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Is There Life After November for 527s?

If Democratic Presidential Nominee John Kerry wins on Nov. 2, he may owe his success to a handful of tax-exempt organizations that were little more than a liberal pipe dream a year ago. The largest -- America Coming Together (ACT), the Media Fund, and Voter Fund -- are backed by wealthy individuals hoping to drive George W. Bush from office. The three have bought $33 million in anti-Bush TV ads and spent $85 million to register new voters and explain the liberal view on issues from health care to trade. "There has never been anything like this magnitude of voter contact in history," says ACT CEO Steve Rosenthal, who ran a similar operation for organized labor.

Now 527s -- as the groups are called after the tax-code section that created them -- hope to use the election as a jumping-off point for a grassroots movement. But their current momentum aside, a triple threat looms, ranging from loss of funding to tighter regulatory oversight and a possible congressional crackdown.

The biggest problem is that success could spoil the 527s' future. If Kerry wins, chances are their Bush-obsessed sugar daddies will lose a lot of interest. Raising even one-fifth of the $200 million or so they expect to garner this cycle could be hard. ACT insiders doubt that hedge-fund impresario George Soros, the top donor, would pony up much more than the $12.8 million he's given the three major committees so far. Soros spokesman Michael Vachon says his boss has not made up his mind about sending checks after Nov. 2, but adds that he "is uncomfortable with the partisan mantle that has been thrust on him."

If Bush wins, the 527s' funding chances improve because they can argue that they need money to stay in fighting trim for 2008. But a Bush victory would increase the legal and legislative threat. The liberal 527s walk a fine line: Though they accept unlimited soft money and operate outside election laws, they openly work toward Bush's defeat. They skirt the law by being careful not to advocate voting for or against any candidate. Some legal experts argue that the 527s are splitting hairs and should follow the same fund-raising and spending limits as other political committees -- not just loose disclosure rules set by the IRS. "[They] are knowingly and willfully violating the law," says Mark Glaze of the nonpartisan Campaign Legal Center.

The Nine Lives of Soft Money

In May, the Federal Election Commission declined to regulate the 527s, but it could return to the issue later this month -- though no rules would take effect until 2006's midterms. The heat is on the FEC to act. GOP Senator John McCain, who co-wrote the reform law that inadvertently encouraged 527s, is pushing legislation to reduce the FEC's power -- a direct response to its May vote to punt. And Senator Trent Lott (R-Miss.), who oversees the FEC as chairman of the Senate Rules Committee, may seek to bar 527s from using soft money -- especially if they boost turnout and are credited with a Kerry win.

Harold M. Ickes, who helps run ACT, believes it "will carry on." Under a Kerry Administration, ACT could raise grassroots support for Kerry's health-care plan. If Bush wins, it could mobilize opposition to Social Security privatization. But first, ACT and its peers will have to replenish their coffers, keep the FEC at bay, and calm a possible congressional backlash. Only then will they live to fight another day.

Internet scamsters have found new targets for "phishing" schemes: political donors. Less than two days after John Kerry accepted the Democratic Presidential nomination, an e-mail hit the Internet purportedly soliciting donations to his campaign. The plea looked legit -- it featured a picture of the candidate's brother Cameron Kerry and a letter asking for funds to "fight back against George Bush." But MailFrontier, an e-mail security company in Palo Alto, Calif., noted that the "secure donation" link went to a Web site registered in Jaipur, India. The campaign warned would-be donors of the scam and called in the FBI.

Former Housing & Urban Development Secretary Mel Martinez sent donors a news flash in early August: They can write bigger checks to his campaign for the GOP Senate nomination in Florida. One of Martinez' primary opponents is computer software executive Doug Gallagher, who has poured more than $2.5 million into his own campaign. That spending triggered the "millionaires' amendment," a provision in the McCain-Feingold campaign-finance law designed to help candidates facing rich opponents. Martinez, who has access to President Bush's big funders, can now take gifts of up to $6,000, three times the normal limit. The same provision boosted funding for Barack Obama, keynoter at the Democratic convention, when he won the seven-candidate race for the Dems' Senate nomination in Illinois.

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