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Secret, Unrestricted Gifts Finance New GOP Groups
Efforts Test Boundaries of Campaign Laws

By Juliet Eilperin
Washington Post Staff Writer
Saturday, January 8, 2000; Page A01

A senior House Republican has quietly created a new political organization that allows anonymous donors to contribute unlimited sums to a project aimed at boosting the GOP's image, marking the latest effort by lawmakers to test the boundaries of campaign law.

The organization, launched by House Republican Conference Chairman J.C. Watts (Okla.), is conducting an extensive Madison Avenue-type polling campaign to tell Republican leaders how Americans "view the brand" of the GOP.

The Watts group, Securing America's Families Everyday (SAFE), has raised more than $200,000 since its October launch. Watts, who declined requests to identify the donors, has personally solicited big GOP givers and headlined a fund-raiser for SAFE at a private business club in Houston in November.

SAFE, whose existence has not been previously reported, is the latest example of an increasingly popular--and controversial--new breed of political organization.

The groups, known as 527 organizations for the provision of tax law under which they are created, argue that they can accept limitless funds without disclosing who made the donations or how the money is spent. That is because while the groups qualify as political committees under the tax code and can engage in extensive political activities, they say that they do not fall under the domain of the Federal Election Commission because they do not directly intervene in elections.

The development has alarmed advocates of tighter campaign finance laws, who see the 527 organizations as a way for political committees to operate without any public disclosure and with few real limits on the kinds of political activities they can engage in--from get-out-the-vote efforts to issue advertising campaigns to polling.

"This is a growth area for evasion of campaign finance laws," said Common Cause general counsel Donald J. Simon. He noted that such groups enjoy the benefit of avoiding paying taxes on the contributions they receive without having to comply with the strict reporting rules imposed by the FEC on other types of political committees.

SAFE is the third GOP-affiliated group under Section 527 to be founded this election season. Last year, advisers close to House Majority Whip Tom DeLay (R-Tex.) started the Republican Issues Majority Committee, which aims to raise $25 million for a get-out-the-vote campaign in two dozen districts. Another group, Citizens for the Republican Congress, is affiliated with former House member Pat Saiki (R-Hawaii) and hopes to launch a national media campaign promoting the GOP agenda.

Groups with ties to elected officials raise an additional wrinkle because of the concerns that donors may be seeking to curry favor without having their identities disclosed.

"We have an elected official, with power and influence and the ability to do favors for undisclosed donors," raising the money, said Fred Wertheimer of Democracy 21, which lobbies for tighter campaign finance laws. "When you get to the notion of undisclosed, unlimited money floating around politics, you're in the ultimate danger zone."

The Section 527 device offers significant benefits. A lawmaker's political action committee, for example, can only accept $10,000 each election cycle from any one source. In addition, the PACs can't take money directly from corporations and labor unions, and must report their donations and expenses to the FEC.

Mark Braden, the lawyer who helped set up SAFE, said, "I think [it's] pretty obvious this is a device to raise additional funds than would be available to a political action committee."

Until recently, Section 527 groups were mostly established political organizations like the Democratic and Republican National Committees, and other political groups that also filed with the Federal Election Commission. James Bopp Jr., a GOP election lawyer who represents the Republican Issues Majority Committee, said activists are increasingly turning to these groups because the IRS has begun cracking down on political activity by organizations that had filed for tax-exempt status under Section 501(c)4 of the tax code.

These new groups claim that while they are political organizations for tax law purposes, they are not so political that they have to file with the FEC.

For example, the Christian Coalition reorganized in part as a 527 political organization last year after the IRS delayed acting on its application for Section 501(c)4 status.

Both types of committees enjoy tax-exempt status, meaning their donations are not treated as income subject to taxes. But groups that reorganize as 527 committees actually enjoy a tax advantage, because large donations to them are not subject to gift taxes either, unlike contributions to 501(c)4s.

While tax-exempt organizations with GOP ties have attracted public attention in recent months, groups on the other end of the ideological spectrum have also been taking advantage of the tax code. The Sierra Club, for example, established a 527 group in 1996 and has spent more than $50,000 in the past two months on ads in New Hampshire targeting presidential candidate George W. Bush's environmental record.

Watts said his new organization is an important component of the GOP's effort to retain control of the House. Watts, who is currently weighing a decision to retire, has publicly called for the GOP to go on the political offensive this year.

If the GOP does not focus enough on its rapport with voters, Watts said, "We run the risk of losing the majority."

David Winston, a pollster at Fabrizio, McLaughlin who is conducting SAFE's research on issues like education, health care and Social Security, said the project treats the GOP as a "brand" of products being sold to the American public.

"What SAFE is trying to do," Winston said, "is give Republican leaders and the House Republican Conference a better conception of how people view the brand and how they view the issues."

© Copyright 2000 The Washington Post Company

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