An About-Face on '527' Groups

WASHINGTON -- Two years ago, Republicans were organizing against new, loosely regulated political groups that were raising money to attack President Bush.

Now, illustrating how roles often reverse in politics, some of the party's conservative activists are trying to stop legislation that would choke off those groups.

The dispute centers on a House bill that would curtail funding for organizations nicknamed 527s, for the section of the tax code that governs them. The groups drew attention during the 2004 presidential campaign, particularly when financier George Soros donated millions of dollars to launch the Media Fund and America Coming Together, or ACT. Those groups ran television commercials against President Bush and registered voters opposed to his re-election.

Republicans want to prevent Mr. Soros and other wealthy Democrats from doing that again. But legislation may not be necessary to achieve their goal: The rich liberals who spent heavily to oust Mr. Bush aren't investing in 527s this election cycle, even though the stakes are high, with control of Congress in play. ACT closed last year and the Media Fund is dormant.

In the 2006 campaign so far, it is right-leaning 527s that are most active. The Club for Growth, a conservative economic-issue group, is leading the charge to kill the Republican bill that would shut down 527s. The Club for Growth received $8 million in donations during the 2004 cycle; for this cycle, its donations as of May tally $5.1 million. "I don't know how they would expect organizations to sit on the sideline and cheer when they are talking about taking a wrecking ball to the First Amendment," says David Keating, the club's executive director.

Mr. Keating's allies include social conservatives, gun-rights groups and college Republicans. Their campaign could stall congressional efforts to enact anticorruption legislation -- a response to a spate of ethics scandals -- because the House attached 527 language to its rewrite of lobbying laws.

The fracas stems from the 2002 McCain-Feingold campaign-finance law, which banned unlimited "soft-money" donations to political parties from companies, labor unions and wealthy individuals. But many of those donors didn't rein in their spending in the campaign cycle that followed. Instead, they found a new outlet in 527 advocacy groups, which could take unlimited funds from donors, though they ostensibly couldn't explicitly say who to vote for and couldn't coordinate their efforts with the parties.

The House measure would subject 527s to limits like those for political action committees. Individuals could give a maximum of $5,000 per election cycle to groups advocating or opposing federal candidates and $25,000 to groups engaged in partisan voter registration.

The proposal is backed by the Republican National Committee and other party leaders. "There is certainly an opinion in the House that the 527s represent a loophole in campaign-finance laws that they want to see reformed," says New York Republican Rep. Tom Reynolds, who heads the National Republican Congressional Committee.

The House passed the bill in April and attached it to legislation overhauling lobbying rules. The Senate version doesn't have 527 limits. The two chambers are trying to reconcile their bills but failed to do so before Congress's July 4 recess -- in part because of the 527 tussle.

Seven Republican senators have sent a letter to Majority Leader Bill Frist warning they might filibuster the lobbying legislation if it emerges with 527 limits attached to it. "Republicans do not need, and should not attempt, to muzzle their opponents," the letter said. It was signed by Virginia Sen. George Allen and Kansas Sen. Sam Brownback, two potential 2008 presidential candidates who are wooing the Republican's conservative base.

The debate is causing some philosophical gymnastics. Many Republicans opposed the McCain-Feingold law's limits on party donations, saying that the curbs infringed on free speech. Now, some Republicans argue that extending the donation limits to 527 groups aren't a further infringement.

Democrats who supported the 2002 bill as vital to ending the corrosive influence of money on politics now say such limits on independent groups would infringe on the political discussion.

The dispute comes amid scant evidence that 527 groups will figure significantly in November's midterm elections.

Fred Wertheimer, president of Democracy 21, a money-and-politics watchdog, says 527s "are certainly not going to play the kind of role they played in the 2004 election in this election."

But, he adds, "That doesn't mean the problem has gone away or that it won't come back in a very big form in the next presidential election."

A recent Campaign Finance Institute study found that in the 2004 election cycle, 527s raised a total of $426 million. By this point in the cycle, they had collected $109 million. As of March of this year, the 527s registered in the 2006 cycle had raised just $57 million -- and most groups are focused on labor or particular issues that aren't as tethered to wealthy donors as the groups in 2004.

Mr. Soros, for instance, has given about $1 million to one 527 group, America Votes, a voter-turnout operation. Most of his other donations this cycle are to traditional party committees and candidates. "George fundamentally believes the effort to elect Democrats has to be united under the banner of the Democratic Party," said Michael Vachon, Mr. Soros's spokesman. "There wasn't sufficient time in 2004 to do that."

House leaders say they will enter negotiations with the Senate determined to see their 527 language included in a final bill overhauling lobbying rules. But as ethics scandals make headlines, lawmakers are under pressure to back down and clear the way for an anticorruption measure. Most Republicans say passage of such a law is vital to restore voter confidence before November's elections. When asked if the House would stick to that position if it meant blocking passage of an ethics and lobbying-overhaul law, Rep. Reynolds, of New York, said: "I don't think you could necessarily say that."

If the House cedes its position, Federal Election Commission Chairman Michael Toner says the rules governing 527s "will be pretty well settled for the 2006 election and the 2008 elections" under a loose system similar to the one in 2004. "The $64,000 question will be what these outside groups do with that. How active will they be? And will they play as big a role in 2008 as they did in the 2004 election?"

Write to Jeanne Cummings at jeanne.cummings@wsj.com