A “Section 527 Committee” is a
entity organized under Section 527 of the Internal Revenue Code to
raise money for political activities other than "express advocacy" for the election of a particular federal
House, Senate, or Presidential) candidate.
(Express advocacy is considered to be the domain of political action committees, or PACs, whereas 527s are technically supposed to be independent of, and unaffiliated with, any candidate.) Most
527s are run
by special-interest groups and are
used for raising “soft money,” which they are permitted to
collect from donors in unlimited amounts, and which they can
subsequently funnel to the political party (not to the candidate) of their choice – also
in amounts unbound by any legal limits.
The terms "soft money" and its counterpart, "hard money," date back to the 1970s, when the financing of political campaigns was altered dramatically by the Federal
Election Campaign Act of 1974 (FECA).
Act strictly limited the amount of money which any donor could give
directly to any single candidate or PAC in a federal election – no
than $1,000 per year to any candidate, and no more than $5,000 per
year to any PAC. Such
donations – earmarked for the "express advocacy" of a specific candidate's campaign – became known as “hard-money” donations.
“Soft-money” donations, by contrast, were those given to political parties
(not to candidates or PACs) for purposes other than express
advocacy for a specific candidate -- e.g., “voter
education and mobilization,” “issue-oriented” political advertising,
“party-building” activities, and other such nebulous enterprises.
hard-money contributions, there were no legal limits on the amounts of
soft money that any individual or PAC can give to a party.
A footnote in the Supreme
Court's 1976 Buckley
v. Valeo decision defined the precise circumstances under which hard and soft money could, and could not, be used by a party to bankroll political advertising. The Buckley
footnote identified a set of “magic
which, if used in conjunction with a candidate's name in political
ads, would signal that those ads would
have to be paid for with hard money rather than soft. The "magic words"
included: “vote for,” “elect,” “support,” “cast your
ballot for,” “for Congress,” “vote against,” “defeat,” and “reject.” Many political
operatives assumed that unless their advertising used these exact words, they technically were not engaged in express
advocacy and thus were not bound by FECA's restrictions governing hard-money collection.
the distinction between outright electioneering (i.e., express advocacy)
on the one hand, and “voter education”
or “party-building” on the other, was often difficult – even
impossible – to discern. For example, as noted above, a political
party was required to use hard-money contributions, which were limited
and regulated, to pay for a TV ad that explicitly urged voters to
cast their ballots for a specified candidate. However, if the ad
simply displayed an image of that candidate without
mentioning him or her by name, and simultaneously encouraged voters
to support that candidate's party, soft money could be used to pay for
2002, the newly passed McCain-Feingold
reform bill forbade political parties from collecting any soft money at all from
individual donors. To mitigate the impact of this prohibition, the bill raised the limit on individual hard-money
contributions from $1,000 per candidate each year to $2,000.
McCain-Feingold -- which would be invalidated as an infringement on free speech by the Supreme Court in 2010 -- failed to address the issue of 527s, which, unlike PACs, remained free to continue raising soft money. At that point, Democrats took the lead in making extensive use of 527s -- which are sometimes referred to as "stealth PACs" -- as major fundraising vehicles with which to circumvent the constraints imposed by McCain-Feingold. The Democrats reasoned that as long as they (a) refrained from coordinating
their candidates' activities directly with those of the 527s, and (b) refrained from uttering the “magic words” as defined by Buckley,
they could raise as much money as they wanted through 527s.
it was the Democrats -- and George Soros in particular -- who had been pushing McCain-Feingold for
They knew the law's loopholes and weaknesses intimately, and were ready to
exploit them the moment the legislation was passed.