Order Code RL33580
Campaign Finance: An Overview
Updated April 20, 2007
Joseph E. Cantor
Specialist in American National Government
Government and Finance Division
Campaign Finance: An Overview
Concerns over financing federal elections have become a seemingly perennial
aspect of our political system, long centered on the enduring issues of high campaign
costs and reliance on interest groups for needed campaign funds. Rising election
costs had long fostered a sense in some quarters that spending was out of control,
with too much time spent raising funds and elections “bought and sold.” Debate had
also focused on the role of interest groups in campaign funding, especially through
political action committees (PACs). Differences in perceptions of the campaign
finance system were compounded by the major parties’ different approaches.
Democrats tended to favor more regulation, with spending limits and public funding
or benefits a part of past proposals. Republicans generally opposed such limits and
The 1996 elections marked a turning point in the debate’s focus, as it shifted
from whether to further restrict already regulated spending and funding sources to
addressing election-related activities largely or entirely outside federal election law
regulation and disclosure requirements (i.e., soft money). While concerns had long
been rising over soft money in federal elections, its widespread and growing use for
so-called issue advocacy since 1996 raised questions over the integrity of existing
regulations and the feasibility of any limits at all. Following 1996, reform supporters
offered legislation whose primary goals were to prohibit use of soft money in ways
that could affect federal elections and to bring election-related issue advocacy
communications under federal regulation. In both the 105th and 106th Congresses,
the House passed the Shays-Meehan bill, but the Senate failed to invoke cloture to
allow a vote on the companion McCain-Feingold bill. The 106th Congress did,
however, agree on an aspect of campaign reform, in passing P.L. 106-230, to require
disclosure by certain tax-exempt political organizations organized under Section 527
of the Internal Revenue Code. Such groups exist to influence elections, but many
had not been required to disclose financial activity (to the FEC or IRS).
In the 107th Congress, the Senate passed McCain-Feingold, as amended, and the
House passed the companion Shays-Meehan bill, as amended. The Senate then
passed the House bill, which was signed into law by President Bush as the Bipartisan
Campaign Reform Act of 2002 — BCRA (P.L. 107-155) — constituting the first
major change to the nation’s campaign finance laws since 1979.
In the 2004 elections, some $435 million was raised and spent by “political
organizations” organized under Section 527 of the Internal Revenue Code but outside
of federal election law regulation. In response to this perceived circumvention of
election law regulation, the 109th Congress examined the role of 527 groups in federal
elections; while the House passed legislation to address it, no Senate bill was passed.
Similar bills — H.R. 420 and S. 463 — have been introduced in the 110th Congress.
This report provides an overview of campaign finance law governing federal
elections, issues raised in recent years by campaign finance practices, and recent
legislative activity and proposals in Congress. It will be updated as developments
Evolution of the Current System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Campaign Finance Practices and Related Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Enduring Issues: Campaign Costs and Funding Sources . . . . . . . . . . . . . . . . 2
Increased Campaign Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PACs and Other Sources of Campaign Funds . . . . . . . . . . . . . . . . . . . . 3
Today’s Paramount Issues: Perceived Loopholes in Current Law . . . . . . . . . 4
Soft Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Issue Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
527 Political Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Policy Options to Address Campaign Finance Issues . . . . . . . . . . . . . . . . . . . . . . 6
Addressing the Enduring Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Campaign Spending Limits and Government Incentives or Benefits . . 7
Changing the Balance Among Funding Sources . . . . . . . . . . . . . . . . . . 8
Closing Perceived Loopholes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Soft Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Issue Advocacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
527 Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Legislative Action in Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
109th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Major Legislation in 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
List of Tables
Table 1. Receipts and Disbursements by Federal-Related 527s:
2000-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Campaign Finance: An Overview
Evolution of the Current System
Today’s federal campaign finance law evolved during the 1970s out of five
major statutes and a paramount Supreme Court case. That case not only affected
earlier statutes, but it has also continued to shape the dialogue on campaign finance
The 1971 Federal Election Campaign Act (FECA), as amended in 1974, 1976,
and 1979, imposed limits on contributions, required disclosure of campaign receipts
and expenditures, and set up the Federal Election Commission (FEC) as a central
administrative and enforcement agency. The Revenue Act of 1971 inaugurated
public funding of presidential general elections, with funding of primaries and
nominating conventions added by the 1974 FECA Amendments. The latter also
imposed certain expenditure limits, later struck down by the Supreme Court’s
landmark Buckley v. Valeo ruling [424 U.S. 1 (1976)].
In the Buckley ruling, the Court upheld the act’s limitations on contributions as
appropriate legislative tools to guard against the reality or appearance of improper
influence stemming from candidates’ dependence on large campaign contributions.
However, Buckley invalidated the act’s limitations on independent expenditures, on
candidate expenditures from personal funds, and on overall campaign expenditures.
These provisions, the Court ruled, placed direct and substantial restrictions on the
ability of candidates, citizens, and associations to engage in protected First
Amendment free speech rights. The Court saw no danger of corruption arising from
large expenditures, as it did from large contributions, and reasoned that corruption
alone could justify the First Amendment restrictions involved. Only voluntary limits
on expenditures could be sustained, perhaps in exchange for government benefits.
Such a plan was specifically upheld in the existing presidential public funding
system, as a contractual agreement between the government and the candidate. The
Court’s dichotomous ruling, allowing limits on contributions but striking down
mandatory limits on expenditures, has shaped subsequent campaign finance practices
and laws, as well as the debate over campaign finance reform.
In 2002, Congress enacted the Bipartisan Campaign Reform Act (BCRA) of
2002 (popularly known as McCain-Feingold for its Senate sponsors). This statute
made the most significant changes in the FECA since the 1970s, featuring higher
contribution limits, a ban on the raising of soft money1 by political parties and federal
candidates, and a restriction on broadcast ads by outside groups in the closing days
Soft money (discussed more fully in this report) generally refers to funds that are raised
and spent outside the purview of federal election law regulation but which are intended to
affect federal elections, at least indirectly.
of an election. BCRA’s constitutionality was challenged in court but, in a decision
that surprised many observers, was essentially upheld by the Supreme Court in its
December 10, 2003, ruling in McConnell v. FEC.
Campaign Finance Practices and Related Issues
From the mid-1970s through at least the late 1990s, the limits on contributions
by individuals, political action committees (PACs), and parties, and an absence of
congressional spending limits, governed the flow of money in congressional
elections. Throughout the 1980s and much of the 1990s, the two paramount issues
raised by campaign finance practices were the phenomena of, first, rising campaign
costs and the large amounts of money needed for elections and, second, the
substantial reliance on PACs as a source of funding.
After 1996, the debate shifted considerably to a focus on the perceived
loopholes in existing law (a source of increasing debate since the mid-1980s). The
PAC issue was largely supplanted by more fundamental issues of election regulation,
with one-time critics finding new appreciation for the limited, disclosed nature of
PAC funds. The issue of high campaign costs and the concomitant need for vast
resources continues to underlie the debate, but even this was almost overshadowed
by concerns over the system’s perceived loopholes. Although these practices were
(largely) presumably legal, they may have violated the law’s spirit, raising a basic
question of whether money in elections can, let alone should, be regulated.
Enduring Issues: Campaign Costs and Funding Sources
Increased Campaign Costs. Since first being systematically compiled in
the 1970s, campaign expenditures have risen substantially, even exceeding the
overall rise in the cost of living. An estimated $540 million was spent on all
elections (at all levels) in the U.S. in 1976,2 rising to some $3.9 billion in 2000.3
Preliminary estimates from the 2004 elections show that spending on federal
elections alone exceeded $3.9 billion.4
Aggregate costs of House and Senate campaigns increased tenfold between 1976
and 2004, from $115.5 million to $1.16 billion, while the cost of living rose a little
more than threefold. Campaign costs for average winning candidates, a useful
measure of the real cost of seeking office, showed an increase in the House from
$87,000 in 1976 to $1.0 million in 2004; a winning Senate race went from $609,000
in 1976 to $7.0 million in 2004 (not adjusted for inflation).
Herbert E. Alexander, Financing the 1976 Election (Washington: Congressional Quarterly
Press, 1979), p. 166.
Candice J. Nelson, “Spending in the 2000 Elections,” in David B. Magleby (ed.),
Financing the 2000 Election (Washington: Brookings Institution Press, 2002), p. 24.
Center for Responsive Politics, ‘04 Elections Expected to Cost Nearly $4 Billion, press
release, Oct. 21, 2004, [http://www.opensecrets.org/pressreleases/2004/04spending.asp], site
visited July 21, 2006.
The above data are cited by many as evidence that our democratic system of
government has suffered as election costs have grown to levels often considered
exorbitant. Specifically, it is argued that officeholders must spend too much time
raising money, at the expense of their public duties and communicating with
constituents. The high cost of elections and the perception that they are “bought and
sold” are seen as contributing to public cynicism about the political process. Some
express concern that spiraling campaign costs have resulted in more wealthy
individuals seeking office or determining election winners, denying opportunities for
service to those lacking adequate resources or contacts. Others see a correlation
between excessive, available money and the perceived increased reliance of
sophisticated, often negative, media advertising.
Not all observers view the high cost of elections with alarm. Many insist we do
not spend too much on elections and maybe do not spend enough. They contrast the
amount spent on elections with that spent by government at all levels, noting that
only a fraction of a percent is spent to choose those who make vital decisions on the
allocation of tax dollars. Similarly, they contrast costs of elections with those on
commercial advertising: the nation’s two leading commercial advertisers in 1996,
Proctor & Gamble and General Motors, spent more to promote their products that
year ($5 billion) than was spent on all U.S. elections.5 In such a context, these
observers contend, the costs of political dialogue may not be excessive.
High election costs are seen largely as a reflection of the paramount role of
media in modern elections. Increasingly high television costs and costs of fundraising
in an era of contribution limits require candidates to seek a broad base of small
contributors — a democratic, but time-consuming, expensive process — or to seek
ever-larger contributions from small groups of wealthy contributors. It has been
argued that neither negative campaigning nor wealthy candidates are new or
increasing phenomena but merely that better disclosure and television’s prevalence
make us more aware of them. Finally, better-funded candidates do not always win,
as some recent elections show.
PACs and Other Sources of Campaign Funds. Issues stemming from
rising election expenses were, for much of the 1970s through 1990s, linked to
substantial candidate reliance on PAC contributions. The perception that fundraising
pressures might lead candidates to tailor their appeals to the most affluent and
narrowly “interested” sectors raised perennial questions about the resulting quality
of representation of the whole society. The role of PACs, in itself and relative to
other sources, became a major issue. In retrospect, however, it appears that the issue
was really about the role of interest groups and money in elections, PACs being the
most visible vehicle thereof. As discussed below, the PAC issue per se has seemed
greatly diminished by recent events, while concerns over interest group money
through other channels have grown.
Through the 1980s, statistics showed a significant increase in PAC importance.
From 1974 to 1988, PACs grew in numbers from 608 to a high of 4,268, in
contributions to House and Senate candidates from $12.5 million to $147.8 million
“100 Leaders by U.S. Advertising Spending,” Advertising Age, Sept. 29, 1997, p. 14.
(a 400% rise in constant dollars), and in relation to other sources from 16% of
congressional campaign receipts to 34%. While PACs remain a considerable force,
data show a relative decline in their role since 1988: the percentage of PAC money
in total receipts dropped to 28% in 2004; PAC numbers dropped to 4,040 in 2004;
and, after individual giving had been declining vis-à-vis PACs, there has been some
increase of late, with individuals giving 72% of Senate and 56% of House receipts
in 2004, for example. Still, not all indicators show decline in the PAC role; PAC
contributions to candidates rose to $289.1 million in 2004, for example.
Despite some aggregate data on the relative decline of PACs, they still provide
a considerable share of election financing for various subgroups. For example, in
2004, House candidates got 35% of their funds from PACs; House incumbents
received 41%. To critics, PACs raise troubling issues in the campaign financing
debate: Are policymakers beholden to special interests for election help, impairing
their ability to make policy choices in the national interest? Do PACs overshadow
average citizens, particularly in Members’ states and districts? Does the appearance
of quid pro quo relationships between special interest givers and politician recipients,
whether or not they actually exist, seriously undermine public confidence in the
PAC defenders view them as reflecting the nation’s historic pluralism,
representing not a monolithic force but a wide variety of interests. These observers
see them, rather than overshadowing individual citizens, merely as groups of such
citizens, giving voice to many who were previously uninvolved. PACs are seen as
promoting, not hindering, electoral competition, by funding challengers in closely
contested races. In terms of influencing legislative votes, donations are seen more
as rewards for past votes than as inducements to alter future ones. Defenders also
challenge the presumed dichotomy between special and national interest, viewing the
latter as simply the sum total of the former. PACs, they argue, afford clearer
knowledge of how interest groups promote their agendas, particularly noteworthy in
light of the flood of unregulated and undisclosed money since 1996.
Today’s Paramount Issues: Perceived
Loopholes in Current Law
Interest has intensified, especially since 1996, in campaign finance practices that
have been seen by some as undermining the law’s contribution and expenditure limits
and its disclosure requirements. Although these practices may be legal, they have
been characterized as “loopholes” through which electoral influence is sought by
spending money in ways that detract from public confidence in the system and that
are beyond the scope intended by Congress. Some of the prominent practices have
been soft money, election-related issue advocacy, and, most recently, election-related
activities by groups operating under Section 527 of the Internal Revenue Code (IRC).
Soft Money. This term has generally been used to refer to money that may
influence federal elections (at least indirectly) but is raised and spent outside the
purview of federal laws and would be illegal if spent directly on a federal election by
a candidate, party, or PAC. The significance of soft money, prior to enactment of
BCRA, stemmed from several factors: (1) many states permitted (then and now)
direct union and corporate contributions and individual donations in excess of
$25,000 in state campaigns, all of which were (and are) prohibited in federal races;
(2) under the 1979 FECA Amendments and FEC rulings, such money could be spent
by state and local parties in large or unlimited amounts on grassroots organizing and
voter drives that could benefit all party candidates; and (3) publicly funded
presidential candidates could not spend privately raised money in the general
election. In presidential elections through 2000, national parties made extensive
efforts to raise money for their state affiliates, partly to boost the national tickets
beyond what could be spent directly. The data for 2000 showed some $495 million
in soft money was raised by the major parties, nearly double the $262 million raised
Issue Advocacy. Although federal law regulates expenditures in connection
with federal elections, it has generally used a fairly narrow definition for what
constitutes such spending. Prevailing judicial interpretation of Supreme Court
precedent, both before and arguably since BCRA, has created a conundrum by
permitting regulation of only those communications containing express advocacy,
that is, communications containing explicit terms urging the election or defeat of
clearly identified federal candidates. By avoiding such terms, groups arguably can
promote their views and issue positions in reference to particular elected officials,
without triggering the disclosure and source restrictions of the FECA. Such activity,
known as issue advocacy, is widely perceived as having the intent of bolstering or
detracting from the public image of officials who are also candidates for office. In
1996, an estimated $135 million was spent on issue advocacy, rising to between $275
and $340 million in 1998, and to $509 million in 2000 (although these data do not
distinguish between campaign-related and non-campaign-related communications).
Also, groups ranging from labor unions to the Christian Coalition promote their
policy views through voter guides, which present candidates’ views on issues in a
way that some see as helpful to some candidates and harmful to others, without
meeting the standards for FECA coverage.
527 Political Organizations. In the years leading up to enactment of BCRA
and in the wake of its major provisions being upheld by the Supreme Court in
December 2003, attention has been increasingly focused on activity by interest
groups operating outside the regulatory framework of federal election law. Of
particular interest have been groups operating under Section 527 of the Internal
Revenue Code, which provides tax-exempt status to organizations it defines as
political. In 2000, some groups engaged in election-related issue advocacy aroused
controversy when it was revealed that they were operating under Section 527 of the
IRC while not being regulated under the FECA. At that time, BCRA was still under
consideration, and Congress was enmeshed in the thorny issue of regulating activity
that was not express advocacy. Rather than short-circuit that debate and begin yet
another on the also complicated issue of differing definitions of political
organization under the IRC and political committee under the FECA, Congress
addressed the issue by simply requiring disclosure to the IRS by groups with taxexempt 527 status.
In 2002, Title II of BCRA addressed the express advocacy issue, but only with
regard to broadcast advertisements in the period just prior to federal elections.
BCRA was silent regarding interest groups’ involvement in such other election-
related activities as public communications through non-broadcast methods,
broadcasts prior to the last 30 days before a primary or 60 days before a general
election, voter identification, and get-out-the-vote and registration drives. These
activities loom particularly large in the wake of BCRA’s prohibition on national
political party use of non-federally permissible funds (i.e., soft money) to pay for
voter mobilization activities. With some $435 million reported as having been spent
in the 2004 elections by groups with Section 527 status, public attention has shifted
to these new patterns of electioneering, raising questions as to whether requiring
disclosure to the IRS is sufficient. The following table presents data on spending and
receipts of 527s since IRS disclosure was required in 2000. The source,
PolicalMoneyLine, examined reports and identified “key groups,” those that were
clearly federal election-related.
Table 1. Receipts and Disbursements by Federal-Related 527s:
(dollars in millions)
Election Cycle Total Spending
Source: PoliticalMoneyLine, “key groups” (those that were clearly federal-election related) identified
from IRS filings [http://www.tray.com/cgi-win/irs_ef_527.exe?DoFn=&sYR=2000], site visited Jan.
Policy Options to Address Campaign
The policy debate over campaign finance laws proceeds from the philosophical
differences over the underlying issues discussed above, as well as the more practical,
logistical questions over the proposed solutions. Two primary considerations frame
this debate. What changes can be made that will not raise First Amendment
objections, given court rulings in Buckley and other cases? What changes will not
result in new, unforeseen, and more troublesome practices? These considerations are
underscored by the experience with prior amendments to FECA, such as PAC growth
after the 1974 limits on contributions.
Just as the overriding issues centered until recently around election costs and
funding sources, the most prominent legislation long focused on controlling
campaign spending, usually through voluntary systems of public funding or
cost-reduction benefits, and on altering the relative importance of various funding
sources. Some saw both concepts primarily in the context of promoting electoral
competition, to remedy or at least not exacerbate perceived inequities between
incumbents and challengers. Increasingly since the mid-1980s, and particularly since
the 1996 elections, concerns over perceived loopholes that undermine federal
regulation have led to proposals to curb such practices. Conversely, some proposals
have urged less regulation, on the ground that it inherently invites circumvention,
while still other proposals have focused exclusively on improving or expanding
Addressing the Enduring Issues
Campaign Spending Limits and Government Incentives or Benefits.
Until the late 1990s, the campaign reform debate often focused on the desirability of
campaign spending limits. To a great extent, this debate was linked with public
financing of elections. The coupling of these two controversial issues stemmed from
Buckley’s ban on mandatory spending limits, while allowing voluntary limits, with
adherence a prerequisite for subsidies. Hence the notion arose in the 1970s that
spending limits must be tied to public benefits, absent a constitutional amendment.
Public funding not only might serve as an inducement to voluntary limits, but
by limiting the role of private money, it is also billed as the strongest measure toward
promoting the integrity of and confidence in the electoral process. Furthermore, it
could promote competition in districts with strong incumbents or one-party
domination. Public financing of congressional elections has been proposed in nearly
every Congress since 1956 and has passed in several Congresses. The nation has had
publicly funded presidential elections since 1976, and tax incentives for political
donations were in place from 1972 to 1986.
Objections to public financing are numerous, many rooted in philosophical
opposition to funding elections with taxpayer money, supporting candidates whose
views are antithetical to those of many taxpayers, and adding another government
program in the face of some cynicism toward government spending. The practical
objections are also serious: How can a system be devised that accounts for different
natures of districts and states, with different styles of campaigning and disparate
media costs, and is fair to all candidates — incumbent, challenger, or open-seat,
major or minor party, serious or “longshot”?
A major challenge to spending limit supporters has been how to reduce, if not
eliminate, the role of public funding in their proposals. Although spending limits
may have wide public support, most evidence suggests far less support for public
financing. In the 105th through 107th Congresses, the principal reform bills debated
on the floor contained neither campaign spending limits nor public funding,
reflecting not only the overriding concerns over soft money and issue advocacy but
also the changed political climate since the 1970s.
Stemming from the spending limits debate have been proposals to lower
campaign costs, without spending limits. Proposals for free or reduced rate broadcast
time and postage have received some notable bipartisan support. Such ideas seek to
reduce campaign costs and the need for money, without the possibly negative effects
of arbitrary limits.
Changing the Balance Among Funding Sources. Until the late 1990s,
most proposed bills sought, at least in part, to curb PACs’ perceived influence, either
directly, through a ban or reduced contribution limits, or indirectly, through
enhancing the role of individuals and parties. Prior to enactment of BCRA,
individuals could give $1,000 per candidate, per election, while most PACs (if they
were “multicandidate committees”) could give $5,000 per candidate, thus increasing
their ability to assist candidates. Furthermore, unlike individuals, there was (and is)
no aggregate limit on all contributions in federal elections by a PAC in a given time
period, thus further increasing a PAC’s opportunity to be involved.
Three chief methods of direct PAC curbs were prominent in proposals advanced
through the mid-1990s: banning PAC money in federal elections; lowering the
$5,000 limit; and limiting candidates’ aggregate PAC receipts. These concepts were
included, for example, in all of the bills that the House and Senate voted on in the
101st through 104th Congresses. Although support for such proposals was fueled by
a desire to reduce the perceived role of interest groups, each proposal had drawbacks,
such as constitutional questions about limiting speech and association rights and the
more practical concern over devaluation of the $5,000 limit by inflation since it was
set in 1974.
Yet another concern raised during that period was the potential encouragement
for interest groups to shift resources to “independent” activities, which are less
accountable to voters and more troublesome for candidates in framing the debate.
Furthermore, independent advertisements were often marked by negativity and
invective. If such prospects gave pause to lawmakers during the 1980s, the surge of
financial activity outside the framework of federal election law since 1996 has largely
dampened attempts to further limit PACs. The major reform bills in the 105th
through 107th Congresses contained no further PAC restrictions.
Partly because of this problem, both before and after 1996, many have looked
to more indirect ways to curb PACs and interest groups, such as raising limits on
individual or party donations to candidates. These increases have also been proposed
on a contingency basis to offset such other sources as wealthy candidates spending
large personal sums on their campaigns. As enacted in 2002, BCRA provided both
for higher individual contribution limits in general and provisional increases in both
individual and party limits to assist candidates opposed by free-spending, wealthy
opponents. While higher limits might counterbalance PACs and others and offset
inflation, opponents observed that few Americans could afford to give even $1,000,
raising age-old concerns about “fat cat” contributors.
House Republicans have pushed to boost the role of individuals in candidates’
states or districts, to increase ties between Members and constituents. By requiring
a majority of funds to come from the state or district (or prohibiting out-of-state
funds), supporters sought to indirectly curb PACs, typically perceived as out-of-state,
or Washington, influences.
Support also exists for increasing or removing party contribution and
coordinated expenditure limits, based on the notions that the party role can be
maximized without leading to influence peddling and on strengthening party ties to
facilitate effective policymaking. Opponents note that many of the prominent
allegations in 1996 involved party-raised funds.
Closing Perceived Loopholes
Proposals have increasingly addressed perceived loopholes in FECA, and indeed
this area was the primary focus of recent reform efforts, culminating in enactment of
BCRA in the 107th Congress. This debate underscored a basic philosophical
difference between those who favored and opposed government regulation of
campaign finances. Opponents said that regulation invited attempts at subterfuge,
that interested money would always find its way into elections, and that the most one
could do was see that it was disclosed. Proponents argued that while it was hard to
restrict money, it was a worthwhile goal, hence one ought to periodically fine-tune
the law to correct “unforeseen consequences.” Proposed “remedies” stemmed from
the latter view (i.e., curtail the practices as they arise).
Soft Money. This issue was one of the key issues addressed by BCRA. Title
I provided that national parties and federal candidates or officials, and entities they
directly or indirectly establish, finance, maintain, or control, may not solicit, receive,
direct, transfer, or spend funds not raised under the limits, prohibitions, and reporting
requirements of federal law (i.e., soft money). State and local political parties, and
entities they directly or indirectly establish, finance, maintain, or control, may not
spend soft money on “federal election activities.” The act’s so-called Levin
amendment, however, allowed for some use of soft money under certain conditions
for specified grassroots activities by state and local parties.
Issue Advocacy. The other key issue addressed by BCRA pertained to issue
advocacy. The challenge to Congress in addressing this practice, a form of soft
money, involved broadening the definition of what constituted federal
election-related spending. A 1995 FEC regulation had offered such a definition,
using a “reasonable person” standard, but this was struck down by a First Circuit
federal court in 1996; this decision was later upheld by an appeals court but was at
variance with an earlier Ninth Circuit ruling. The FEC was reluctant to enforce the
regulation pending further judicial or legislative action. Earlier versions of what
became BCRA (the Shays-Meehan bill, as passed in the 105th and 106th Congresses)
sought to codify a definition of “express advocacy” that allowed a communication
to be considered as a whole, in context of such external events as timing, to
determine if it was election related.
In the final analysis, BCRA adopted a narrower approach, in large measure to
enhance its chances of withstanding judicial scrutiny, by incorporating into Title II
language initially proposed by Senators Snowe and Jeffords. This title regulates
election-related issue advocacy by creating a new term in federal election law,
electioneering communications (i.e., political advertisements that refer to clearly
identified federal candidates, broadcast within 30 days of a primary or 60 days of a
general election). Generally, they may not be funded from union or corporate
treasuries, and disbursements of over $10,000 and donors of $1,000 or more must be
527 Activity. Efforts to address the activity of 527 political organizations that
operate outside the regulatory framework of federal election law were seen in the
109th Congress. Supporters of BCRA offered measures (S. 1053 and H.R. 513) to
apply federal election law regulation to 527 groups involved in federal electionrelated activities. The 527 Reform Act of 2005 would add political organizations
under Section 527 of the IRC to the definition of political committee under FECA,
unless they are involved exclusively in state and local elections. The Senate bill was
reported by the Rules and Administration Committee and placed on the Senate’s
legislative calendar. In response to this proposal, H.R. 1316 (Pence-Wynn) was
introduced to address the issue more indirectly, largely by loosening restrictions on
individuals, parties, and PACs under the FECA, and in the soft money realm as well.
This bill, intended to provide some balance to the role of the 527s, was reported by
the House Administration Committee, which later reported H.R. 513 without
recommendation. This set the stage for a potential House floor debate between two
bills to address the 527 issue based on diametrically opposed philosophies, although
such a debate never occurred.
On April 5, 2006, the House passed H.R. 513 (Shays-Meehan), as amended, by
a 218-209 vote. The bill, the 527 Reform Act of 2006, would subject 527 political
organizations involved in federal elections to regulation under the Federal Election
Campaign Act (FECA). (It included one floor amendment, to remove political party
coordinated expenditure limits.) The text of H.R. 513, as passed, was also added to
H.R. 4975, the Lobbying Accountability and Transparency Act of 2006, which
passed the House on May 3, 2006; it also included an amendment added by the
House Rules Committee to prohibit leadership PAC funds from being converted to
personal use but to allow them to be transferred without limit to national party
committees (as is the case with funds in principal campaign committees). After
passing H.R. 4975, the House substituted it for the text of S. 2349, the Senate-passed
version of the bill, to enable a conference with the Senate. The Senate-passed bill did
not contain the 527 provisions, and the Senate resisted considering 527s in the
context of ethics reform. This conflict between the House and Senate kept the issue
from being resolved in the 109th Congress.
Legislative Action in Congress
Congress’s consideration of campaign finance reform has steadily increased
since 1986, when the Senate passed the PAC-limiting Boren-Goldwater amendment,
marking the first campaign finance vote in either house since 1979 (no vote was
taken on the underlying bill). With Senate control shifting to Democrats in 1986,
each of the next four Congresses saw intensified activity, based on Democraticleadership bills with voluntary spending limits combined with inducements to
participation, such as public subsidies or cost-reduction benefits. In the 100th
Congress, Senate Democrats were blocked by a Republican filibuster. In the 101st
through 103rd Congresses, the House and Senate each passed comprehensive bills
based on spending limits and public benefits. Those bills were not reconciled in the
101st or 103rd, while a conference version in the 102nd was vetoed by President
George H. W. Bush.
Republicans assumed control in the 104th Congress, and changes in campaign
finance laws were not a priority for the new leadership, as many of them had
philosophical differences with the most prominent “reform” proposals. A bipartisan
bill based on previous Democratic-leadership bills was blocked by filibuster in the
Senate, while both Republican- and Democratic-leadership bills — with starkly
different approaches — failed to pass in the House. In the 105th Congress, reform
supporters succeeded in passing the Shays-Meehan bill in the House (H.R. 2183, as
amended). Senate sponsors of its companion McCain-Feingold measure (S. 25, as
revised) failed on three occasions to break a filibuster in opposition, and no vote
occurred on the bill.
In the 106th Congress, the House again passed the Shays-Meehan bill (H.R.
417). Supporters of the companion McCain-Feingold bill initially introduced S. 26,
much the same bill as its final version in the 105th Congress. They later introduced
a much narrower version (S. 1593), focusing largely on party soft money but
dropping the issue advocacy and other provisions. This version was debated in
October 1999 but failed to break a filibuster in opposition. Reform supporters
succeeded, however, in enacting a law to require disclosure by tax-exempt political
organizations under Section 527 of the Internal Revenue Code.
In the 107th Congress, the long stalemate over campaign finance reform was
broken when Congress enacted BCRA. The Senate passed S. 27 (McCain-Feingold)
on April 2, 2001, by a vote of 59-41, after a two-week debate which added 22
amendments on the floor and rejected 16 others. The Senate also defeated S.J.Res.
4 (Hollings-Specter), a constitutional amendment to allow mandatory campaign
spending limits, by a 40-56 vote on March 26, 2001. Although Senate passage
marked a major breakthrough, the measure appeared to be stalled in the House in
2001, when the House rejected (by 203-228) the proposed rule for consideration on
July 12. Supporters of Shays-Meehan filed a discharge petition to force
reconsideration and, on January 24, 2002, secured the last four needed signatures.
On February 13, 2002, the House passed H.R. 2356 (Shays-Meehan) by a 240-189
vote, after including four perfecting amendments and rejecting two substitute and
eight perfecting amendments. On March 20, the Senate passed H.R. 2356 by a 60-40
vote, and President Bush signed the measure into law on March 27, as P.L. 107-155.
Also in the 107th Congress, P.L. 107-276 was enacted to relieve 527 tax-exempt
political organizations that operate at the state and local levels from reporting
requirements enacted in 2000 and to improve IRS dissemination of federally filed
reports under that law.
The 108th Congress was a transitional one in terms of campaign finance issues,
as the political community adjusted to the newly enacted BCRA and watched the
courts for rulings on its constitutionality. This matter was settled on December 10,
2003, when the Supreme Court, in McConnell v. FEC (549 U.S. 93), upheld the
constitutionality of key provisions of BCRA, dealing with soft money and
electioneering communications. The issue of 527 political organizations, which
emerged as strong forces in the wake of BCRA, occupied some congressional
attention, with hearings held on the subject in the House Administration and Senate
Rules and Administration Committees and bills introduced by supporters of BCRA
to apply federal election law regulation to such groups involved in federal electionrelated activities.
In the wake of the 2004 elections, when some $435 million was spent by 527
organizations outside federal election law regulation, the 109th Congress examined
the role of 527 groups in federal elections. On March 8, 2005, the Senate Rules and
Administration Committee held a hearing on S. 271 (McCain-Feingold-Lott), a bill
to require that 527s involved in federal elections comply fully with federal election
law, and on April 27, it voted to report the bill, as amended in committee. On May
17, that bill was reported as an original bill — S. 1053 — and placed on the Senate’s
The House Administration Committee held a hearing April 20, 2005, on
regulation of 527 organizations, which focused on H.R. 513 (Shays-Meehan), the
companion to S. 271 (which became S. 1053), and H.R. 1316 (Pence-Wynn). In
sharp contrast with the bill reported in the Senate, H.R. 1316 sought to address the
527 issue indirectly, by loosening restrictions on funding sources within FECA. By
so doing, proponents maintained that there would be less of an incentive for political
money to flow to 527 groups operating outside the framework of FECA. On June 9,
2005, House Administration voted to report H.R. 1316, as amended; it was reported
on June 22.6 On June 29, the committee held a markup of H.R. 513 (Shays-Meehan),
and ordered it reported (as amended to reflect the sponsors’ changes), without
recommendation,7 thus setting the stage for a floor debate on the two contrasting
measures. Such a debate never occurred, however.
On April 5, 2006, the House passed H.R. 513 (Shays-Meehan), as amended, by
a 218-209 vote. The rule under which it was considered — H.Res. 7558 — allowed
one floor amendment, by Representative Dreier, to remove political partycoordinated expenditure limits. This was added by voice vote before final passage.
The text of H.R. 513 was also incorporated into the House Republican
leadership’s lobby and ethics reform bill — H.R. 4975 (Dreier). As introduced, Title
VI of the bill incorporated the language of H.R. 513 as reported by the House
Administration Committee. In addition, it included one provision unrelated to 527s,
to remove the political party-coordinated expenditure limits in 2 U.S.C. §441a(d).
Prior to House passage of H.R. 4975, an amendment was included by the House
Rules Committee to prohibit leadership PACs from converting funds to personal use
but to allow them to transfer unlimited funds to national party committees (as is the
case with funds in principal campaign committees). On May 3, 2006, the House
U.S. Congress, House Committee on House Administration, 527 Fairness Act of 2005,
report to accompany H.R. 1316, 109th Cong., 1st sess., H.Rept. 109-146 (Washington: GPO,
U.S. Congress, House Committee on House Administration, 527 Reform Act of 2005,
report to accompany H.R. 513, 109th Cong., 1st sess., H.Rept. 109-181 (Washington: GPO,
U.S. Congress, House Committee on Rules, Providing for Consideration of H.R. 513, 527
Reform Act of 2005, report to accompany H.Res. 755, 109th Cong., 2nd sess., H.Rept. 109-404
(Washington: GPO, 2006).
passed H.R. 4975, the Lobbying Accountability and Transparency Act of 2006,
which included the text of H.R. 513 (Shays-Meehan), as well as the amendments on
leadership PACs and party coordinated expenditures. After passing H.R. 4975, the
House substituted it for the text of S. 2349, the Senate-passed version of the bill, to
enable a conference with the Senate. The Senate-passed bill did not contain the 527
provisions, and the Senate resisted considering 527s in the context of ethics reform.
This conflict between the House and Senate kept the issue from being resolved in the
On other 109th Congress issues, a provision allowing leadership PACs to
transfer unlimited funds to national parties was added in committee to the
Transportation-Treasury-HUD-Judiciary-DC appropriations bill for FY2006 (H.R.
3058). Following a move by BCRA sponsors, the Senate deleted the provision by
unanimous consent on October 17, 2005.
Also, the Senate Indian Affairs Committee held a hearing February 8, 2006, to
examine rules governing campaign contributions by Indian tribes, in response to large
sums of money given in recent elections and concerns over the application of federal
campaign finance law thereto. In its final report on its investigation of lobbying and
political activities by Indian tribes, the committee recommended requiring Indian
tribes making federal election contributions to register with the FEC and improving
rules for disclosure of those contributions.9
The issue of regulation of Internet communications was addressed at a House
Administration Committee hearing September 22, 2005. On November 2, the House
failed to approve a measure to exempt Internet communications from regulation
under federal campaign finance laws. H.R. 1606 (Hensarling) was brought up under
suspension of the rules but failed on a 225-182 vote. On March 9, 2006, the House
Administration Committee ordered the bill favorably reported,10 and it was expected
to be considered by the House on March 16, but that vote was postponed. On March
27, the FEC approved new regulations to regulate only paid advertisements placed
on another’s website, thus addressing much of the concern expressed about Internet
regulation. On March 29, House Majority Leader Boehner announced that
consideration of H.R. 1606 would be postponed indefinitely.
In all, 51 bills (43 House and 8 Senate) were introduced in the 109th Congress
to change federal campaign finance law.
Although campaign finance has yet to emerge as a major issue in the 110th
Congress, the Senate’s consideration of S. 1, the Ethics Reform bill, touched upon
U.S. Congress, Senate Committee on Indian Affairs, “Gimme Five”: Investigation of
Tribal Lobbying Matters, final report, 109th Cong., 2nd sess., June 22, 2006; at
[http://www.indian.senate.gov/public/_files/Report.pdf], visited July 21, 2006.
U.S. Congress, House Committee of House Administration, Online Freedom of Speech
Act, report to accompany H.R. 1606, 109th Cong., 2nd sess., H.Rept. 109-389 (Washington:
several aspects of campaign finance practices as they pertained to lobbyists. Several
campaign finance-related amendments were incorporated into S. 1, which passed the
Senate January 18, 2007 by a 96-2 vote.11 As passed, S. 1 contains provisions to
amend FECA to exempt air travel by federal candidates on private
airplanes from definition of “contribution” under FECA (and thus
not subject to source prohibitions and limits) only if reimbursement
is provided at the fair market value, based on the private charter rate;
amend Senate Rules to prohibit Senators from being honored during
national party conventions at events sponsored by registered
require registered lobbyists to disclose on required reports relevant
information (including names and dollar amounts) on federal
candidates, party committees, and leadership PACs for whom they
sponsored fundraisers, made contributions to, and collected
contributions or otherwise arranged for contributions to be made
require that information disclosed on lobbyists’ reports be made
available on a public database, with links to relevant information
filed with the Federal Election Commission; and
require the newly established Commission to Strengthen Confidence
to report to Congress on campaign contributions made by specified
entities during a specified period.
Two other proposed campaign finance-related amendments to S. 1, both offered by
Senator Vitter, were tabled by the Senate: amendment 5, to require Indian tribes to
set up political action committees to make campaign contributions, rather than using
tribal treasury funds; and amendment 6, to prohibit immediate family of federal
candidates on the payroll of their principal campaign committees or leadership
On March 28, 2007, the Senate Rules and Administration Committee
unanimously voted to report S. 223 (Feingold), to require electronic filing of Senate
candidates’ campaign disclosure reports. The measure was placed on the Senate
On April 18, 2007, the Senate Rules and Administration Committee held a
hearing on S. 1091 (Corker), a bill to eliminate limits on political party coordinated
expenditures (i.e., expenditures made by a party in coordination with a candidate’s
campaign, subject to limits since the 1974 FECA Amendments). The limits are
“Legislative Transparency and Accountability Act of 2007,” Congressional Record, daily
edition, vol. 153 (Jan. 18, 2007), p. S746.
“Legislative Transparency and Accountability Act of 2007,” Congressional Record, daily
edition, vol. 153 (Jan. 10, 2007), pp. S343-344..
relatively high compared with limits on contributions, with typical House candidates
eligible for $79,200 in 2006 and a Senate candidate as much as $4.2 million (in
California) that year. Ever since the Supreme Court ruling in Colorado Republican
Federal Campaign Committee v. FEC (518 U.S. 604 (1996)), which permitted parties
to make independent expenditures on behalf of their candidates, the importance of
coordinated expenditures has been diminished. The prospect of unlimited
independent expenditures has been increasingly appealing to the parties, and it has
become common for parties to make both independent expenditures and coordinated
expenditures for the same candidates, albeit from at least nominally different
departments of a party committee. In 2006, Democratic party committees (federal,
state, and local) made $20.7 million in coordinated expenditures and $108.1 million
in independent expenditures to promote their federal candidates; Republican party
committees made $14.2 million in coordinated expenditures and $115.6 million in
BCRA had contained a provision to require a party to choose making either
independent expenditures or coordinated expenditures, but not both, for one of its
nominees; this, however, was one of two BCRA provisions struck down by the
Supreme Court in McConnell v. FEC (549 U.S. 93(2003)). Hence, while abolishing
the limit on coordinated expenditures would appear to allow the parties to spend
unlimited amounts on behalf of their candidates, they already have that right, albeit
through expenditures that are technically made without any coordination with the
favored candidate. Supporters of removing the limits assert that doing so would
largely indicate acceptance of the current reality and allow parties to reinforce their
direct ties with candidates. Opponents assert that this would send the wrong message
to an electorate cynical about the role of money in politics and also that the national
parties are now playing a significant role, especially in light of increased hard money
limits under BCRA. In the 2004 election cycle, the first conducted after the soft
money prohibition went into effect, nearly $1.5 billion was raised by party
committees (all hard money), more than ever had been raised in combined hard and
soft money by the national parties.
Thus far in the 110th Congress (as of April 19, 2007), 41 bills (12 in the Senate
and 29 in the House) have been introduced to make changes in campaign finance law
or related campaign practices. Two of them, H.R. 420 and S. 463, the 527 Reform
Act of 2007, are essentially the proposal passed twice by the House in the 109th
Congress (see summary below) and which reform supporters consider unfinished
business for the 110th Congress to address.
Major Legislation in 110th Congress
H.R. 420 (Meehan-Shays) — 527 Reform Act of 2007.
Includes in definition of political committee any IRC §527
organization, unless it: (1) has annual gross receipts of less than
$25,000; (2) is a political committee of a state or local party or
candidate; (3) exists solely to pay certain administrative expenses or
expenses of a qualified newsletter; (4) is composed solely of state or
local officeholders or candidates whose voter drive activities refer
only to state/ local candidates and parties; or (5) is exclusively
devoted to elections where no federal candidate is on ballot, to nonfederal elections, ballot issues, or to selection of non-elected
Makes last exemption (above) inapplicable if the IRC §527
organization spends more than $1,000 for: public communications
that promote, support, attack, or oppose a clearly identified federal
candidate within one year of the general election in which that
candidate is seeking office; or for any voter drive effort conducted
by a group in a calendar year, unless: (1) sponsor confines activity
solely to one state; (2) non-federal candidates are referred to in all
voter drive activities and no federal candidate or party is referred to
in any substantive way; (3) no federal candidate or officeholder or
natl. party official/agent is involved in organization’s direction,
funding, or spending; AND (4) no contributions are made by the
group to federal candidates;
Codifies 2005 FEC regulations and makes them applicable to 527s
not affected by current rules;
Allows contributions to non-federal accounts making allocations
(above) only by individuals and subject to limit of $25,000 per year;
prohibits fundraising for such accounts by national parties and
officials and federal candidates and officeholders;
States that this act shall have no bearing on FEC regulations, on any
definitions of political organizations in Internal Revenue Code, or on
any determination of whether a 501(c) tax-exempt organization may
be a political committee under FECA;
Provides special expedited judicial review procedures, similar to
BCRA’s, for a challenge on constitutional grounds, and allows any
Member to bring or intervene in any such case.
Introduced January 11, 2007; referred to Committee on House Administration.
S. 223 (Feingold) — Senate Campaign Disclosure Parity Act
Requires Senate candidates’ disclosure reports to be filed electronically.
Introduced January 9, 2007; referred to Committee on Rules and Administration.
March 28, 2007, unanimously reported by Rules and Administration Committee, as
amended, and placed on Senate legislative calendar.
S. 463 (McCain-Feingold) — 527 Reform Act of 2007.
Identical to H.R. 420. Introduced January 31, 2007; referred to Committee on
Rules and Administration.
S. 1091 (Corker) — Campaign Accountability Act of 2007
Repeals limits on political party coordinated expenditures. Introduced April 11,
2007; referred to Committee on Rules and Administration. April 18, 2007, hearings
held in Rules and Administration Committee.
For Additional Reading
CRS Report RS21176, Application of Campaign Finance Law to Indian Tribes, by
L. Paige Whitaker and Joseph E. Cantor.
CRS Report RL31402, Bipartisan Campaign Reform Act of 2002: Summary and
Comparison with Previous Law, by Joseph E. Cantor and L. Paige Whitaker.
CRS Report RS21693, Campaign Finance Law: The Supreme Court Upholds Key
Provisions of BCRA in McConnell v. FEC, by L. Paige Whitaker.
CRS Report RL33836, Campaign Finance Legislation and Activity in the 109th
Congress, by Joseph E. Cantor and R. Sam Garrett.
CRS Report 97-1040, Campaign Financing: Highlights and Chronology of Current
Federal Law, by Joseph E. Cantor.
CRS Report RS22272, Campaign Finance Reform: Regulating Political
Communications on the Internet, by L. Paige Whitaker and Joseph E. Cantor.
CRS Report RL30669, Campaign Finance Regulation Under the First Amendment:
Buckley v. Valeo and Its Supreme Court Progeny, by L. Paige Whitaker.
CRS Report RS22644, Coordinated Party Expenditures in Federal Elections: An
Overview, by R. Sam Garrett and L. Paige Whitaker.
CRS Report RL32954, 527 Political Organizations: Legislation in the 109th
Congress, by Joseph E. Cantor and Erika Lunder.
CRS Report RS21716, Political Organizations Under Section 527 of the Internal
Revenue Code, by Erika Lunder.
CRS Report RL33814, Public Financing of Congressional Elections: Background
and Analysis, by Joseph E. Cantor and R. Sam Garrett.
CRS Report RL33888, Section 527 Political Organizations: Background and Issues
for Federal Election and Tax Laws, by Joseph E. Cantor, Erika Lunder, and L.
CRS Report RL33377, Tax-Exempt Organizations: Political Activity Restrictions
and Disclosure Requirements, by Erika Lunder.
CRS Report RL32786, The Presidential Election Campaign Fund and Tax Checkoff:
Background and Current Issues, by Joseph E. Cantor.