A 527 group is created primarily to influence the selection, nomination, election, appointment or defeat of candidates to federal, state or local public office.
However, in common practice the term is usually applied only to such organizations that are not regulated under state or federal campaign finance laws because they do not "expressly advocate" for the election or defeat of a candidate or party.
The organizations must register with the Internal Revenue Service (IRS), publicly disclose their donors and file periodic reports of contributions and expenditures.
[3] In the case of Buckley v. Valeo, the U.S. Supreme Court attempted to draw a limit on the extent to which campaign finance laws could regulate speech about politics.
In footnote 6 of the Buckley opinion, the Court limited "express advocacy" to words and phrases such as "Smith for Congress", "elect", "defeat", or other specific calls for action to vote for or against a candidate.
Thus, organizations could run ads discussing candidates and issues without being subject to campaign finance restrictions, so long as they avoided such express advocacy.
Based on that decision, many persons urged the Federal Election Commission (FEC) to use its regulatory power to extend campaign finance laws to cover these groups.
A February 2010 poll from the Pew Research Center found that 68 percent of Americans disapprove of the Supreme Court's decision to allow corporations to make expenditures on behalf of candidates during elections.
[11] Although 527 organizations were in common use by the 1990s, in the wake of the Bipartisan Campaign Reform Act, which limited the ability of political parties to raise money, 527s rose to much greater prominence and visibility.
The FEC's rationale was that these groups had specifically advocated the election or defeat of candidates, thus making them subject to federal regulation and its limits on contributions to the organizations.