The 527 Problem . . . And the Buckley Problem

Abstract

In the world of campaign finance, 2004 was surely the year of the 527 committee. Named after the section of the Internal Revenue Code under which they are organized, 527s raised and spent more than $400 million, accounting for between a fifth and a fourth of total presidential election spending. Coming shortly after the Congress's enactment, and the Supreme Court's approval of the Bipartisan Campaign Reform Act (BCRA) of 2002, the rise of the 527s has been seen as an evasion of BCRA and a return of the soft money problem that BCRA was supposed to have solved. Congress is currently considering bills to more closely regulate 527s and to cap donations to them.

This Article traces the history of the 527s, examines their role in the 2004 election, and considers the constitutional questions raised by pending proposals to regulate them. It finds that although the explosive growth in 527s in 2004 directly followed BCRA's limits on political party soft money, gifts to 527s did not simply substitute for money that otherwise would have gone to the parties. Whereas many soft money gifts to the parties were clearly intended to win the donors influence with elected officials, the goals of 527 givers were more ideological. Corporations gave 527s far less money than they had previously given to the parties, while a handful of super-wealthy individual megadonors gave 527s far more than their previous soft money gifts. 527s do not clearly implicate the corruption concerns triggered by soft money, but they do raise important questions about the role of extremely large donations in our political system.

Pending proposals to treat 527s as political committees under the Federal Election Campaign Act (FECA), and apply FECA's disclosure requirements and limits on corporate and union donations to 527s are likely to be found constitutional. The far more difficult question is whether Congress can limit the size of contributions to 527s. Surprisingly, that has little to do with the nature of the new 527s, but rather traces back to an unresolved tension at the heart of Buckley v. Valeo, in which the Court upheld contribution limits because they present a danger of corruption and the appearance of corruption but invalidated expenditure limits because expenditures raise no corruption danger. The Court has never clearly addressed whether it is constitutional to limit contributions to organizations that only make independent expenditures and do not give money to candidates.

Capping donations to 527s that only make expenditures does not fit easily under Buckley's anti-corruption paradigm. The Article presents three theories that would support limits on very large individual donations to 527s: (i) empirically, treating the web of informal relations between 527s and political parties as demonstrating that at least some 527s are arms of the parties, so that they can be regulated like parties; (ii) broadening the definition corruption to include the consequences of the gratitude a candidate is likely to feel for spending that benefits him, even if the spending is not coordinated with his campaign; and (iii) reconsidering Buckley's rejection of controlling the political role of wealth inequality as a basis for limiting spending. The third argument would be the most radical departure from Buckley, but it comes closest to capturing the particular challenge posed by the 527s.