Tuesday, March 28, 2006

West Virginia's 527 Reform

As Tom Searles reports in the Charleston Gazette, West Virginia is the first state to regulate 527 organizations, the outside groups which spent hundreds of millions to influence the 2004 presidential election.

527 groups are explicitly formed under a provision of federal tax code to influence elections. While they broke into the nation's awareness during the 2004 presidential elections, 527 groups operate to influence both federal and state elections.

At the federal level, the most recent campaign finance law - the Bipartisan Campaign Reform Act of 2002 (BCRA) - didn't explicitly deal with 527 groups, choosing instead to punt the issue to the regulatory agency responsible for implementing the BCRA: the Federal Elections Commission (FEC). Although 527 groups were already amassing millions to influence the upcoming presidential election, the FEC chose not to regulate the groups' electioneering activity.
The upshot of this legislative and regulatory palsy was to turn the 2004 presidential election into a battleground for billionaires, as Democrat richies like financier George Soros funded groups like the Media Fund and Republican richies like Ameriquest owner Dawn Arnall funded groups like the Progress for America Fund.

President Bush and Senator John McCain have both called for the regulation of 527s at the federal level, and Republicans in Congress are considering 527 reform ostensibly as part of lobbying reform, although the reality is as a substitute for lobbying reform.

But 527 groups also operate at the state level to influence state elections. In a 2004 state Supreme Court race in West Virginia, a group called "And For The Sake Of The Kids" ran ads blasting Supreme Court justice and candidate Warren McGraw. Only weeks before the election, the public found out that $2.4 million of the $3.5 million the group spent came from the CEO of Massie Energy. McGraw lost the election.

Perhaps to protect their own hide, members of West Virginia's state legislature saw fit to act to prevent Massey and others from using their millions to buy election outcomes in the future. The legislature passed a fairly common sense law which treats 527 organizations as federal tax law treats them: as groups who are trying to influence election outcomes.

The legislature passed a bill limiting contributions to such 527s to $1,000 per election, and upped disclosure requirements as well. A 527 apparently would have to run electioneering ads within 30 days of the primary and 60 days of the election in order for the new regs to kick in. The law would only apply to 527s which operated to influence West Virginia state-level elections: federal law arguably pre-empts regulation of 527 groups which operate to influence federal elections, even if in the individual states.

Check out our Deep Six the 527 Loophole campaign for more info on 527 groups, including links to a searchable database of 527 groups and contributors.

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