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Why Did Unity08 Want to Be a 527 Organization?

I’ve got another question about Unity08, the “grassroots movement” with slick public relations infrastructure care of Peak Communications, and with the intention to nominate a member of each major political party, one to be President and one to be Vice President.

Why did Unity08 want so much to be a 527 organization rather than a PAC?

An almost-completely unreported upon interaction between Unity08, the Federal Election Commission and the Campaign Legal Center occurred this year. Almost immediately after the “grassroots” group popped into existence late this spring, it retained the services of Steptoe & Johnson, a well-placed law firm whose attorneys include the former Secretary of Defense, Secretary of the Interior, Commissioner of the Internal Revenue Service, Commissioner of the Interstate Commerce Commission, and so on and so forth. What a stroke of luck for this “grassroots” organization!

As a first order of business, Stepoe and Johnson attorney John J. Duffy sent off a memo to the FEC on May 30, 2006, requesting that Unity08 be classified as a Section 527 organization rather than a Political Action Committee (PAC). The nonpartisan Campaign Legal Center objected because 527 organizations can’t work to specifically elect presidential candidates, and that’s what Unity08 is expressly designed to do. As part of its work, CLC released the Unity08 memo (thanks, CLC) for all to read.

The CLC won with its argument, and Unity08 must now be classified as a PAC. That’s the result (click here to read the FEC ruling as of October 10, 2006 that must register as a PAC after spending $1,000, which it has already done), but I’m more interested in trying to figure out why Unity08 wanted so badly to be a 527 organization rather than a PAC. After all, PACs get to spend money to advocate for a ticket, which is what Unity08 said it wanted to do. What makes 527 organizations different from PACs?

1. 527 organizations don’t have the annual contribution limit of $5000 per individual that PACs do.
2. PACs have strict quarterly reporting requirements of contributions and debts. These go to the FEC, which releases them promptly. But 527 organizations are required to report their contributions and debts to the IRS, OR to a state agency, which may not keep online reports.

The second difference seems to be less important than the first (although Public Citizen reports problems with lax IRS enforcement and state non-disclosure). So one might think that Unity08 wished to raise gobs of cash from small numbers of wealthy individuals. However, if you read Unity08’s webpage, they specify that:

Unity08 does not accept contributions from special interests or corporations – and contributions from individuals are voluntarily capped at $5,000 (cumulative) per year.

It would be tidier if I could report that this text magically appeared in October, when Unity 08 lost its ruling and was informed that it would have to register as a Political Action Committee. But that’s not true: this text could be found as early as July of 2006.

So what’s going on here? Why did Unity08 want to register as a 527 organization? The text of Unity 08’s memo to the FEC is opaque to me on this point. But there is a reason here — lawyers don’t make big, hairy filings without reasons. What’s the reason?

I surely could use your help on this point. Make a comment below with your astute observations.

[Update: Well, here’s another difference. Look at the 2Q IRS report for Unity08 as a 527 organization. What don’t you see reported? The donors’ employers and professions, which are a required part of FEC campaign contribution disclosures.]

5 thoughts on “Why Did Unity08 Want to Be a 527 Organization?”

  1. Alan says:

    A 527 organization does not have the “source prohibitions” that a PAC has?

    Okay, I do get the point that 527 organizations are used by politicians to hide “soft money”. The usual reason for a 527 is to conceal the identity of any donors who may have interests before congress.

  2. Jim says:

    But Alan, Unity08 did have to make reports — to the IRS (see the report linked through in the article).

  3. Alan says:

    Yes, Jim, I read them of course, but Unity08 has not yet submitted the required 4th quarter report to the IRS. And more to the point of the question you keep harping, they have not published the monthly update they promised to demonstrate their accountability and transparency.

    “lawyers don’t make big, hairy filings without reasons”

    Obviously someone wanted to pour some money into this organization early in the game–more than the $5000 limit for PAC’s–and was looking for a legal way to do it, then change the organization to a PAC after the candidate was announced. Someone who didn’t want their identity disclosed. ‘Source prohibitions’ refers to contributions by foreign governments?

  4. Jim says:

    The 4th Quarter report is due AFTER the 4th Quarter is over.

    I’m really interested to see where they file. With the IRS? With the FEC?

  5. Alan says:

    Governments can use any kind of fiscal year they want, starting in July, September, whatever. I’m not sure if there are any requirements for PAC’s, but if Unity08 is using April 1-June 30 as their second quarter and July 1-September 30 as their third quarter(as it says on the top of their “initial report”), it looks like their 4th quarter ends December 31.

    Where have they been filing, and why does it matter? I notice the link to the documents is internal to IT website.

    Okay I see it in your point #2 above. PAC’s file with FEC; 527’s file with IRS. Since Unity08 lost the ruling in October, they are supposed to register as a PAC. Who they file with will tell whether they have registered yet.

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