Actions Similar to DeLay's Disputed Transactions

The Center for Public Integrity's ongoing analysis of 527 committees provides comprehensive documentation of a little-known, but well-oiled backdoor to political financing. Here is how our researchers do it.

Vetting the committees

Beginning in August 2000, the Internal Revenue Service was required to obtain detailed registration and financial activity reports from groups structured under Section 527 of the tax code regulating not-for-profit political organizations.

Since then, more than 20,000 groups registered as 527 committees. The vast majority of those were not actually 527 committees because they were already filing with state or federal election authorities. Center researchers narrowed this field in search of money raised and spent outside of federal and state campaign finance regulation. By focusing on organizations possessing one or more of the following traits, the Center was able to identify 628 committees to include in its study of "true" 527s:

• The committee is not required to report financial activities to state or federal election authorities.
• The committee is tied to or formed by a federal lawmaker.
• The committee is active in many states and spends most of its money on election-related activities such as broadcast advertisements, mailings and political research.

Some of the committees included in this database have registered with state election authorities but were added either because they have connections to prominent state and federal politicians or because they spent money in states that require outside entities to file with elections authorities.

With $51 million in the bank for 2005 so far, 527 committees are riding high in the off-year election cycle. On the campaign trail, though, many of these political nonprofit organizations are running afoul of state regulators and election authorities.

So-called 527 committees—nicknamed for the section of the tax code under which they receive a tax exemption—can spend money in support of specific issues but not for the election of particular candidates. Some have been fined, forced to open their books or left to dissolve after months of battling state officials.

Take the Club for Growth, for example. The popular free-market political group—a top earner among 527s with $2.6 million raised so far this year—is being sued by the Federal Election Commission for failing to register as a political committee with the agency while spending money to influence congressional races.

Other 527 groups have found themselves in similar hot water with local officials because those in charge either sidestepped or misunderstood strict state campaign finance laws. Some alleged infractions include illegally contributing corporate money to state races, supporting a candidate rather than advocating an issue, forgetting to register with the state along with the IRS, and failing to disclose financial donors to the appropriate authorities.

So-called 527 committees entered the public realm last year as a tool of campaigns and consultants to win elections. But in Alaska, one such group has found a new function: lobbying to open up the Arctic National Wildlife Refuge for oil and gas development.

The Alaska to America Energy Initiative, a non-profit group exempt from taxes as a political organization under section 527 of the Internal Revenue Code, reimbursed travel expenses of more than $2,500 last year for Kris Knauss, Gov. Frank Murkowski's policy director. On the group's dime, Knauss attended the Republican Governors Association November 2004 annual meeting, held in New Orleans, and passed around a resolution for other governors to sign that supported Alaska's push to develop ANWR's oil and gas resources.

"He was pursuing some ANWR advocacy, which is clearly a priority of this governor and of this state," Becky Hultberg, Gov. Murkowski's press secretary, told the Center for Public Integrity. According to the governor's staff, the resolution did not pass.

Many of the group's contributors have lobbied the Alaskan legislature on behalf of energy companies that wish to develop the Refuge. Murkowski, too, has been a steady champion of harvesting ANWR's resources.

ANWR's fate remains a contentious issue in Washington, D.C. Unlike the House of Representatives, the Senate has not included development of ANWR in its energy bill. To avoid a Senate filibuster, Republican congressional leaders reportedly plan to include ANWR development authorization in a budget bill.

Regulated by the IRS, 527 groups operate outside the reach of both federal and state campaign finance laws. In turn, the political non-profits can accept unlimited contributions from almost any source.

Interest groups that spent millions through their 527 committees in Election 2004 are now turning their sights on a different target: Social Security.

In recent weeks, a half-dozen organizations have begun fundraising, television and print campaigns to promote or oppose President Bush's plans to revamp the Social Security system.

How these groups—some of which were among the most active 527s in the 2003-2004 election—intend to fund their campaigns is unclear. All told, 527s raised and spent $550 million during the two-year cycle, according to an updated Center for Public Integrity analysis of disclosure forms filed with the Internal Revenue Service.

One group—Progress for America, which raised $45 million in the 2004 election through its 527—has already begun raising money for the effort. Others told the Center they have no plans as yet to use their 527s or have begun campaigning on the issue through other channels, such as their 501(c)(4) non-profit affiliates. Such 501(c)(4) groups are "social welfare" organizations which can lobby, as long as the lobbying fulfills their tax-exempt function.

By definition, 527s, named after the section of the tax code for political organizations, cannot directly contribute or coordinate with federal candidates. Yet many groups were still able to promote their choice for the White House this past election through myriad ways, such as advertising, direct mail and voter mobilization efforts.

As outlined in his State of the Union address, President Bush considers reforming Social Security a priority for his ambitious second-term agenda. Bush's focus on private accounts has become a contentious point between both sides of the political spectrum.

Section 527 organizations supporting President Bush spent nearly $30 million on broadcast ads in the final three weeks of the election — from Oct. 13 through Election Day — triple the amount spent by similar groups supporting Sen. John Kerry.

This late surge in advertising was led by two anti-Kerry or pro-Bush groups — Swift Boat Vets and POWs for Truth and Progress for America Voter Fund — which together spent $23 million. Much of their money went to key battleground states including Ohio, which received at least $6.6 million in advertising expenditures and ultimately won Bush the election.

In addition to Ohio, these Republican-based 527s spent significant sums in Florida, Pennsylvania and Wisconsin.

Progress for America Voter Fund was the largest of these groups, spending $16.7 million during the last three weeks of the election — $6.5 million more on advertising than all the Democratic 527s put together.

These figures only represent funds spent directly on broadcast advertising, and do not include money used for other election-related activities. The totals are derived from filings with the Federal Election Commission. The FEC requires 527 groups to submit detailed accounting of television and radio ads during the final 60 days before a general election when those ads mention a federal candidate.

Political organizations known as "527 committees" have raised a record $391 million during the 2003-2004 election cycle, according to a Center for Public Integrity analysis of filings with the Internal Revenue Service.

Just under half of the money—$175 million—went to 28 of the independent groups formed either to elect or to defeat President George W. Bush, the Center found. Groups involved in all federal elections—the presidential race plus House and Senate contests—have raised more than $233 million.

The amount raised by 527 groups during the months of July, August and September alone totaled nearly $161 million, which is about $12 million less than was raised during the entire year of 2002. The total was boosted by two dozen committees that filed their first disclosure forms last week.

The top 527 committees this cycle are America Coming Together and its partner, the Media Fund, which were formed to oppose the re-election of President Bush. ACT has collected $51 million, while the Media Fund has raised $46 million (a third related committee, Joint Victory Campaign 2004, splits its proceeds between the two). The largest Republican-leaning 527, Progress for America Voter Fund, has raised nearly $30.6 million. Swift Boat Vets and POWs for Truth, a 527 group which has aired ads attacking Kerry's anti-Vietnam war activities, has raised more than $9 million.

Thirty six individuals or couples have given at least $1 million to 527 groups during this cycle, led by Peter B. Lewis, chairman of Progressive Insurance, who has contributed nearly $18.9 million through Sept. 30 to liberal committees. Financier George Soros has given $18.2 million during the same time frame to many of the same groups that Lewis gave to. Hollywood producer Stephen Bing ranks third with $13.5 million in contributions to 527 organizations.

Although Ohio has long been called ground zero for the presidential election, other Midwestern states appear to be key targets for independent political groups seeking to influence the race, particularly the conservative Progress for America Voter Fund.

Progress for America Voter Fund spent nearly $1.2 million on Wisconsin television stations between Aug. 24 and Sept. 8 for advertisements promoting President George W. Bush, according to a Center for Public Integrity analysis of filings with the Federal Election Commission. Some of the stations reach into Minnesota and Illinois, according to the FEC records. In Iowa, the group ran ads costing nearly $952,000 during a similar period.

The Media Fund, a liberal group opposed to Bush, purchased nearly $249,000 in ads in Wisconsin and nearly $100,000 in Iowa in July, August and early September. The group also turned its attention to Florida. The Media Fund bought $871,000 in television ads on Aug. 13. The spots aired between Aug. 17 and Aug. 23 in cities including Orlando, Jacksonville, Sarasota, Gainesville and West Palm Beach.

Groups such as the Media Fund and the Progress for America Voter Fund are known as "527 organizations" after the section of the Internal Revenue Code that governs their activities. They can raise unlimited contributions and can spend millions on advertising so long as they do not specifically call for the election or defeat of a federal candidate. They are mainly funded by individual contributors, some of whom have given six- and seven-figure checks.

Since June, the Progress for America Voter Fund has spent at least $3.8 million on presidential ads, while the Media Fund has spent nearly $2.6 million. The Swift Boat Veterans for Truth, which opposes Democratic presidential candidate Sen. John F. Kerry, spent nearly $585,000 on Sept. 10 for commercials on national cable networks CNN, Fox News Channel, MSNBC and The History Channel.