Fattest of State’s Fat Cats Open Checkbooks to ‘Shadow Parties’

So-called 527 groups enable corporations, unions and wealthy individuals
to get around federal soft money ban

July 6, 2004

Madison - An elite corps of 142 wealthy individuals, businesses, unions and political committees from Wisconsin have contributed more than $565,000 to groups that accept and spend unlimited and unregulated contributions to influence federal elections, according to a report compiled by the Wisconsin Democracy Campaign.

The groups known as 527s are tax-exempt political nonprofit groups that get their name from the U.S. Internal Revenue Service code under which they are organized. Nationally, 527s - including such groups as the electioneering arm of MoveOn.org, America Coming Together and the Club for Growth - raised $179 million between January 2003 and March 2004 to spend on direct mail campaigns, negative broadcast advertising and voter registration drives.

Their numbers are growing because the new Bipartisan Campaign Reform Act, also known as the McCain-Feingold campaign finance law, now prohibits national party committees from accepting and spending hundreds of millions of dollars in anonymous contributions known as "soft money."

WDC’s report on 527s, “Tax Code Two-Step,” found that 107 individuals, 29 corporations and trade groups, three labor unions and three political committees from Wisconsin gave $565,397 to 22 of these unregulated groups between January 2003 and March 2004. WDC compiled the report after reviewing thousands of pages of IRS reports filed by 132 of the tax-exempt political groups during the 15-month period.

The donations averaged $3,982 per contributor - nearly double the $2,000 limit on contributions an individual can make to a federal candidate. Federal law prohibits corporations and unions from making contributions from their treasuries to influence federal elections.

"The 527s are the new pipeline for unlimited soft money donations, which are supposed to be illegal under the McCain-Feingold law. The Federal Elections Commission’s refusal to regulate 527s opened a giant loophole in the law and created new shadow parties that are fast usurping the role of national and state political parties," WDC executive director Mike McCabe said.

Leading the list of 107 individual contributors who gave $163,020 was Mary and Terry Kohler, of Sheboygan, who contributed $30,500 and $25,000 respectively to 527 organizations that support GOP candidates. Their Windway Capital Corp. also contributed another $10,000. Terry Kohler, an unsuccessful candidate for governor in 1982, and his wife are longtime supporters of Republican causes.

Topping the list of 29 corporations and trade groups was Johnson Controls Inc. in Milwaukee which doled out $116,945 during the 15-month period. Other top corporate contributors included Miller Brewing Co. which has given $32,074, Credit Union National Association which has contributed $30,000, Wisconsin Energy Corp. which has donated $25,395 and Kohl’s Corp. which has contributed $20,000.

Three unions made more than $92,000 in contributions to their national headquarters which engage in 527 activity. Topping the list was the Wisconsin Laborers District Council which contributed $77,979 to the Laborers Political League Education Fund.

Three political committees contributed another $9,500 to 527 groups. Leading the list was the Campaign Fund of Northwestern Mutual Life Political Action Committee which gave $5,000 and Democratic Governor James Doyle’s campaign committee which gave $3,500.

The report also found that 56 percent of the Wisconsin contributions - $316,754 - went to Republican-leaning 527 groups, a break from the national trend where Democratic-leaning 527 organizations raised substantially more cash than Republican-leaning groups through March 2004.

More than half of the Wisconsin contributions went to two 527s. The Republican Governors Association netted $157,250 from state donors and the Democratic Governors Association received $129,550. Collectively that represents 51 percent of total 527 contributions from Wisconsin.

The report also found that most of the Wisconsin contributions to 527 groups came from only two areas of the state. An analysis of 527 contributions by zip code shows that total contributions from seven of the top 10 zip codes cover portions of Milwaukee and Madison and some of their wealthy suburbs.

"The FEC can and should regulate 527s. These groups should be treated as the political committees they clearly are and required to play by the same rules all other participants in the electoral process must obey," McCabe said. "Leaving them unregulated renders federal campaign contribution limits, the McCain-Feingold soft money ban and the prohibition of corporate and union donations functionally meaningless."

Tax Code Two-Step