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Editor’s note: Since this article was published in 2005, major changes in election law, particularly the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, have affected the operations of 527 groups. Learn more here about political groups. Click here for the Center for Public Integrity’s latest political coverage.

What is a 527?
A 527 is a non-profit organization formed under Section 527 of the Internal Revenue Code, which grants tax-exempt status to political committees at the national, state and local level. Over the past several years, the term has come to refer to a new form of political organization operating in a gray area of the law. These groups actively influence elections and policy debates at all levels of government, but do not advocate explicitly for election or defeat of candidates. For this document, the definition of “527 organization” is a political committee that files its most complete set of reports with the Internal Revenue Service, not with the Federal Election Commission or its counterparts in the states.

How were 527s created?
These groups are the result of a loophole which was opened more than 25 years ago when the IRS broadened its definition of the types of groups eligible for tax-exempt, non-profit status as political committees. That new definition was more expansive than the FEC’s definition; and it allowed these groups to gain political committee status under tax law, while avoiding regulation under federal election law.

Who starts a 527?
The most common types of 527s are those affiliated with interest groups, unions or associations of elected officials, such as the Republican Governors Association. Many of them have associated federal and sate political committees, and some are affiliated with other non-profit organizations. The Sierra Club, which has at least four separate political and non-profit wings, is one example.

Why start a 527?
A 527 may be affiliated with a formal, incorporated rganization or it may be as simple as a single person and a bank account. The important thing to remember is this: the 527 designation is a tax status. Nothing prevents an organization or individual from raising money without filing as a 527, but 527 status means not having to pay tax on donations. In addition, there may be other state or federal election rules that restrict what can be done with that money. The bottom line: 527 status provides a good deal of flexibility for political committees.

Do 527s have financial restrictions?
Financial restrictions on 527s are very few: there are no upper limits on contributions to these committees, and no spending limits, either. Any type of donor may contribute, from individuals to unions to corporations, even other non-profits. There is no specific prohibition on foreign contributions.

Can 527s help federal candidates?
On the federal level, 527s cannot coordinate with or contribute to a federal candidate in any way. They also may not expressly advocate for the election or defeat of a specific federal candidate, although 527s are quite free to portray federal candidates in such a way that there is little doubt as to the message.

Can 527s help state candidates?
At the state level, the rules are different. Section 527 organizations generally can, and frequently do, give money directly to state and local candidates. In most cases, however, these groups must abide by state laws, which include registering with state elections authorities and filing financial reports disclosing the contributions to state candidates as well as the sources of those contributions. Of course, every state has different rules that govern committees like this.

Are 527s allowed to buy political ads?
Yes, although depending on the content of the ads they may have to file additional disclosure information with the FEC. Advertising involving a federal candidate falls under the federal campaign laws, which apply to all political organizations, including 527s. State laws may also apply to ads featuring state candidates.

Does McCain-Feingold regulate 527s?
Not specifically; the law’s restrictions on coordination with a federal candidate and broadcast advertisements close to the election apply to all political organizations. If a 527 wants to run television or radio ads that mention or reference a federal candidate within 60 days of the general election, the money for those ads must be raised from individuals and not from corporate or labor union treasuries. A 527 group cannot give directly to federal candidates, but can establish federal political action committees that raise federal money to do so.

What do 527s have to disclose?
All 527 groups have to register with the IRS and have to file “periodic” reports of contributions and expenditures. Those committees that raise or spend $50,000 a year (or expect to) are required to use the IRS’ electronic filing system, while other committees can file on paper. The IRS compiles all of the records from electronic filings into a single file that it posts on its Web site every Sunday morning. The single file contains records from six different tables and can be imported into a database program.

What reports do 527s file?
Filing requirements for 527 groups are two-fold: statements of organization, called Form 8871, and periodic reports of contributions and expenditures, called Form 8872. The filing schedule roughly mirrors the FEC schedule: quarterly or monthly during even-numbered election years and quarterly, monthly or semi-annually in odd-numbered non-election years. The committees themselves choose their filing schedules. During election years, the committees also file pre-general election and post-general election reports, although there is no 527 equivalent to the FEC’s “48-Hour” reports of contributions during the final 10-12 days of the campaign. Filings come into the IRS on a rolling basis, but more often during the heavy filing periods (15th and 20th of the month, depending on the filing schedule).

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