N.J. Candidates
Discover '527' Cash Cow
By Marianne Holt and Kathryn Wallace
The Center for Public Integrity
(Washington, June 2) Two Republican candidates for the 2001 New Jersey
gubernatorial race have set up "527 groups" a full year before the party
primary.
The 527 groups are so named because they take advantage of Section 527 of the
Internal Revenue Code, which allows for so-called “issue ads” by groups that
are free to receive contributions from any source and invest unlimited
resources into campaigns, skirting all donation limits and disclosures.
This is apparently the first instance at the state or federal level where
candidates are taking advantage of the IRS loophole. Others, such as members
of Congress, have established 527s, but not for their personal benefit.
The loophole has been exploited by interest groups, corporations, labor
unions and business associations, but is now broadening to include candidates
for an elected state position, conducting campaign activity with dollars that
will be raised secretly and are not required to be disclosed to the public.
State Senate President Donald DiFrancesco, a 21-year state senator from
Scotch Plains, in central New Jersey, and Assembly Speaker Jack Collins, of
Woodstown, in south Jersey, can skirt the state’s tight fund-raising caps
through the newly established groups; the ceiling for the governor’s race is
$6 million.
DiFrancesco’s group, Solutions for a New Century, was created to promote
“education reform, job creation, affordable health care and other key New
Jersey issues,” according to the Web site. But another objective of the group
is to raise $1 million, the fund-raising goal for the year. That money will
most likely be used to pay for pricey television advertising during the long
campaign for the June 2001 Republican primary, and then for the
general-election governor’s race that November.
Collins’ group, “Leadership for New Jersey’s Future,” has announced plans
to raise $750,000 for Collins before the end of the summer.
Candidates in New Jersey have long looked for ways to circumvent the strict
fund-raising caps. Gov. Christine Todd Whitman, a Republican, formed a
different type of fund-raising tool in her last campaign --a non-profit,
non-advocacy group that, unlike the new 527 groups set up by DiFrancesco and
Collins, was required to file a tax return that was publicly available. Other
state officials followed Whitman's lead. The Democratic candidate in the
upcoming gubernatorial race, Jim McGrevey, is reportedly considering forming
an issue advocacy group to help him with fund raising.
Marianne Holt is a senior associate and Kathryn Wallace is a writer at the
Center for Public Integrity.
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