The commission's ruling applies to "527" organizations -- named for their tax-exempt status under Section 527 in the tax code -- that are registered with the FEC and raise money to help influence voters and the outcome of the 2004 elections.
Some of the more active and well-funded 527 committees include MoveOn.org, America Coming Together, the Media Fund and Partnership for America's Families. MoveOn.org and America Coming Together, for instance, recently attracted notice after international financier and philanthropist George Soros donated millions of dollars to each, with the explicit goal of ousting President Bush from office in the upcoming election.
The commission decided that advocacy groups registered with the FEC will now be restricted to using "hard money" donations -- raised only from individuals or entities and limited to $2,000 per election -- for campaign communications, including for TV ads, that "promote, attack, support, or oppose" a federal candidate. In other words, 527 committees can no longer spend larger soft money donations to advocate for or against national candidates running for president or Congress.
At the same time, the FEC said the 527s are permitted to use a mixture of hard and soft money for political communications that mention national as well state and local candidates or for ads about issues, such as health care and trade policies.
For several of the new groups that sprang up in recent months, the decision dealt a major blow to their work. Americans Coming Together, an active pro-Democratic Party group with a projected budget of $98 million, could be substantially affected since it is registered with the FEC. On the other hand, the ruling does not apply to 527 committees not registered with the FEC, such as The Media Fund, a group run by former President Clinton adviser Harold Ickes with an estimated $95 million budget.
But the six-member commission delayed several key decisions on exactly how these groups could spend a mix of soft and hard money and to what degree they should be regulated. The commissioners announced they would initiate a formal rule-making process to address these questions.
The commission's action drew mixed reviews and various interpretations.
Campaign watchdog groups criticized the commission for deferring the more crucial decision about how these groups can use soft money, saying the FEC's decision only perpetuated a major loophole to allow unlimited money to influence federal campaigns.
"It's just postponed the biggest soft money issues until the next round," said Fred Wertheimer, president of Democracy 21, a campaign finance reform organization based in Washington, D.C.
Republican National Committee Chairman Ed Gillespie on Wednesday praised the FEC's decision as ensuring that groups that seek to affect the election will need to operate in the open and under many of the same rules as the national political parties.
"The Federal Election Commission should be commended for its campaign finance ruling to uphold the new law of the land," Gillespie said. "Today's ruling effectively shuts down illicit 527 groups that operate in the shadows by using unregulated soft money to influence federal elections."
Meanwhile, Jim Jordan, a spokesman for America Coming Together, responded: "We'll be plowing forward as planned.
"It's clear that [the FEC's] action is limited in scope. We remain confident that we'll have the room we need to operate robustly and effectively," Jordan told The New York Times.
Since the 2002 campaign finance reform law took effect last fall, numerous 527 committees -- often called "shadow parties" -- have cropped up to fund television advertising and other communications with soft money donations. The 2002 Bipartisan Campaign Reform Act prohibits national political parties from raising and spending soft money.
The GOP has continued to rake in money under the higher contribution limits -- individuals and groups can donate up to $25,000 in regulated money to national political parties. But Democrats, who raised much of their soft money from a few wealthy individuals and unions, have had trouble keeping pace.
The FEC took up the issue after a Republican-allied 527 organization, Americans for a Better Country, filed a request in November for an advisory opinion on how these advocacy groups could use soft money for political activities.
Three Democratic-appointed commissioners and one Republican appointee approved the advisory opinion, while two GOP appointees dissented, including FEC Chairman Bradley Smith, who said he opposed further political finance regulation.
Smith on Monday even took the step of issuing a 37-page recommendation for his fellow commissioners to vote against additional finance regulations for pro-Democratic advocacy groups.
"If Republicans think they can win by silencing their opponents, they are wrong ... they are going to deserve to lose," Smith was quoted as saying in The Washington Post Thursday.
Smith and FEC Vice Chairwoman Ellen Weintraub, a Democratic-appointee, both expressed doubts the ruling would curtail the use of soft money among 527 committees.
"I don't think sophisticated political actors would have a hard time figuring out how to work within this framework," Weintraub told The Washington Post.
The FEC will begin its rule-making process in March, but a final decision on the remaining issues may not be reached until May, leaving key decisions unanswered well into the height of this year's campaign season.
Furthermore, the FEC gave no indication whether its final ruling will apply to 2004, or whether the new rules will not take effect until after the general elections in November.