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Announcement

FEC Subjects Section 527 Organizations to Regulation and Civil Penalties

December 14, 2006

On Dec. 13, 2006, the Federal Election Commission (FEC) announced that it has collectively penalized three section 527 organizations almost $630,000 for failing to register as “political committees” with the FEC and, accordingly, abide by source restrictions and contribution limits under federal law as well as file the required periodic disclosure reports.

If an organization receives contributions or makes expenditures in excess of $1,000 and its major purpose is involvement in campaign activity, it must register with the [FEC] and abide by the contribution restrictions and reporting requirements of the Federal Election Campaign Act.


Through their public statements, solicitations for contributions, and various communications to the public, these organizations clearly established that they were political committees during the 2004 campaign.
The three organizations that entered into the settlement agreements were active in the 2004 presidential election:

  • Swiftboat Veterans and POWs for Truth ($299,500 in civil penalties) ($25 million raised) (produced advertisements and direct mail that attacked John Kerry and found to have expressly advocated his defeat)
  • League of Conservation Voters ($180,000 in civil penalties) ($5.6 million raised) (funded door-to-door and phone canvassing activities that were found to expressly advocate the election of Senator Kerry and defeat of President Bush)
  • MoveOn.org Voter Fund ($150,000 in civil penalties) ($9.8 million raised) (produced television advertisements targeted to Presidential battleground states found to have been aimed at defeating President Bush and its solicitations for funds clearly indicated that the funds received would be used to defeat President Bush in the 2004 general election)

In sum, the settlement agreements indicate that such determinations by the FEC will continue to be made on a case-by-case basis but that the FEC will go beyond a “magic words” analysis of the communication itself. In these three matters, the FEC took into consideration all of the organization’s statements and communications – including fundraising communications and statements to the media – as well as the context of the communication. When considering all of these factors, the communications were found to have “no other meaning” but an express advocacy message.

While it is mentioned in passing in two of the settlement agreements and in the FEC’s statements to the media, the FEC did not advance a “major purpose” argument or test. That is, while the FEC is clearly moving toward a broader standard for considering whether a communication is “express advocacy,” the FEC did not establish a new “major purpose” standard or provide any additional guidance on when an organization’s “major purpose” may be found to be subject to federal regulation.

The FEC’s announcement today is not the end of section 527 organizations and does not mean that every section 527 organization will need to register with the FEC. Instead, these settlement agreements mean that each section 527 organization should thoroughly review its activities and carefully consider all communications and public statements to ensure that it is not engaging in activities subject to federal regulation. It is not just the communication that will be taken into consideration by the FEC. It will also consider what other statements an organization may have made about the communication, the context and its intent.

Section 527 organizations active in state political activities will need to take similar steps and take into consideration the scope of each state’s campaign finance regulation. And, all section 527 organizations (and other tax exempt organizations) have to keep in mind that they might be the next test case and regulatory example in providing additional guidance for all other organizations.

Please contact Mike Wittenwyler (mwittnewyler@gklaw.com) or another member of the Political Law Team if you have questions or need any additional information.

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