Four Seasons, a nexus
of party operatives, Kerry campaign officials and friendly
celebrities gathered for the party's convention this week. In a
luxurious suite where guests nibble on chocolate ganache tarts
and sip espresso, he asks them to give and give more.
Then, in the evenings, this onetime White House deputy
chief of staff throws on his credentials as a Democratic Party
superdelegate and joins party functionaries gathered for the
Democratic convention at the FleetCenter as one of their own.
Just how precisely this squares with the new campaign
finance law that allows such groups, known as 527
organizations, to raise unlimited sums for politics so long as
they do not coordinate with the candidates or the national
parties depends on how much one takes Mr. Ickes's word about
the distance between him and the Democrats.
Advocates for stronger fund-raising regulation say that Mr.
Ickes's four-star road show provides the most vivid example yet
of how he and leaders of groups like his have all year been
flouting the new fund-raising laws, drafted to stanch the flow
of unlimited donations to parties and candidates.
But Mr. Ickes and his colleagues say they are well within
the boundaries of the law, and they are unapologetic. They say
they are in no way coordinating their activities with the many
party and campaign officials with whom they are rubbing elbows
so frequently here this week, simply legally fishing for
dollars in a fully stocked pond.
``We are here talking to donors,'' said Mr. Ickes, who was
known for his command of fund-raising details and the fund-
raising law back when he worked for President Bill Clinton.
``We can talk to them anywhere--and we find this is a very
efficient, effective place to talk to them,'' Mr. Ickes said.
Erik Smith, head of the group Mr. Ickes founded, The Media
Fund, put it more starkly: ``To quote Willie Sutton, `You rob
banks because that's where the money is.'''
When the new campaign finance law was debated in Congress
its supporters argued that it would cut the tie between big
money contributors and lawmakers. Its opponents countered that
it would drive that money away from the national parties and
into other, more opaque, affiliated groups that would operate
like shadow political parties.
The scene at the Four Seasons this week has shown just how
close to the line of independence groups like The Media Fund--
which has been running advertisements against President Bush
since March--can come.
Just down the hallway from Mr. Ickes's second-floor suite
in the Wendell Phillips Room is the registration office in the
Winthrop Room, where fund-raisers pick up their special-access
passes. As Mr. Ickes mingled with passers-by outside of his
suite Wednesday afternoon, a parade of campaign and party
officials walked by, including Bob Shrum, Mr. Kerry's chief
strategist. Mr. Shrum and Mr. Ickes have worked on campaigns
together like the David N. Dinkins New York mayoral campaigns
of 1989 and 1993.
Mr. Smith was also right near longtime comrades-in-arms.
While Mr. Smith sat at a table in the Four Seasons lounge
speaking with a reporter on Tuesday, Steve Elmendorf, Mr.
Kerry's deputy campaign manager, who is staying at a nearby
hotel, passed by the window. Mr. Elmendorf was a senior adviser
for the presidential campaign of Representative Richard A.
Gephardt of Missouri last fall when Mr. Smith was its press
secretary.
The proximity is hardly by chance. The hotel is not just
the base of operation for Mr. Smith, Mr. Ickes and yet another
group for which Mr. Ickes is raising money, America Coming
Together, but has also become a salon for top fund-raisers in
the Kerry campaign and the Democratic Party.
Mr. Ickes's hospitality suite, just up a sweeping staircase
from the hotel lounge, is open to all--all, that is, but the
news media. On Tuesday a reporter who was barred at the door
spied Bill Press, the liberal former co-host of ``CNN
Crossfire,'' mingling with visitors and signing copies of his
book, ``Why Bush Must Go: Top 10 Reasons Why George Bush
Doesn't Deserve a Second Term.'' (``I was glad to do it, they
bought the books and gave them out to donors,'' he said.) On
Wednesday, Donna Brazile, the campaign manager for Al Gore in
2000, did the same, with her own book.
``People are coming in and we are grabbing them in the
halls,'' said Ellen Malcolm, president of America Coming
Together, who said she had met with more than 100 supporters at
the hotel.
But the intermingling of the avowed independent groups and
Democratic officials is not restricted to the Four Seasons
here. Environment 2004, an organization that runs a 527
committee held a reception to thank donors on Monday at the
Beacon Hill home of Cathy Douglas Stone, a Boston environmental
activist. Among those who spoke were the columnist Arianna
Huffington, the singer Carole King and Senator Maria Cantwell
of Washington.
On Monday Ms. Malcolm was on hand at an event honoring
Representative Nancy Pelosi of California, the House minority
leader, that drew dozens of lawmakers and major donors together
to drink lemonade and iced tea in a garden atrium of the
Isabella Stewart Gardner museum. Later that night, Ms. Malcolm,
like Mr. Ickes, was on the convention floor.
And Mr. Ickes is not the only official of a 527 group with
delegate status. Simon Rosenberg, head of the New Democrat
Network, a group running Spanish-language advertisements
against Mr. Bush since March, said he sits on the convention's
platform committee.
It is all too much for campaign finance regulation
advocates who pushed for the new rules and are here this week,
too, to take it all in. ``They're supposed to be independent
groups operating independently of the Democratic Party and the
Kerry presidential campaign,'' said Fred Wertheimer, president
of Democracy 21, a group which advocated for the new law.
``Instead, they're going out of their way to brazenly and
blatantly demonstrate that they are intertwined with the
Democratic Party and the Democratic nominating convention.''
Mr. Ickes replies that while he interacts with his old
friends in Mr. Kerry's campaign, ``I talk to them, but I don't
talk to them about their spending, they don't talk to me about
our spending.'' He said, ``We are very arm's length--not
Chinese wall, but brick wall.'' He added of his role as a
delegate to the Democratic National Committee, that it is a
position he is allowed to hold under campaign finance
regulations.
He has particularly drawn the ire of Mr. Wertheimer, who
has filed complaints against the groups he is fund-raising for
with the Federal Election Commission, complaints that are
pending. The Media Fund has been credited with playing a
crucial role in helping to beat back an advertising barrage
that President Bush launched against Mr. Kerry when he emerged
the winner of the Democratic primary season--and nearly broke.
It has spent $28 million on advertisements against Mr. Bush in
key states.
With Mr. Kerry announcing that he will not run
advertisements in August to save money for the fall, The Media
Fund announced that it, in turn, would increase its advertising
next month--another example, critics say, of how closely its
strategy is tied to that of Mr. Kerry's campaign.
Ms. Malcolm said she was downright angered by implications
that she was doing anything untoward. ``It makes me mad and it
personally offends me that people are implying that we are
doing something wrong,'' she said. ``All we're trying to do is
comply with the law.''
Mr. Wertheimer said that at the very least, she and her
colleagues should do a better job looking as if they were.
``The perception here is there's a marriage taking place,'' he
said.

APPENDIX C

----------

Comments of Mark Brewer, President, Association of State Democratic
Chairs

ON PROPOSED REGULATIONS DEFINING FEDERAL ELECTION ACTIVITY AND ON THE
PROPOSED REGULATION GOVERNING ALLOCATION OF SALARIES BY STATE AND LOCAL
PARTY COMMITTEES

On behalf of the Association of State Democratic Chairs, I
am submitting comments on the proposed revision of the
definition of federal election activity and on the treatment of
certain salaries and wages paid by state, district and local
party committees. Because these two rulemakings are related and
will have substantial impact on operation of political parties
at the state and local level, I have combined my comments into
one document that I will file separately in each proceeding.
The Commission initiated these rulemakings in response to
United States District Court's decision in Shays v. Federal
Election Commission. The District Court in overturning the
Commission's regulation faulted the Commission for various
shortcomings in the rulemaking process including failing to
provide sufficient notice of the alternatives being considered,
to explain the Commission's choice of rules and to demonstrate
why the promulgated rules were consistent with the legislative
objectives of Bipartisan Campaign Reform Act (BCRA). Each of
these failings, should the appeals court agree that they were
failings, is understandable given the compressed time period in
which the Commission was required to act, the statute's use of
vague undefined terms and the paucity of legislative history on
critical aspects of the law. These procedural weaknesses in the
promulgation of the Commission rules should not be considered
as proof of substantive flaws in the rules themselves.
In fact, the regulations that are now subject to Commission
reconsideration are for the most part not only reasonable but
in many instances to be preferred to alternatives that the
Commission is now considering. The existing rules are easier to
understand and take into account the daily practicalities of
running a state or local committee. State and local party
committees operate in a very complex regulatory environment. No
other political committees are asked to manage such Byzantine
rules. The proposed alternatives suggested in these rulemakings
would impose even more complexity on state and local parties.
The consequence of adopting some of these alternatives would be
to push to the breaking point the ability of many party
committees to comply.
An unfortunate consequence of BCRA is that many state and
local party committees are avoiding participating in grassroots
political activity because federa1 law poses compliance
challenges that are beyond their ability to meet. If the
Commission doubts that this is the case, it need only review
how many federal reporting party committees received and spent
Levin funds. Levin funds were intended to allow state and local
parties to use nonfederal funds to finance grassroots activity.
The fact that very few committees took advantage of Levin funds
is testament to the fact that the rules were just too complex
for state and local parties to comply. If these committees were
able to marshal sufficient federal funds to pay for voter
registration, voter identification and get-out-the-vote
programs, this consequence of BCRA would be less regrettable.
However, this was not the case, particularly at the local level
and in states that were not Presidential targets. Instead of
running the risk of violating federal law, many committees
simply did not engage in federal election activity.
Changing the rules as suggested in these rulemakings will
only compound the problem. The thrust of the proposed rules is
to subject more grassroots party activity to federal
regulation. Subjecting more party activity to the complex
allocation and reporting requirements of federal law will only
accelerate the flow of these activities out of the party into
less accountable political organizations. The changes proposed
proceed from a basic misunderstanding of how local parties now
operate.
Local parties operate largely autonomously from the state
and national committees. Most local committees are small
volunteer centered organizations. These committees do not have
nor could they afford the lawyers and accountants that have
become necessary to comply with complexity of federal law. A
common response to BCRA then was to avoid any activity that
would trigger federal reporting obligations. These committees
were advised to avoid engaging in voter registration, not to
undertake any get-out-the-vote activity and to devote all paid
staff to local elections. For most localcommittees, this was
the only available survival strategy. Now some of the Commission's
proposals will close off even this avenue. Below the alternatives
offered in these rulemakings are explored and their shortcomings noted.
In response to the District Court's concern that limiting
the definition of voter registration to assisting voters in the
actual act of registering may be too limiting and may ``unduly
compromise the Act's purposes'', the Commission asks whether
encouraging someone to register combined with some direction on
how one registers should be included in the definition.
Expanding the definition in this way would cover a voter
calling his local party headquarters and asking where they
could register. It would cover placing a stack of voter
registration cards at the front desk. Presumably it would cover
a party website where registration materials are available.
Local committees that no longer register voters because they
cannot practically comply with BCRA will be reduced to silence
when a voter asks how or where to register. The practical
consequence of expanding the definition of voter registration
will be to mute core political speech.
The Commission also seeks comments on whether it should
reconsider the definition of get-out-the-vote activity. The
Commission notes that Congress did not provide a definition.
The District Court correctly pointed out that the list of get-
out-the-vote activity is not exhaustive and questioned what
additional activity might be included. In response to the
Court's decision, the Commission should make the list
exhaustive. State and local party committees and groups of
state and local candidates that are governed by this regulation
are entitled to a clear and full statement of the governing
rule.
This regulation substantially impacts the right of state
and local candidates to associate in their election efforts. In
providing a list of covered activities the Commission should
keep the list narrow. A broad reading of what constitutes get-
out-the-vote activity will severely impair the ability of local
candidates to join in common effort to effect a shared
political outcome. For local party committees a broad reading
will shrink even further the political playing field. Without
additional Congressional direction, the Commission should be
chary of extending its jurisdiction over a broader swath of
local candidate activity. The fact that the Commission has yet
to provide state and local candidates with sufficient
instruction and tools to comply with the existing regulation
underscores the folly of expanding the range of covered
activity.
Again in response to the District Court's decision, the
Commission proposes to redefine ``voter identification''. The
proposed definition covers the acquisition ``of information
about potential voters including, but not limited to, obtaining
voter lists and creating or enhancing voter lists by verifying
or adding information about the voter's likelihood of voting in
an upcoming election or their likelihood of voting for specific
candidates.'' This definition proceeds from a basic
misunderstanding of how modern political parties operate.
Political committees maintain or purchase access to large
databases of people living in the United States. These
databases are constantly sorted using various demographic,
economic and personal criteria. New information is regularly
appended or employed depending on the purpose that the database
is being used.
Because nearly every resident of the country is a potential
voter, the proposed regulation would cover any and all uses of
a party database. These databases are employed in fundraising,
persuasion, volunteer recruitment and for a host of other
purposes beyond get-out-the-activity. On the other hand, the
term ``voter identification'' in the general political lexicon
is used to refer to those activities, most commonly canvassing,
that are undertaken in close proximity to the election to
identify specific voters to target in a ``get-out-the-vote''
effort. Although not defined in BCRA, this is how the statute
appears to use the term. The statute defines federal election
activity to include ``(ii) voter identification, get-out-the-
vote activity, or generic campaign activity conducted in
connection with an election in which a candidate for Federal
office appears on the ballot''. Clearly the term is used in a
restricted manner. It is addressed to activity tied directly to
a Federal election and similar to or connected with the other
activities cited. There is no statutory justification for
giving a broader sweep to the term. There is no reason to
expand the definition to cover all uses or additions to a
database.
The Association commends the Commission for proposing to
rededefine the definition of ``in connection with an election
in which a candidate for federal office appears on the
ballot.'' The new definition recognizes that state and local
committees spend much and in some cases all their time and
money on local elections. In many states, years can pass
between true federal contests. The focus of local parties is
most often on municipal elections. The proposed regulation
recognizes this fact and seeks to limit the federalization of
state and local party activity that is directed at municipal
elections. The Association urges its adoption.
Lastly the Commission proposes revising the rule governing
the allocation of salaries and wages by requiring state and
local committees to allocate at least 25% of these costs to a
Federal account whenever an employee engages in any Federal
election activity or activity in connection with a Federal
election. As explained above, most local committees are focused
on state and local elections. These committees do not register
with the Commission and do not maintain Federal and state
accounts. They take care to avoid being subject to the
recordkeeping, registration, reporting and allocation
requirements of Federal law. The proposed regulation imposes
these Federal obligations even where the Federal election
activity is minimal. For example, the allocation requirement
would be triggered if a staffer for a local committee in a
college town spent a single day on campus registering students
to vote. It is not enough that to be told that the Commission
is unlikely to pursue such a violation. Party committees are
not in the business of instructing their employees to
disrespect the law because the committee is likely to escape
punishment for violating the law.
The District Court expressed concern that the current
regulation opens an opportunity for gross abuse is mere
speculation without any support in the legislative or
administrative record. First, state and local committees simply
do not employ sufficient numbers of staff to cleverly assign
them monthly duties to assure that each stays below the 25%
threshold. Second, where there is a highly contested Federal
election in which a state or local committee is participating,
the committee staff assigned to work on that race will devote
more than 25% of their time to that race and therefore, will be
100% allocated to the Federal account. The consequence will be
over allocation which will more than compensate for any under
allocation of other employees. If the Commission needs to be
convinced of this fact, it should do a study of state and local
committee staffing patterns. It should not proceed to further
handicap local parties based on unfounded speculation of
undocumented abuse. A review of state and local party activity
in the last election will demonstrate that the District Court's
concern found no expression in actual party activity.
In closing, the proposed regulations are rooted in a basic
misapprehension of the nature of state and local committees.
These are not committees flush with resources and staffed with
well paid professionals. Rarely is a Federal candidate in a
position to control a committee. Federal elections are not
their primary focus and as often as not the Federal election
receives minimal, if any attention. The Commission can easily
confirm these facts. The Commission's regulations should
reflect what state and local committees actually do, rather
than unfounded fears of wholesale circumvention of the law.
Facts rather than wildly imagined corruptive schemes should
guide the Commission. Visit a few local party committees and
any fears will be allayed. Add to the complexity of the
regulation and there will be fewer to visit.

MINORITY VIEWS OF RANKING MEMBER JUANITA MILLENDER-McDONALD,
REPRESENTATIVE ROBERT A. BRADY, AND REPRESENTATIVE ZOE LOFGREN

The House Administration Committee ordered H.R. 1316
reported on a 6-3 vote. In our view, H.R. 1316 as a whole is
not needed and does not accomplish the objectives that the
Majority purports are needed to level the playing field between
the major parties and 527 organizations. The bill also would
increase the undue influence of a few wealthy individuals by
repealing the aggregate limits on contributions. In essence, it
rolls back not only the reforms of the Bipartisan Reform Act of
2002 (BCRA), but the Federal Election Campaign Act of 1971
(FECA), as amended in 1974, which placed limits on political
contributions to candidates for federal elective office by an
individual or a group, which were enacted in the wake of the
Watergate scandals.

Preface

H.R. 1316, under the pretext of addressing the need to
regulate independent political organizations, will enhance the
considerable financial advantage already enjoyed by the
majority party and incumbent office holders. Some of the bill's
provisions do so in such an obvious, flagrant manner that the
constitutionality of H.R. 1316 is put into serious doubt.
Nowhere is the constitutional defect more obvious than in
section 6 of the bill, which allows Federal officeholders, and
only Federal officeholders, the right to create special
``leadership'' committees, which in turn can make unlimited
transfers to national party committees. H.R. 1316 denies
challengers this new perquisite of incumbency. Even if this
defect were remedied by extending the privilege to non-
officeholders, it would be an empty gesture because few
challengers would be able to take advantage of it.
H.R. 1316 is motivated by fear more than fact. Spending by
independent political organizations in 2004 congressional races
was a traction of what the Republican Party was able to marshal
in response. It is this immense partisan financial advantage
that this bill is intended to secure. By removing effectively
any limit on what an individual may contribute to a political
party, and any limit on how that money can be spent, H.R. 1316
is intended to entrench party power. BCRA imposed soft money
limits on parties, while H.R. 1316 removes them. Under H.R.
1316, the only limit on how much an individual may contribute
in response to a party's, or a candidate's solicitation, is the
creativity of the solicitor. Current law permits individuals to
contribute over one hundred thousand dollars in an election
cycle. The only people that will benefit from the removal of
this limit are multi-millionaires and the party that most
caters to them.
It is instructive to note that the 527 activity that this
bill appears most concerned about is the voter registration and
get-out-the-vote activity that was not directed at particular
Congressional candidates but at increasing participation. The
supporters of H.R. 1316 may be troubled by this development,
but it is far from clear that the public is. With both major
political parties raising record sums in 2004, it is hard to
discern the unfairness that the H.R. 1316 seeks to correct.
Greater participation in elections, and more competitive
elections, are not the hallmarks of a problem in need of a
remedy. Recent Republican Party fundraising certainly should
reassure the supporters of this bill that their party will
continue to enjoy a sizable financial advantage, and will be
able to come to their financial rescue at the first sign of any
vulnerability.
H.R. 1316's drive for ``fairness'' goes beyond enhancing
the huge financial advantage already enjoyed by the party in
power, to a concern about the ability of trade associations to
circumvent the electioneering communications limitations of
BCRA. Apparently the sponsors of H.R. 1316 do not believe that
the managers of trade associations have sufficient freedom to
employ the considerable resources and ingenuity of their trade
associations to influence federal elections. H.R. 1316 removes
the BCRA ban on electioneering communications by trade
associations, and allows them to use individual membership dues
and payments to fiance television and radio advertising
attacking or promoting a federal candidate. To assure that
trade associations can raise sufficient funds for this and
other elections purposes, H.R. 1316 removes long standing
restrictions on trade association solicitations. It is easy to
see how these changes will play to the great advantage of
incumbents and the party in power.
The provisions of H.R. 1316, as a whole, are problematic
and inconsistent with BCRA and FECA. We find that this bill has
little to do with 527s, but everything to do with allowing the
parties to collect more money from a few wealthy contributors.
If H.R. 1316 becomes law, it will have the devastating effect
of diluting the political voice of people of modest means,
while magnifying the influence of wealthy contributors who,
without the current restrictions, would be free to direct their
wealth to a vast range of interests they support.
This bill is most disturbing because it is such a blatant
attempt to advantage incumbents and the majority party. As
such, it is an abuse of power and a breach of the people's
trust. Below is a more detailed review of this badly defective
bill.

Principal Flaws

REPEAL OF AGGREGATE LIMIT ON CONTRIBUTIONS BY INDIVIDUALS

Repealing the aggregate limits on contributions by
individuals will allow the wealthy populace to give millions of
dollars to candidates and parties. Currently, an individual can
give up to $101,400 to all political parties, PAC committees
and candidates in a two year Federal election cycle. This
amounts to a limit of $40,000 an individual can give to Federal
candidates and $61,400 to political parties, and PAC
committees. H.R. 1316 would allow an individual to give
$160,200 to the three national committees of a political party,
$1 million to the state party committees of that party ($20,000
to each of the 50 state party committees) and $1,827,000 to
each of the 435 house races for a particular party; for a total
of almost $3 million. Fundamentally, it strips away the
protections implemented by the FECA aggregate restrictions,
which were put in place as a direct result of the Watergate
scandals. We voted for BCRA to break the link between
Federalofficeholders and candidates, and the undue influence of
unregulated money given by wealthy individuals. This provision would
re-open the door to individuals giving million-dollar contributions to
federal officeholders and candidates for federal elections, in essence
opening the ``hard money'' floodgates and converting ``hard money''
into ``soft money''.

REPEAL OF LIMIT ON AMOUNT OF PARTY EXPENDITURES ON BEHALF OF CANDIDATES
IN GENERAL ELECTIONS

By removing the caps on coordinated expenditures, H.R. 1316
would allow a national party committee to completely underwrite
multi-million dollar campaign(s) against any candidate(s) that
it targets. Essentially, this provision would allow a political
party to coordinate and spend unlimited amounts to support or
defeat a candidate. Should this provision become law, unlimited
resources will be put at the disposal of any vulnerable
candidate who happens to be a member of the party in power?
This legislation should not be passed for partisan gain.

PERMITTING TRANSFERS BETWEEN LEADERSHIP COMMITTEES AND NATIONAL PARTY
COMMITTEES

H.R. 1316 would allow any Member of Congress to make
unlimited transfers from their leadership PACs to national
party committees. That Member of Congress could then control
the spending of these transferred funds to support the Member's
own campaign. Under current law, Members' leadership PAC funds
are not supposed to be spent on the Member's campaign.
Donors could give the maximum contribution allowed for a
candidate's campaign and the maximum contribution allowed for a
Member's leadership PAC, and all of these funds could end up
being spent by the candidate on the candidate's campaign. As
noted above, only incumbents enjoy this privilege. Contribution
limits long an essential feature of the law are rendered
meaningless. Members from noncompetitive districts holding
positions of leadership in the House, and on committees, will
be able to use their considerable legislative clout to raise,
and to place at a vulnerable Member's disposable, almost
unlimited funds. Few challengers, whether in a primary or a
general election, will enjoy such a rich financial advantage.
For them, the ``Fairness'' referenced in the title of this
bill, will be forever elusive.

PERMITTING EXPENDITURES FOR ELECTIONEERING COMMUNICATIONS BY CERTAIN
ORGANIZATIONS

H.R. 1316 would undermine a key BCRA restriction to prevent
the use of non-federal money, more commonly referred to as
``soft money'', to fund deceptive issue ads. Under this bill,
trade associations would once more be allowed to use unlimited
``soft money'' donations from individuals to pay for broadcast
ads promoting and attacking federal candidates close to an
election. Again, it is hard to imagine how this change will do
anything other than benefit incumbents and the party in power.

Conclusion

The proponents of this legislation are among the strongest
opponents of BCRA, and are using public concern over 527's as a
pretext for rolling back BCRA and the reforms put in place
after the Watergate scandals. Passage of this bill would be a
huge step backwards towards the unregulated six and seven
figure donations which were common before BCRA became law. BCRA
was intended to end this practice, and its perceived effect on
the shaping of public policy to the benefit of the wealthy and
influencial.
We stand in agreement with a recent letter written by the
Democratic leadership stating that limiting total campaign
giving has been a cornerstone of fair and honest campaigns for
a generation, and one of the most effective ways to prevent
corruption and the appearance of corruption in our political
process, and in the process of governing and shaping public
policy.
Democrats have stood proudly as the party of reform. H.R.
1316 is a direct assault on this principle, and a step
backwards into the preception of unseemliness at best, and
influence peddling at its worst. Perceptions do matter, and
H.R. 1316 should not become law.

Juanita Millender-McDonald.
Robert A. Brady.
Zoe Lofgren.