In a message dated 12/15/03 7:11:59 AM, SSholk@gibbonslaw.com writes:

<< One thing that has always puzzled me is that in the media 
coverage of 527s as a way around BCRA, the emphasis is on issue 
advocacy, and not supporting any candidate or party.  Yet to be 
a 527, the organization must engage in an exempt function, which
is influencing or attempting to influence an election.  Is there
a disconnect here? >>

Yes, there is a disconnect.  The media doesn't understand the distinctions.  
A 501(c)(4) may engage in unlimited issue advocacy, but is socked with a 
penalty tax by the IRS if it engages in candidate advocacy.  A 527 must engage 
always, directly or indirectly, in influencing an election.

Thus, a 527 organized under the old law that intervened during the 
Clinton/Lazio Senate election.  It did not expressly advocate.  It mailed a 
"side-by-side" issue-only comparison on the candidates which included their pictures and 
was mailed about a month before the election.  It was biased toward Lazio.  Was 
that "direct" or "indirect" influence?  Regardless, it was not FEC express 
advocacy under the case law in the jurisdiction of the 2nd Court of Appeal.  But 
the mailing would have been considered as "directly" or "indirectly" 
influencing the election by the IRS.

For a detailed discussion of the tax treatment and relationship of 501(c)(4)s 
and associated 527 separate segregated funds, see "Political Campaign and 
Lobbying Activities of IRC 501(c)(4), (c)(5), and (c)(6) organizations", IRS 
Exempt Organizations-Technical Instruction Program for FY 2003.

James V. Lacy
Wewer & Lacy, LLP