The Latest Campaign Finance Stir Are 527 groups as nonpartisan as they claim to be?
By Peter Carbonara

(MONEY Magazine) – The McCain-Feingold campaign finance law, enacted in 2002, banned the large unregulated contributions to political parties known as soft money. (So-called hard money--individual donations of up to $2,000--is regulated by the Federal Election Commission, or FEC.) But keeping money out of politics is like trying to keep ants out of your kitchen: Plug one hole, and they'll just find another route in.

-- THE "OTHER WAY IN" This election cycle, the other way in is via certain tax-exempt organizations called 527 committees. These groups are supposedly independent of the political parties. They may raise money and use it for things like get-out-the-vote drives and to buy television time to express a political point of view, but not to explicitly endorse a candidate. Giving money to a candidate is forbidden.

-- EQUAL OPPORTUNITY Both sides have 527s, but Democrats have gone for them in a bigger way, at least partly in an attempt to counter the roughly 50-to-1 advantage President Bush has over Sen. John Kerry in the hard-money sweepstakes. As of Jan. 31, the most recent filings available at press time, the President had $104.4 million in the bank to Sen. Kerry's paltry $2.1 million.

Most of the best-known and best-funded 527 groups are associated with Democratic positions (and managed in some cases by Democratic operatives). Among these are, the Media Fund and America Coming Together (ACT). George Soros, the billionaire speculator and political activist, has pledged a donation of $10 million to ACT. Working together, ACT and the Media Fund say they've raised about $75 million. As of Jan. 31 the biggest Republican-leaning 527, the antitax Club for Growth, had raised only about $2.2 million.

-- A CLEVER TACTIC? The key question about 527s is this: Are they the nonpartisan entities that they profess to be, or are they just a clever way to get around the McCain-Feingold ban on soft money? Both of the law's sponsors--Sen. John McCain, a Republican, and Sen. Russ Feingold, a Democrat--have been critical of 527s and have asked the FEC to rein them in. It was scheduled to take up the matter at a meeting in April, but the earliest that any change in the regulations could take effect would be late in June. --PETER CARBONARA