Congress has become fed up with so-called “527” groups’ ability to collect and spend unlimited contributions to influence federal elections, and some members are demanding that the groups disclose the names of their donors.
Republican Reps. E. Clay Shaw Jr. and Mark Foley of Florida and Phil English of Pennsylvania are supporting the 527 Transparency Act, which would force the quasi-political organizations to report monthly financial reports of contributions and expenditures to the Federal Election Commission. The groups already are required to report that information to the Internal Revenue Service.
“An organization comes up with a name — Citizens for Fair Government or another name — and they hide, and you don’t know who is behind them,” Mr. Shaw said. “We’ve been ravaged with problems as a result of these organizations.”
Mr. English called the disparaging advertisements produced by some 527s “sucker punches” to unsuspecting politicians.
The 527 designation refers to the IRS code section that regulates such nonprofit groups.
“I think we can put this simple but strong transparency law in place to reclaim the integrity of our political process,” Mr. English said.
Because the groups are not required to reveal their donors, Mr. Foley said, he and others have felt helpless to respond to the ads even if they agree with them.
“I would like to know who is paying for ads in my district, urging Mark Foley ‘to reform Social Security’ or ‘tell Mr. Foley to vote for this.’ They may be positive ads, but I want to know,” he said.
The transparency bill also would establish penalties for organizations that do not report by increasing by 30 percent the excise tax on contributions that are not reported.
The groups already must pay a 35 percent excise tax for unreported contributions, but Mr. Shaw said the additional 30 percent would create more disincentive.
“We are trying to make sure and impress upon them that noncompliance is not a good plan,” Mr. Shaw said.
If the organization cannot pay the taxes, then the members of its board of directors could be liable. In addition, if the groups fail to comply, the gift tax exemption accorded to donors would be invalidated.
Some politicians say concern about 527s highlights the inadequacy of the Bipartisan Campaign Reform Act enacted in 2002.
“The fact is, we are now stuck with a complex and convoluted law that does not ban, or even reduce, soft money in the federal political system, but it does impose significant burdens on individuals and groups seeking to be involved in the political process,” said Rep. Bob Ney, Ohio Republican and chairman of the Committee on House Administration.
Mr. Shaw said that his bill does not have support from any Democrats, but that the measure has a better chance of passing than proposals that would limit the amount of money donors can contribute to 527s.