‘More Loophole than Law’: A Case for the Repeal of I.R.C. § 527


This note advocates the repeal of I.R.C. § 527, which provides a tax exemption for organizations involved in election-related activity. The groups which operated under § 527 in the 2004 election include the Swift Boat Veterans for Truth, MoveOn.org, and American Coming Together. The note discusses how § 527 escaped regulation under both the Federal Election Campaign Act of 1971 and the Bipartisan Campaign Reform Act of 2002 (popularly known as McCain-Feingold). It examines the political reasons why the Federal Election Commission has not attempted to reform § 527. As a result, 527 groups have acted largely without federal oversight in the last two Presidential elections. The note argues that the recent activities of 527 groups meet the Supreme Court’s evolving definition of corruption. It also argues that, despite the objections of critics of campaign finance reform, the repeal of § 527 would not violate the First Amendment. The note concludes with a discussion of the political realities which will drive the regulation (or repeal) of § 527 in the second Bush administration.


Law and Politics | Legislation | Tax Law

Date of this Version

February 2005