Having fined a series of organizations for breaking the law against illegal "527" and other unregistered organization activity, the Commission has now more systematically explained the law that they violated.  The agency’s purpose is the broader one of justifying, for a judge among others, its decision in 2004 not to promulgate a specific rule with a definition of "political committee."  In the statement issued yesterday, the FEC tries to show that the regulations now in place, including rules adopted in 2004, are effective enough.  It elucidates the use of those rules in determining if an organization, a 527 or any other group, is illegaly operating to influence federal elections without complying with federal campaign finance restrictions.

     In brief, the Commission rejects the notion that any "527" is, by virtue of tax status alone, a political committee.  Section 527 is too broad, the organizations it includes too varied in purpose, to serve as the basis for establishing "political committee" identity under the Federal Election Campaign Act.  And this is a shrewd move by the agency—the FEC argues that it should not be bound, in searching for rogue political committees, by any one tax classification.  An unregistered 527 might be a political committee; but so also could be a 501(c)(4).  The FEC gives an example of a recent enforcement action, against just such a (c)(4), to demonstrate that in searching out illicit political committee activity, it will consider the activities of any organization beyond any one tax classification.  And the agency insists that Congress’ record on 527 legislation shows that the legislators never expected that 527s for tax purposes and political committees for campaign finance purposes would be considered more or less the same. 

     The FEC’s test is anchored in the statutory definition of "political committee" with supplemental (and critical) reference to the constitutional standard for distinguishing between regulated and constitutionally protected First Amendment activity.  An organization must have received contributions or made expenditures exceeding $1000 in a calendar year, but it must also have overall the major organizational purpose of influencing federal elections.  If the expenditures are made "independently" of a candidate—and if they were not, they would be contributions—they must contain "express advocacy."  Under one of the agency’s 2004 rules, contributions are deemed to have been received if, among other possibilities, funds are solicited with an indication that they will be used to support or oppose a clearly identified candidate. 

     Now if the contribution or expenditure test is met, what remains is the "major purpose" test, and here the FEC emphasizes that its test is flexible and wide-ranging, compelling it to consider the widest range of factors, such as the public and internal statements of the organization’s purposes, its fundraising appeals, and its spending patterns.  Because it will examine all factors bearing on purpose, the Commission states, it could not have fashioned a rule with a clear and inclusive list of such factors.  All cases are different, "as evidenced by the multitude of fact patterns at issue in the Commission’s [recent] enforcement matters."  Explanation and Justification, Political Committee Status at 27.

    The major purpose test as explained and applied by the agency is one of the constructions that will most concern the regulated community—or even more, unregistered organizations operating outside the sphere of regulation but in the belief that they are doing so legally.  The Commission rightly suggests the significance of another interpretative maneuver central to its regulatory program:  the treatment of "expenditures" made independently of a candidate.  These expenditures must include express advocacy, but the test the Commission has chosen is not limited to identifying "magic words" in a communication—"vote for," "reject," etc.  Under a prong of its regulations only recently brought to new life, it will find the requisite explicitness in the "electoral portion" of a communication that is "unmistakable, unambiguous, and suggestive of only one meaning" about which reasonable people could not differ.  11 C.F.R. § 100.22(b).

     So both terms in the statutory test, "contribution" and "expenditure," are flexibly construed under the agency’s freshly articulated standard, and this flexibility carries over to the determination of "major purpose" on a case-by-case basis.  In effect, once the modest level of contributions or expenditures are found to have been made or received, the agency may embark on what it terms "an extensive examination of the organization."  Explanation and Justification at 40.   This "case-by-case analysis," the Commission maintains, "is incompatible with a one-size-fits-all rule."  Id. at 24.

     The Commission offers organizations that are unsure what this means or how it applies, the advice provided through the Advisory Opinion process.  "Through advisory opinions, the Commission can further explain the application of the law and provide guidance to an organization about how the Commission would apply the major purpose doctrine to its proposed activities."  Id. at 42. 

     Can the reform community plausibly argue, as it most probably will, that the FEC has shown weakness of regulatory will in foregoing a formal "rule" on this subject?  The alternative it has developed for pursuing unregistered organizations is certainly not lacking in the potential for forceful application.  It is complex and, in practical deployment, open-ended:  it reserves to the regulators considerable authority to render judgments as they see fit on any set of facts they may encounter.  The Commission notes that "if a rule singled out 527 organizations, those entities could then either shift the same election-related conduct to a related 501(c)(4) organization that shares common management, or perhaps even reorganize as a section 501(c)(4) organization in order to avoid a rule that singled out 527 organizations."  Id. at 18.

     The FEC to some extent has outflanked its reform critics by refusing to pose the question as one about "527s."  All unregistered organizations of whatever kind that are seen to influence elections—or that are suspected of this activity—will undergo extensive examination.  Or, if they have any doubt about what they are or what they can do, they can check first with the government through an Advisory Opinion request. 

     It would be hard to argue that this is not vigorous regulatory activity and some organizations now or soon facing "extensive examination" might describe it even more forbiddingly.

Bob Bauer