Campaign Reforms May Hurt Nonprofit Groups

Leslie Lenkowsky

Public-interest groups and their foundation supporters have been among the chief forces pushing for limits on contributions to election campaigns as a way to reduce the influence of special-interest money in politics. But their efforts could come back to haunt them by limiting the participation of nonprofit groups in electoral campaigns and narrowing the range of views expressed during elections.

The prospect of the federal government’s imposing limits on charities and advocacy groups that get involved in the political process stems from a change in the meaning of the word “campaigning” that was contained in the Bipartisan Campaign Reform Act of 2002.

Before the passage of the campaign-finance law, only direct appeals to vote for or against a candidate for federal office — what was known as “express advocacy” — were subject to regulation. Other efforts that might affect elections — such as publicizing a candidate’s record on environmental measures or urging voters to cast their ballots for candidates who believed in certain principles — were considered “issue advocacy,” outside the reach of the Federal Election Commission. That meant they could be paid for by “soft” money — contributions that exceeded the limits for donations to support candidates — and that the names of the donors need not be revealed.

The 2002 law changed that by including money spent on activities that served to promote, support, attack, or oppose any clearly defined candidate for federal office as campaign expenditures. That expanded definition passed muster with the Supreme Court and was reaffirmed by the Federal Election Commission in February.

The implications vary for the different types of tax-exempt groups that are active in politics.

For organizations that were formed to carry out political goals, classified under Section 527 of the tax code, the commission’s opinion will make raising and spending money more difficult.

Even though such groups only sponsor issue-oriented ads or publications, and do not endorse candidates for federal office, they will not be able to accept unlimited contributions from any one donor if their activities clearly favor one candidate over another. For example, instead of the millions of dollars the philanthropist George Soros said he would donate to issue-oriented anti-Bush organizations, he might now be limited to no more than $5,000 for each (or whatever limits the commission ultimately sets).

Since charities, governed by Section 501(c)(3) of the tax code, are legally prohibited from helping candidates for political office, and advocacy groups constituted under Section 501(c)(4) can do so only through a separate political committee, the Federal Election Commission says that its rules on campaign contributions do not apply to them. But the line between what these organizations are permitted to do and what the law considers as election activities has become increasingly blurry. The situation is further muddied by a debate at the Federal Election Commission — and a court lawsuit challenging exemptions of nonprofit groups — over just how far the 2002 law should go in covering tax-exempt groups.

The Internal Revenue Service, which determines what types of political activities tax-exempt groups can undertake (rather than how they are financed) has tried to draw a clear line. It defined “electioneering communications” as those made during an election that identify a person as a candidate, are aimed at voters, contrast the candidate’s positions on issues with those of others, and are not part of a series of issue-oriented communications on the same subject. Charitable organizations cannot sponsor those types of communications, and advocacy groups can do so only through their political committees, which would be regulated by the Federal Election Commission. By contrast, “genuine issue advocacy,” the IRS said, identifies the candidate solely as a sponsor of the legislation or in a position to influence public policies and focuses on specific legislation or events that occur in a specific time frame, such as a Congressional hearing or the time during which a regulatory agency solicits comments from the public on a pending action.

In a political era of permanent campaigns, this is a distinction that can be contested. Moreover, with most elections pitting an incumbent against a challenger, ads or publications designed to inform the public about an officeholder’s stance will inevitably have the effect of promoting, supporting, attacking, or opposing a candidate. In addition, organizations that regularly communicate about policy issues will have to think twice about intensifying their efforts as Election Day nears (on the reasonable theory that the public and the candidates are more likely to be paying attention) if they want to avoid breaching the wall of separation between advocacy and campaigning the IRS has tried to construct.

If the uncertainties about what constitutes “genuine issue advocacy” prompt the Federal Election Commission to change its position and propose rules to regulate politicking by nonprofit organizations other than those formed under Section 527, the way public-interest groups participate in the political process could change significantly.

Advocacy organizations, for example, might need to rely more on separate political committees to support their election activities, with donations to them limited to the amounts allowed under the campaign-finance laws. Charitable organizations could have to curtail programs now considered educational or informational, but which, under the broadened definition, would fall into the forbidden area of campaigning. The identities of supporters of activities reclassified as election-oriented would have to be disclosed as well, raising the possibility that backing for especially controversial causes might decline.

Despite the extra administrative and fund-raising burdens new restrictions will create, if all organizations participating in the political process face the same set of election rules, it might seem hard for anyone to complain. But as campaign-finance reformers understand, some groups — and the candidates or issues they support — will fare better than others under the same rules. Democrats have been particularly upset over the commission’s limits on donations to Section 527 groups, for example, since they believe that Republicans now have an advantage in obtaining contributions.

Since the premise of campaign-finance laws was that special interests could raise funds more readily than public-interest groups, subjecting both to similar restrictions is likely to be more harmful to the latter — and the often unrepresented people for whom they try to speak.

Although it has not yet come to pass, three decades of efforts to take the money out of politics are leading us in that direction. What started out as an effort to enrich public debate may instead impoverish it.

Leslie Lenkowsky is professor of public affairs and philanthropic studies at Indiana University and a regular contributor to these pages. His e-mail address is llenkows@iupui.edu

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