Feb. 23, 2004
Get the 411 on 527s
By J. Barlow Herget
RALEIGH - There’s a new term that has entered the lingo of American politics and you’re going to hear it often this election year: 527. You’re also going to hear a lot from 527s.
The number has become shorthand for describing a relatively new type of political nonprofit corporation. They take their name, as your accountant will explain, from Section 527 of the IRS code, much like other nonprofits have been nicknamed after the more familiar 501c3.
The 527 comes in all types and sizes. There are legitimate and established groups such as the League of Conservation Voters and the Republican Governors Association. And there are some that may have only a few, typically wealthy members, and these 527s will, like black flies in summer, disappear after the election season.
Such political nonprofits have been around for several years, although many were shut down by the Bipartisan Campaign Reform Act of 2002, known as McCain-Feingold. A 527 corporation cannot contribute directly to federal or North Carolina state candidates, but it can spend money on advertising, direct mail and telephone banks to educate the public on the 527’s issues.
It’s hard for the average citizen to tell the difference between a candidate’s ad and the work of a 527. In the South Carolina Democratic Primary, for instance, a high-sounding 527 named Americans for Jobs, Health Care and Progressive Values hammered former Vermont Gov. Howard Dean. The press exposed the group as one whose members including former N.J. Sen. Robert Torricelli were Sen. John Kerry supporters.
The 527s are gaining in importance in this election cycle because McCain-Feingold prohibited national political parties from accepting millions of dollars in unrestricted “soft money” contributions. While such soft money could not go directly to federal candidates, party officials, especially in presidential campaigns, found loopholes that allowed them to support individual campaigns. That is history.
Candidates now must collect their thousands and millions of campaign dollars the old fashioned way, from individuals who can give a maximum contribution of $2,000 per election. Enter the 527s.
Wealthy individuals and interested businesses can contribute unlimited amounts of money to a nonprofit 527 group. Thanks to the work of The Center for Public Integrity (CPI) in Washington, citizens can go to CPI’s Web site (www.publicintegrity.org) and find the names of 527s that are raising and spending money.
For example, there are two registered in North Carolina, the largest of which is New American Optimists, which serves as a Political Action Committee for the North Carolina’s Sen. John Edwards. It has raised $4.62 million and has spent $4.61 million. The beneficiaries include the political consulting firm of Shrum, Devine and Donilon, and -- surprise! -- the Iowa Democratic Party, the New Hampshire Democratic Party, and the South Carolina Democratic Party.
The other 527 here is something called the US LEC Corp. PAC and it hasn’t raised or spent any money, yet.
There are a number of 527s that are spending money in North Carolina and they also can be found at CPI’s Web site. They include some of the usual suspects: Emily’s List, Communications Workers of America, Bush-Cheney 2000, Inc.-Recount Fund, Republican Governors Assoc., Republican Majority Issues Committee, Sierra Club Voter Education Fund, Democratic Governors’ Assoc., and National Education Assoc. Fund for Children & Public Education.
There are some other, lesser-known groups that offer no clues about their political leanings. For example, Citizens for a Competitive America has spent $20,000; Searchlight Leadership Fund NonFed has spent $10,000; and We All Count, Inc., has spent $3,377.
The one figure that foretells the growing importance of 527s is the amount of money raised. In 2003, according to CPI, they raised $86 million, $3 million more than in 2001. That is certain to grow in this election year.
The Republican Governors Assoc. led in 2003 fundraising with $12.5 million. Billionaire George Soros, an ardent critic of President Bush, has gained the most attention with his pledge to give $10 million to various 527 organizations. He gave $1.5 million and promises more for the internet voter education group MoveOn.org Voter Fund that made news when CBS turned down a $2 million, 30-second spot that MoveOn wanted shown during the Super Bowl. Although, given the nature of this year's Super Bowl, I think MoveOn would have been the least controversial material discussed at water coolers the next day.
Federal candidates who have been denied soft money help are counting on 527s to make up the difference, according to a recent report in TIME magazine. The article said that Democrats in particular are counting on 527s to raise “an extra $190 million” so they can be competitive with President Bush’s campaign organization that is operating like a money machine. At the end of 2003, the President’s team had raised $131.2 million and by November, it is sure to surpass $200 million. And that doesn’t include money raised by GOP-leaning 527s.
What can you do about it? Take the ads paid for by the 527s with a grain of salt. All of these groups have an agenda, even if they are trying to hide it. Be skeptical. Political commercials from mysterious groups are about as reliable as anonymous stock tips. Don't take the bait.
The Federal Election Commission on Feb. 18 held a hearing on these political nonprofits without any clear results. But they learned one thing: 527s are back, bigger and busier.
Barlow Herget served two terms on the Raleigh city council and is host of "State Government Radio Newsmakers."
743 W. Johnson St.
Suite E
Raleigh, NC 27603
919.839.1200