Order Code IB98025
CRS Issue Brief for Congress
Received through the CRS Web
Campaign Finance: Constitutional
and Legal Issues of Soft Money
Updated March 14, 2002
L. Paige Whitaker
American Law Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Definitions of Hard and Soft Money in Federal Elections
Political Party Soft Money
Corporate and Labor Union Soft Money
Soft Money Spent On Issue Advocacy
Court Decisions
Issue Advocacy Distinguished from Independent Expenditures
Section 527 Organization “Issue Ad” Disclosure Law
Selected 107th Congress Legislation
S. 27 (McCain-Feingold) (passed by Senate April 2, 2001)
Party Soft Money
Issue Advocacy
Corporate/Labor Union Soft Money
H.R. 2356 (Shays-Meehan) (passed by House Feb. 14, 2002)
Party Soft Money
Issue Advocacy
Corporate/Labor Union Soft Money
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Reports
Selected World Wide Web Sites

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Campaign Finance: Constitutional
and Legal Issues of Soft Money
SUMMARY
Soft money is a major issue in the cam-
organization directed at its members and
paign finance reform debate because such
families, on any subject; (2) nonpartisan voter
funds are generally unregulated and perceived
registration and get-out-the-vote activities by
as resulting from a loophole in the Federal
a corporation, directed to its stockholders,
Election Campaign Act (FECA). More
executive or administrative personnel and their
specifically, soft money is considered to be
families, or by a labor organization to its
funds that are raised and spent according to
members and their families; and (3) the
applicable state laws, which FECA prohibits
establishment and administration of a political
from being spent directly on federal elections,
action committee (PAC).
but that may have an indirect influence on
federal elections. This Issue Brief discusses
Soft money spent for issue advocacy
three major types of soft money: political party
communications is another use of soft money
soft money, corporate and labor union soft
that has gained great popularity. Issue advo-
money, and soft money used for issue advo-
cacy typically occurs when a group, such as a
cacy communications.
for-profit or non-profit corporation or labor
organization, pays for an advertisement that
Political party soft money is those funds
could be interpreted to favor or disfavor cer-
raised by the national parties from sources and
tain candidates, while also serving to inform
in amounts that FECA otherwise prohibits. In
the public about a policy issue. The prevailing
accordance with the applicable state law, it is
view in the lower courts is that Supreme Court
then largely transferred to state and local
precedent generally holds that regulation of
political parties for grassroots and party-build-
such communications, which do not contain
ing activities, overhead expenses, and issue
specific express words of advocacy, is
ads. Much of the recent campaign finance
unconstitutional. Hence, issue ads may be
legislation would subject national party contri-
paid for with soft money.
butions, expenditures, or transfers, for activi-
ties that might influence a federal election, to
Both major campaign finance reform bills
the limitations, prohibitions, and source re-
in the 107th Congress address the issue of soft
strictions in FECA. Although the courts have
money. S. 27 (McCain-Feingold), as passed
not had occasion to address this issue specifi-
by the Senate on April 2, 2001, and H.R. 2356
cally, it appears arguable that such restrictions
(Shays-Meehan), as passed by the House on
on political party soft money could pass con-
February 14, 2002, generally prohibit the
stitutional muster.
raising of soft money by national parties and
federal candidates or officials and restrict the
Soft money can be used to pay for certain
spending of soft money by state parties on
corporate and labor union activities that are
activities defined to be related to federal elec-
expressly exempt from FECA regulation: (1)
tions. Both bills also regulate in the area of
communications by a corporation directed at
issue advocacy.
stockholders, executive or administrative
personnel and their families or by a labor
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On February 14, 2002 the House passed H.R. 2356 (Shays-Meehan). Its companion
bill, S. 27 (McCain-Feingold) was passed on April 2, 2001. Primary features of both bills
are restrictions on party soft money and issue advocacy. Senator Daschle has pledged to
have the Senate complete action on the bill prior to the spring recess, which begins at the
close of business March 22.
BACKGROUND AND ANALYSIS
Definitions of Hard and Soft Money in Federal Elections
The terms “soft money” and “hard money” are not defined in federal election law or
regulations. However, the FEC broadly describes “soft money” as “funds that are prohibited
under the Federal Election Campaign Act (FECA), 2 U.S.C. §§ 431 et seq., either because
they come from a prohibited source, (see 2 U.S.C. §§ 441b, 441c and 441e), or because the
amount exceeds the contribution limits in 2 U.S.C. § 441a.” (Memorandum from Lawrence
M. Noble, General Counsel, FEC, to the Commissioners of the FEC (June 6, 1997)).
Sometimes referred to as nonfederal funds, soft money often includes corporate and/or labor
treasury funds, and individual contributions in excess of federal limits, which cannot legally
be used in connection with federal elections, but can be used for other purposes. (Federal
Election Commission Twenty Year Report, p. 19 (April 1995)) Similarly, Common Cause
has defined “soft money” as “funds raised by Presidential campaigns and national
congressional political party organizations purportedly for use by state and local party
organizations in non-federal elections, from sources who would otherwise be barred from
making such contributions in connection with a federal election, e.g., from corporations and
labor unions and from individuals who have reached their federal contribution limits.” (See
Common Cause v. Federal Election Commission, 693 F.Supp. 1391, 1392 (D.D.C. 1987).)
For the purposes of this issue brief, “soft money” will be used to describe funds that are not
subject to regulation under the FECA, but appear to be raised and spent in an attempt to
affect federal elections.
The term “hard money,” also undefined under federal election law and regulations, is
typically used to refer to funds raised and spent in accordance with the limitations,
prohibitions, and reporting requirements of the FECA. (See 2 U.S.C. §§ 441a, 441b(a).)
Unlike soft money, hard money may be used in connection with a federal election. Under the
FECA, hard money restrictions apply to contributions and expenditures from any “person,”
as defined to include, “an individual, partnership, committee, association, corporation, labor
organization, or any other organization or group of persons, but such term does not include
the Federal Government or any authority of the Federal Government,” (2 U.S.C. § 431(11).)
This Issue Brief discusses three major types of soft money: political party soft money,
corporate and labor union soft money, and soft money used for issue advocacy.
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Political Party Soft Money
Political party soft money funds are raised by the national parties from sources and in
amounts prohibited in federal elections by the FECA and are then largely transferred, in
accordance with applicable state law, to state and local political parties for grassroots and
party-building activities, overhead expenses, and issue ads. Since the 1979 FECA
Amendments, certain grassroots, voter-registration, get-out-the-vote, and generic party-
building activities are exempt from FECA coverage. (2 U.S.C. § 431(9)(B)(viii),(ix).)
Therefore, money raised and spent for these activities is not regulated and hence, is
considered political party soft money.
Although the courts have not had occasion to address this issue specifically, it appears
that subjecting the contributions, expenditures, or transfers of national political parties, for
any activity that might affect the outcome of a federal election, to the limitations, prohibitions,
and reporting requirements of the FECA, would arguably pass constitutional muster.
In the landmark Buckley v. Valeo case, the Supreme Court made it clear that the right
to associate is a “basic constitutional freedom,” and that any action that may have the effect
of curtailing that freedom to associate would be subject to the strictest judicial scrutiny. (424
U.S. 1, 25 (1976) (quoting Kusper v. Pontikes, 414 U.S. 51, 57 (1973)).) But the Court
further asserted that the right of political association is not absolute and can be limited by
substantial governmental interests such as the prevention of corruption or the prevention of
even the appearance of corruption. (424 U.S. at 27-28.)
Employing this analysis, the Buckley Court determined that limitations on contributions
can pass constitutional muster if they are reasonable and only marginally infringe on First
Amendment rights in order to stem actual or apparent corruption resulting from quid pro quo
relationships between contributors and candidates. The Court noted that, unlike an
expenditure limitation, a reasonable contribution limitation does “not undermine to any
material degree the potential for robust and effective discussion of candidates and campaign
issues by individual citizens, associations, the institutional press, candidates, and political
parties.” (424 U.S. at 20-38.)
It could be argued that eliminating political party soft money by subjecting it to the limits
and restrictions of the FECA would not significantly impact political debate because many
other methods of expression under the FECA would still be available to a person seeking to
make political contributions. For example, persons could: contribute directly to a candidate,
to a PAC that would support a certain candidate, to the political party of such a candidate in
accordance with FECA-regulated contribution limits (also known as “hard money”
contributions), to state parties for state activities, or make independent expenditures on behalf
of the candidate. It could be further argued that prohibiting political party soft money would
stem corruption or the appearance thereof that could result from quid pro quo relationships
between large-dollar soft money contributors and federal office candidates who benefit from
political party soft money expenditures. The Court in Buckley found that preventing
corruption or the appearance thereof, which can be presented by such quid pro quo
relationships, would constitute a substantial governmental interest warranting reasonable
infringement on First Amendment rights. (424 U.S. 26-27.) Hence, under Buckley, it appears
that a prohibition on political party soft money could arguably pass constitutional muster.
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In a recent Supreme Court decision, Nixon v. Shrink Missouri Government PAC, (120
S.Ct. 897 (2000)), the Supreme Court vote upheld a Missouri state campaign contribution
limits and reaffirmed its landmark 1976 precedent in Buckley v. Valeo that the government
can regulate campaign contributions. The Court noted that it has consistently found that less
justification is required in order to uphold limits on campaign contributions than is required
to uphold limits on campaign expenditures. In his dissent, however, Justice Kennedy warned
that the Court’s decision undermines free speech protections and will add to the proliferation
of “covert speech” in the form of soft money.

Corporate and Labor Union Soft Money
Generally, contributions and expenditures by corporations, labor unions, membership
organizations, cooperatives, and corporations without capital stock have been prohibited in
federal elections. (2 U.S.C. § 441b.) The FECA, however, provides for three exemptions
from this broad prohibition, that is, contributions and expenditures for: (1) communications
by a corporation to its stockholders, executive or administrative personnel and their families
or by a labor organization to its members or families on any subject; (2) nonpartisan voter
registration and get-out-the-vote activities by a corporation aimed at its stockholders and
executive and administrative personnel and their families or by a labor organization aimed at
its members and their families; and (3) the establishment, administration and solicitation of
contributions to a separate segregated fund (commonly known as a political action committee
or PAC or SSF) to be utilized for federal election purposes by a corporation, labor
organization, membership organization, cooperative, or corporation without capital stock.
(2 U.S.C. § 441b(b)(2)(A)-(C); see also 11 C.F.R. § 114.1(a)(2)(i)-(iii).)
In Communication Workers of America v. Beck, (487 U.S. 735 (1988)), the Supreme
Court held that labor unions are not permitted to spend funds exacted from dues-paying
non-union employees under an agency shop agreement for certain activities unrelated to
collective bargaining when those employees object to such expenditures. According to the
Court, Congress’ purpose in providing the union shop was to force employees to bear their
fair share of the costs of labor-management negotiations and collective bargaining activities,
but not to force employees to support unrelated labor union political activities they oppose.
As a result of Beck, non-union employees in an agency shop agreement can request a refund
of that portion of their dues used by the union for political activities. Accordingly, if workers
exercise their rights under Beck, labor unions would lose some soft money funds, which
would otherwise be available for election-related expenses. Campaign finance reform
legislation that simply codifies the Beck decision, without expanding on the Court’s ruling,
would appear to be constitutional.
Soft Money Spent On Issue Advocacy
Spending on issue advocacy communications is another use of soft money that has
gained popularity in recent federal election cycles. Issue advocacy communications are paid
for by a group, such as a for-profit or non-profit corporation or labor organization, for
advertisements that could be interpreted to favor or disfavor certain candidates, while also
serving to inform the public about a policy issue. The prevailing view in the lower courts is
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that Supreme Court precedent requires that only those communications that expressly
advocate the election or defeat of a clearly identified candidate can be constitutionally
regulated; any such communication that does not meet this “express advocacy” standard is
constitutionally protected First Amendment speech, which cannot be regulated. Hence, issue
ads may be paid for with unregulated soft money.
Court Decisions
In Buckley v. Valeo, (424 U.S. 1 (1976)), the Supreme Court generally held that
campaign finance limitations apply to “communications that in express terms advocate the
election or defeat of a clearly identified candidate for federal office.” A footnote to the
opinion provides examples of such “express advocacy”: terms “such as ‘vote for,’ ‘elect,’
‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ ‘reject.’” (Id.
at 44 n.52; see 11 C.F.R. 101.22(a)). Communications without these ‘magic words’ are often
classified as issue advocacy, thus falling outside the scope of the FECA.
In the 1986 decision of Federal Election Commission v. Massachusetts Citizens for Life,
Inc., (MCFL), (479 U.S. 238 (1986)), the Supreme Court continued to distinguish between
issue and express advocacy, holding that an expenditure must constitute express advocacy in
order to be subject to the FECA prohibition against corporate use of treasury funds to make
an expenditure “in connection with” any federal election. (Id. at 249-250). In MCFL, the
Court ruled that a publication urging voters to vote for “pro-life” candidates, while also
identifying and providing photographs of certain candidates who fit that description, could
not be regarded as a “mere discussion of public issues that by their nature raise the names of
certain politicians.” Instead, the Court found, the publication “in effect” provided a directive
to the reader to vote for the identified candidates and ergo, constituted express advocacy.
(Id. at 249-250.)
In FEC v. Furgatch, (807 F.2d 857 (9th Cir. 1987), cert. denied, 484 U.S. 850 (1987)),
the Ninth Circuit presented the following three-part test to determine whether a
communication may be considered issue advocacy:
First, even if it is not presented in the clearest, most explicit language, speech is ‘express’
for the present purposes if its message is unmistakable and unambiguous, suggestive of
only one plausible meaning. Second, speech may only be termed ‘advocacy’ if it presents
a clear plea for action, and thus speech that is merely informative is not covered by the Act.
Finally, it must be clear what action is advocated. Speech cannot be ‘express advocacy of
election or defeat of a candidate’ when reasonable minds could differ as to whether it
encourages a vote for or against a candidate or encourages the reader to take some other
kind of action. (Id. at 864.)
On July 6, 1995, the FEC promulgated regulations defining “express advocacy” in a manner
consistent with the test espoused in Furgatch. (60 Fed. Reg. 35292, 35304 (codified at 11
C.F.R. 100.22) (effective Oct. 5, 1995. 60 Fed. Reg. 52069 (Oct. 5, 1995).)
However, the trend in the circuit courts appears to be away from the Furgatch and FEC
definitions toward a more limited interpretation of what type of speech will constitute
“express advocacy.” Hence, regulation of fewer types of communications are being upheld
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as constitutionally permissible and therefore, more “issue ads” are permissibly funded with
soft money.
In Maine Right to Life Committee v. FEC, (914 F.Supp. 8 (D. Maine 1996), aff’d per
curiam 98 F.3d 1 (1st. Cir. 1996), cert. denied, 118 S.Ct. 52 (Oct. 6, 1997)), the First Circuit
affirmed the district court’s opinion that the FEC surpassed its authority when it included a
“reasonable person” standard in its definition of “express advocacy.” The court reasoned that
such a standard threatened to infringe upon issue advocacy, an area protected by the First
Amendment. (Id. at 12.) The Fourth Circuit reached a similar conclusion in FEC v. Christian
Action Network, (92 F.3d 1178 (4th Cir. 1997).) Most recently, on June 14, 2000, the
Second Circuit, in Vermont Right to Life Committee v. Sorrell, (216 F.3d 264 (2d Cir.
2000)), found that state campaign regulations triggering disclosure and reporting
requirements of speech that “expressly or implicitly advocate[] the success or defeat of a
candidate” were facially invalid under the First Amendment because they would result in a
regulation of constitutionally protected issue advocacy, (emphasis added). In Vermont, the
court held that the Supreme Court in Buckley had established an “express advocacy standard”
in order to insure that regulations were neither too vague nor intrusive on First Amendment
protected issue advocacy. Accordingly, the court held that by including the term “implicitly,”
the regulations extend to advocacy with respect to public issues, in violation of the rule
enunciated in Buckley and its progeny.
Nevertheless, the FEC has declined to revise its regulations defining “express advocacy.”
(See 63 Fed. Reg. 8363 (Feb. 19, 1998).) The FEC has stated that its primary reason for this
decision is “its belief that the definition of ‘express advocacy’ found at 11 CFR 100.22(b) is
constitutional.” (Id. at 8264.)
Recently, in Vermont Right to Life Committee v. Sorrell, (216 F.3d 264 (2d Cir. 2000)),
the Second Circuit Court of Appeals found that state campaign regulations triggering
disclosure and reporting requirements of speech that “expressly or implicitly advocate[] the
success or defeat of a candidate” were facially invalid under the First Amendment because
they would result in a regulation of constitutionally protected issue advocacy, (emphasis
added). In Vermont, the court held that the Supreme Court in Buckley v. Valeo had
established an “express advocacy standard” in order to insure that regulations were neither
too vague nor intrusive on First Amendment protected issue advocacy. Accordingly, the
court determined that by including the term “implicitly,” the regulations extend to advocacy
with respect to public issues, in violation of the rule enunciated in Buckley and its progeny.
Issue Advocacy Distinguished from Independent Expenditures
Soft money spent for issue advocacy communications is sometimes confused with
independent expenditures. Although both types of expenditures are purportedly independent,
(Justice Kennedy argues that, by nature, practically all expenditures are coordinated with a
candidate and, thus, cannot be considered independent. Colorado Republican Committee v.
FEC (Colorado I), 518 U.S. 604 (1996)(Kennedy, J., concurring in the judgment, dissenting
in part)), only independent expenditures are subject to the FECA, (2 U.S.C. §§ 431 et seq.)
The Colorado I Court held that the First Amendment would prohibit the application of a
FECA provision, 2 U.S.C. § 441a(d)(3), limiting political party expenditures made
independently and without any coordination with a candidate or his or her campaign. The
Colorado decision essentially banned any limitations on political party expenditures when they
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are made independently of a candidate’s campaign. (Colorado I, 518 U.S. at 614-17.) Since
a political committee making independent expenditures, however, is still subject to FECA
restrictions regarding sources and contribution amounts it may receive from a person, (see,
e.g., 11 C.F.R. § 110.0(d)), an independent expenditure is not considered soft money.
Recently, in FEC v. Colorado Republican Federal Campaign Committee (Colorado II),
(No. 00-191, slip op. (June 25, 2001)), the Supreme Court held that a political party’s
coordinated expenditures, unlike genuine independent expenditures, may be limited in order
to minimize circumvention of the Federal Election Campaign Act’s (FECA) contribution
limits. While the Court’s opinion in Colorado I was limited to the constitutionality of the
application of FECA’s “Party Expenditure Provision” (2 U.S.C. § 441a(d)(3)) to an
independent expenditure by the Colorado Republican Party, in Colorado II the Court
considered a facial challenge to the constitutionality of the limit on coordinated party
spending. Persuaded by evidence supporting the FEC’s argument, the Court found that
coordinated party expenditures are indeed the “functional equivalent” of contributions. (Slip
op. at 12.) Therefore, in its evaluation, the Court applied the same scrutiny to the
coordinated “Party Expenditure Provision” that it has applied to other contribution limits:
inquiring whether the restriction is “closely drawn” to the “sufficiently important”
governmental interest of stemming political corruption. (Slip op. at 21.) The Court further
determined that circumvention of the law through “prearranged or coordinated expenditures
amounting to disguised contributions” is a “valid theory of corruption.” (Slip op. at 7, 21.)
In upholding the limit, the Court noted that “substantial evidence demonstrates how
candidates, donors, and parties test the limits of the current law,” which, the Court concluded,
“shows beyond serious doubt how contribution limits would be eroded if inducement to
circumvent them were enhanced by declaring parties’ coordinated spending wide open.” (Slip
op. at 22.)
Section 527 Organization “Issue Ad” Disclosure Law
On July 1, 2000, P.L. 106-230 was enacted, which requires disclosure by organizations
claiming Internal Revenue Code (IRC) Section 527 status. The disclosure requirement is
triggered by the IRC definition of “exempt function,” 26 U.S.C. § 527(e): “influencing or
attempting to influence the selection, nomination, election or appointment of any individual”
to public office. As the “exempt function” definition appears broader than the definition of
“express advocacy,” i.e. words expressly advocating the election or defeat of a clearly
identified candidate, the IRC definition arguably encompasses what the courts have defined
as First Amendment protected issue advocacy, which may not be constitutionally permissible
to regulate. As a result, a court could find that P.L. 106-230 unconstitutionally regulates
issue advocacy because it requires public disclosure by Section 527 organizations spending
soft money for issue ads. On August 28, 2000, in the U.S. District Court for the Southern
District of Alabama, the National Federation of Republican Assemblies filed suit alleging that
P.L. 106-230 is unconstitutional under the First and Tenth Amendments; a decision is
pending.
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Selected 107th Congress Legislation
S. 27 (McCain-Feingold) (passed by Senate April 2, 2001)
Party Soft Money. Prohibits national party committees from soliciting, receiving,
directing, transferring, or spending soft money; generally prohibits spending of soft money
for a “federal election activity” by state and local party committees, including an entity
directly or indirectly established, financed, maintained, or controlled by: a state or local party
committee or one or more state or local candidates or officials, (permits the principal
campaign committees of state or local candidates to raise and spend funds under state law,
if not for “federal election activity” referring to a clearly identified federal candidate), but
allows a state, district, or local party committee to use funds raised in accordance with state
law for the allocable share of voter registration drives during the last 120 days of federal
election, for voter identification efforts, get-out-the-vote drives, and for generic activities, if
they do not refer to a federal candidate and no person donates over $10,000 per year for such
activities; defines “federal election activity” to include: (1) voter registration drives in last
120 days of a federal election; (2) voter identification, get-out-the-vote drives, and generic
activity in connection with an election in which a federal candidate is on the ballot; and (3)
“public communications” that refer to a clearly identified federal candidate and promote,
support, attack, or oppose a candidate for that office (regardless of whether it expressly
advocates a vote for or against) or services by a state or local party employee who spends at
least 25% of paid time in a month on activities in connection with a federal election; prohibits
federal candidates, officeholders, and their PACs from raising soft money in connection with
a federal election, or money from sources beyond federal limits and prohibitions in non-federal
elections; requires disclosure by national parties of all activity (federal and non-federal) and
by state and local parties of specified activities that might affect federal elections; removes
building fund exemption.
Issue Advocacy. Requires disclosure of “electioneering communications” above
$10,000, with identification of donors of $500 or more; defines “electioneering
communication” as: broadcast, cable, or satellite advertisement that “refers” to a clearly
identified federal candidate, made within 60 days of a general election or 30 days of a primary,
to an audience that includes voters in that election (exempts news events, “expenditures,” and
“independent expenditures”); provides alternative definition of “electioneering
communication,” in the event that the first definition is ruled unconstitutional, based on FEC
v. Furgatch, (807 F.2d 857 (9th Cir. 1987), cert. denied, 484 U.S. 850 (1987)), i.e.,
communication promoting, supporting or attacking, opposing a candidate, regardless of
whether it expressly advocates a vote for or against a candidate, and is suggestive of no
plausible meaning other than an exhortation to vote for or against a candidate.
Corporate/Labor Union Soft Money. Prohibits funding of “electioneering
communications” with union or certain corporate funds, but exempts Internal Revenue Code
§501(c)(4) or § 527 tax-exempt corporations making “electioneering communications” with
funds solely donated by individuals, who are citizens or permanent resident aliens, unless the
communication is “targeted,” i.e. it was distributed from a broadcaster or cable or satellite
service whose audience “consists primarily” of residents of the state for which the candidate
is running for office.
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Introduced Jan. 22, 2001; referred to Committee on Rules and Administration; passed
the Senate on April 2, 2001 (59-41) after including 22 amendments offered during a two-
week floor debate.
H.R. 2356 (Shays-Meehan) (passed by House Feb. 14, 2002)
Party Soft Money. Prohibits national party committees from soliciting, receiving,
directing, transferring, or spending soft money; generally prohibits spending of soft money
for a “federal election activity” by state and local party committees, including an association
or group of state or local candidates or officials. Prohibits state or local candidates from
using soft money for public communications that promote or attack a clearly identified federal
candidate, but exempts communications referring to a federal candidate who is also a state
or local candidate. Permits state, district or local party committees to use some funds raised
under state law for an allocable share (at a 50-50 hard to soft money ratio) of voter
registration drives in the last 120 days of a federal election, and voter identification, get-out-
the-vote drives, and generic activity if it: (1) does not refer to a federal candidate; (2) does
not pay for a broadcast, cable or satellite communication (unless it refers solely to state/local
candidates); (3) takes no more than $10,000 per year from any person for such activity (or
less, if state law so limits); and (4) uses only funds raised by that party committee expressly
for such purposes, with no transfers from other party committees. Defines “federal election
activity” to include: (1) voter registration drives in last 120 days of a federal election; (2)
voter identification, get-out-the-vote drives, and generic activity in connection with an
election in which a federal candidate is on the ballot; and (3) “public communications” that
refer to a clearly identified federal candidate and promote, support, attack, or oppose a
candidate for that office (regardless of whether it expressly advocates a vote for or against)
or services by a state or local party employee who spends at least 25% of paid time in a
month on activities in connection with a federal election. Requires disclosure by national
parties of all activity (federal and non-federal), and by state and local parties of specified
activities, that might affect federal elections; removes building fund exemption.
Issue Advocacy. Creates a new term in federal election law, "electioneering
communication," which would regulate political ads that: "refer" to a clearly identified federal
candidate, are broadcast within 30 days of a primary or 60 days of a general election, and
(differing from S. 27) for House and Senate elections, is “targeted to the relevant electorate.”
Generally, it would require disclosure of disbursements over $10,000 for such
communications, including identification of each donor of $1,000 or more, and such
communications would be prohibited from being financed with union or certain corporate
funds. With respect to corporate funds, it exempts Internal Revenue Code § 501(c)(4) or §
527 tax-exempt corporations from making “electioneering communications” with funds solely
donated by individuals who are U.S. citizens or permanent resident aliens, unless the
communication is “targeted,” i.e., (differing from S. 27) it was distributed from a broadcaster
or cable or satellite service and is received by 50,000 or more persons in the state or district
where the Senate or House election, respectively, is occurring. H.R. 2356 expressly exempts
from the definition news events, “expenditures,” and “independent expenditures,” and
(differing from S. 27) candidate debates and certain other communications expressly
exempted by FEC regulation. If this definition of “electioneering communication” is ruled
unconstitutional, H.R. 2356 provides an alternative definition, based on FEC v. Furgatch,
(807 F.2d 857 (9th Cir. 1987)): a communication promoting, supporting, attacking, or
opposing a candidate, regardless of whether it expressly advocates a vote for or against a
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candidate and is suggestive of no plausible meaning other than an exhortation to vote for or
against a candidate.
Corporate/Labor Union Soft Money. Prohibits funding of “electioneering
communications” with union or certain corporate funds, but exempts Internal Revenue Code
§501(c)(4) or § 527 tax-exempt corporations making “electioneering communications” with
funds solely donated by individuals, who are citizens or permanent resident aliens, unless the
communication is “targeted,” i.e., it was distributed from a broadcaster or cable or satellite
service and is received by 50,000 or more persons in the state or district where the Senate or
House election, respectively, is occurring.
Introduced on June 28, 2001; ordered reported unfavorably by Committee on House
Administration, June 28 (H.Rept. 107-131, pt. 1). Passed House, as amended, February 14,
2002 (240 to 189). Received in Senate and placed on legislative calendar, February 26, 2002.
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Issue Brief IB87020. Campaign financing, by Joseph E. Cantor.
CRS Reports
CRS Report RL30582. 527 Organizations: How the Differences in Tax and Election Laws
Permit Certain Organizations to Engage in Issue Advocacy Without Public Disclosure
and Proposals for Change, by Marie B. Morris.
CRS Report RS20650. 527 Organizations: Reporting Requirements Imposed on Political
Organizations after Enactment of P.L. 106-230, by Marie B. Morris.
CRS Report 97-973. Business and Labor Spending in U.S. elections, by Joseph E. Cantor.
CRS Report RL31290. Campaign Finance Bills Passed in the 107th Congress: Comparison
of S. 27 (McCain-Feingold), H.R. 2356 (Shays-Meehan), and Current Law, by Joseph
E. Cantor and L. Paige Whitaker
CRS Report RL31036. Campaign Finance Bills in the 107th Congress: Comparison of S.
27 (McCain-Feingold), H.R. 2356 (Shays-Meehan), H.R. 2360 (Ney-Wynn), and
current law, by Joseph E. Cantor and L. Paige Whitaker.
CRS Report 98-282. Campaign Finance Reform: a Legal Analysis of Issue and Express
Advocacy, by L. Paige Whitaker.
CRS Report RS20849. Campaign Finance Reform: Constitutional Issues Raised by
Disclosure Requirements, by L. Paige Whitaker.
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CRS Report RS20854. Campaign Finance Reform and Incentives to Voluntarily Limit
Candidate Spending from Personal Funds: Constitutional Issues Raised by Public
Subsidies and Variable Contribution Limits, by L. Paige Whitaker.
CRS Report RL30669. Campaign Finance Regulation under the First Amendment: Buckley
v. Valeo and its Supreme Court progeny, by L. Paige Whitaker.
CRS Report 97-1040. Campaign Financing: Highlights and Chronology of Current Federal
Law, by Joseph E. Cantor.
CRS Report 97-555. Compulsory Union Dues and Agency Fee Objectors, by Gail
McCallion.
CRS Report 96-484. Political Spending by Organized Labor: Background and Current
Issues, by Joseph E. Cantor.
CRS Report 97-91. Soft and Hard Money in Contemporary Elections: What Federal Law
Does and Does Not Regulate, by Joseph E. Cantor.
CRS Report RL31288. Soft Money, Allegations of Political Corruption, and Enron, by Jack
Maskell and L. Paige Whitaker.
CRS Report 97-618. The Use of Union Dues for Political Purposes: a Legal Analysis, by
L. Paige Whitaker.
Selected World Wide Web Sites
Federal Election Commission:
[http://www.fec.gov]
For access to full text of court decisions:
[http://www.findlaw.com/casecode/cases.html]
For ongoing tracking of issue advocacy by the Annenberg Public Policy Center of the
University of Pennsylvania:
[http://www.appcpenn.org/issueads/]
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