Campaign finance reform enacted in 2002 may restrict some donations, but a huge loophole in the new law is allowing some groups unchecked power in elections across the country.
Independent organizations can no longer raise huge sums of unregulated campaign contributions after the 2002 legislation created by Sen. John McCain (R-Ariz.). However, nonprofit groups formed under Section 527 of the Internal Revenue Service tax code have become important players in many elections.
527s are "considered a loophole in campaign finance reform," political analyst Terry Madonna said. This is the first year that the campaign finance reform has taken effect.
The committees are not technically connected with a candidate and do not collect hard money -- instead money is donated directly to a candidate from a donor. As a result, the groups can make media purchases in support of candidates that can use millions of dollars in private contributions from wealthy donors.
The groups are allowed to spend money on advertisements as long as they refrain from coordinating with a candidate or naming the specific candidate that they support.
This type of committee has been especially active in the U.S. Senate race for the Pennsylvania Republican nomination between Pat Toomey and Arlen Specter.
527s "have been very, very active on behalf of Toomey," Madonna said, "pumping sizeable sums of money" into television advertising.
Specter spokesman Christopher Nicholas argued that 527s, like the conservative Club for Growth, are illegally organizing with Toomey's campaign.
"The Club for Growth's number one priority besides the presidential race is the defeat of Sen. Arlen Specter," said Nicholas, adding that the campaign and the 527 have been "leapfrogging" each other, buying advertisements on alternating weeks.
"The club uses its 527 IRS nonprofit status to raise unlimited contributions from individuals and organizations to fund its 'independent' advertising against candidates," Nicholas said. "By the end of March, the club will have spent $950,000 on TV ads attacking Specter, according to public records on file with the state's TV stations."
Toomey spokesman Mark Dion said 527s have the right to use their money in support of any candidate they choose.
"The way that the law is structured, groups have a First Amendment right to voice their opinions about certain candidates," he said, adding that the Club for Growth and other groups are "outside the scope" of the Toomey campaign.
Dion added that the Specter campaign also receives support from 527s and cited the Republican Main Street Partnership as a contributing voice against Toomey.
527s have played a role in the presidential election as well, with some groups emerging as strong voices against President George W. Bush.
Although Sen. John Kerry's (D-Mass.) campaign maintains that it does not directly coordinate with 527s, television advertisements criticizing Bush have appeared from both MoveOn.org and the Media Fund.
Bush has a significant lead on Kerry in individual fundraising, but analysts say the Kerry campaign could make up the difference in support from 527s.
Because of the significant role the 527s have played already this year, the Federal Election Commission is looking into new regulations to restrict the activity of the organizations. They are set to vote on the issue on May 13.
