527s vs. 501(c)4

Law, Politics, The Economy

There has been a lot of talk about how hypocritical Bush is for asking Kerry to disavow 527s (such as As Nick Confessore writes:

If President Bush is opposed to 527s, somebody better tell his senior campaign staff, and quick.

It is certainly true that the Republicans now rely upon 527s as much as the Democrats, and that Bush deliberately avoided closing the 527 loophole” when he signed the campaign finance law a few years ago. However, what all this discussion (see Matthew Yglesias, and Atrios) misses is that the Republicans have had an advantage using an entirely different entity: 501(c)4s. Unlike the more widely known 501(c)3s which are charitable institutions,

donors cannot deduct the contributions from their taxable income. However, such organizations are free to spend as much of their funds as they like lobbying on legislation.

In fact, one of the main reasons Republicans not fighting harder against 527s, is that it would have brought too much attention on 501(c)4s, such as the National Rifle Association (NRA). Although there are some restrictions which make fundraising harder for 501(c)4s, such as higher taxes, they are actually much less accountable than are 527s:

Most 527 groups are not required to file regular disclosure forms with the FEC, but they are required to file with the states in which they are located or the Internal Revenue Service, and they must identify their donors. That is not true for other sorts of non-profit groups, including the kind so far favored by Republicans. Those groups, referred to as 501(c)3s and 501(c)4s, face stiffer taxes than 527s but are not required to disclose their funding sources.

Interestingly, on both sides a lot of organizations have changed their status one way or the other between these two types of organizations.
Here is a handy list of some of the major 527, 501(c)3/4, PAC, etc. in this year’s election.

And make sure to read this post on Sisyphus Shrugged, from which I found this Mother Jones article on the subject.