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Congress Passes New “Stealth PAC” Disclosure Law

Oct. 18, 2002

Congress Passes New “Stealth PAC” Disclosure Law

Bill Will Put More Sunshine on Groups That Will Be Soft Money Magnets After November 6

WASHINGTON, D.C. – Public Citizen today applauded final passage of legislation to significantly enhance public disclosure of contributions to and expenditures by stealth political action committees known as “Section 527” groups. The new disclosure law, H.R. 5596, is expected to be signed by President Bush.

Public Citizen earlier published a study detailing serious weaknesses in the current disclosure system and worked with a number of other groups to help forge this bipartisan law, which was sponsored by U.S. Sens. Joe Lieberman (D-Conn.) and Kay Bailey Hutchison (R-Texas) and U.S. Reps. Kevin Brady (R-Texas) and Lloyd Doggett (D-Texas).

“Last night, Congress took another significant step forward to promote full and open disclosure of how special interests are influencing elections,” said Public Citizen President Joan Claybrook. “Much more work needs to be done before anyone can say our campaign system is based on open and honest debate, rather than special interest money, but we’re getting closer.”

There are two types of 527 groups – those connected to politicians and parties, and those connected to interest groups. Public Citizen’s analysis of the 150 largest Section 527 groups has found that in the past two years they have raised a total of more than $150 million. That amount is expected to grow significantly after the Bipartisan Campaign Reform Act, which prohibits political parties from accepting soft money, takes effect on November 6.

“It was imperative that Congress pass this new legislation,” said Frank Clemente, director of Public Citizen’s Congress Watch. “Section 527 groups will soon be a soft money magnet, as they are one of the few places special interests can send their contributions after the November election.”

Key provisions of the bill will:

  • Enhance the quality of information that 527 committees must report. Previously, Section 527 committees filed ambiguous reports of their financial activity that did not even include the purpose of a particular payment. With this new law, 527s will have to describe the purpose of each expenditure as well as the date of each contribution.
  • Mandate electronic filing and disclosure of 527 financial reports. What little information 527 committees did file with the Internal Revenue Service was usually unavailable to the public for months afterward. H.R. 5596 will fix this by mandating electronic filing for rapid posting on the IRS Web site and requiring the IRS to make significant improvements to its Web site so that the data are offered in a searchable and downloadable format.
  • Streamline reporting requirements for 527s. Since these committees must file with the IRS instead of the Federal Election Commission (FEC), many of the reporting requirements are duplicative. This law ends some of the unnecessary reporting that burdens state and local political committees and some federal committees that are already filing with the FEC.

“With this law’s passage, the grossly inadequate IRS disclosure system will be brought closer to FEC standards by providing some much-needed sunshine,” Claybrook said. “We owe a debt of gratitude to the chief sponsors of this legislation – Sens. Lieberman and Hutchison and Reps. Brady and Doggett – who worked hard for its passage.”

For further information on H.R. 5596 and the genesis of Section 527 committees, click here.