Iowa's 527 groups have been active this year, and could help determine which party controls the Iowa legislature.

Two of Iowa’s largest and most influential 527s have been hard at work lately, using loopholes in the law to help spread their messages and advance their political agendas, though most voters may not even know the groups exist.

The activities of 527s by law can not advocate for or against a specific candidate, but often they will try to shape opinion of a political candidate or party in the context of a specific issue. Such “issue advocacy” won’t explicitly tell you to elect or defeat a particular candidate, but the advocacy group’s view of the candidate’s stance on their issue is clear.

The most recent case of this comes from a Des Moines-based 527 called Midwest Enterprise Group. Earlier this month the group sent out mailers condemning Republican Jarrett Heil, who is running for the Iowa Senate in District 22, for supporting a nationwide sales tax. The mailings did not trigger campaign finance law because they never said whether voters should or shouldn’t support the Republican, stating only that they should call him and “tell him Iowa families are already paying enough taxes.”

“[527s] are involved politically, but they aren’t technically campaigning,” said Charlie Smithson, executive director of the Iowa Ethics and Campaign Disclosure Board (IECDB), the government agency that polices campaign finance in the Hawkeye State. “They have to be careful about what they say.”

As long as 527s (named after the tax code that governs them) avoid “express advocacy,” they are not governed by campaign finance laws. This means they can accept unlimited contributions from corporations to help spread their group’s message.

“You can do an awful lot of talking and have a huge influence on an election without expressly advocating,” Smithson said. “That’s why people get frustrated with these types of organizations.”

In Iowa, there are five 527s registered with the IECDB, with the two biggest and most influential being Midwest Enterprise Group and the Iowa Leadership Council. There could be many more, but tracking the organizations can be difficult.

For the Democrats

Midwest Enterprise Group was formed in August 2007 with the purpose of “educating citizens about an array of civic issues,” according to paperwork filed with the Internal Revenue Service (IRS). The Center for Responsive Politics reports that in 2008, the group raised nearly $457,000, almost entirely from corporations.

Midwest Enterprise Group sent out this mailer attacking Republican Jarrett Heil for his position on a nation wide sales tax.

Gambling interests make up many of the group’s donors, including Riverside Casino and Golf Resort LLC, Ameristar Casinos and Harrah’s Operating Co. Other big donors include Iowa Health Care Association, which gave $25,000 last September and another $60,000 this summer; MidAmerican Energy Co., which gave $25,000 last year; and Anheuser-Busch Cos. Inc., which has given $10,000 this year.

Surprisingly, some of the group’s money comes from companies and individuals long considered to be supportive of Republicans, such as Hawkeye Renewables, the company started by Bruce Rastetter, who has been mentioned in some political circles as a potential Republican candidate for governor in 2010. The company has given $25,000.

According to its IRS filings, in 2008 the group donated $115,000 to the Iowa Democratic Party Building Fund. Smithson said this is legal because each party’s “building fund” is a separate account that cannot be used to advocate for candidates.

“They can do things like pay mortgage or rent, certain overhead costs, but cannot give to candidates or use for express advocacy,” he said. “It’s a segregated fund both parties have.”

So while the group cannot give money directly to the party or its candidates, it can use corporate money to help pay for other expenses the parties may incur. That way parties can spend their money where it counts: getting their candidates elected.

The director of Midwest Enterprise Group is Melissa Peterson, a paid lobbyist with the firm Eide & Heisinger LLC. According to her bio on the firm’s Web site, Peterson previously worked in the office of state Senate Majority Leader Mike Gronstal and served as finance director for the Iowa Senate Democratic Campaign from 2004-2006.

Last August, Peterson incorporated her own consulting firm, MP Advantage Inc. Since then, one of the only other expenses Midwest Enterprise Group has incurred is a monthly fee to MP Advantage for “consulting services” or “fundraising services,” thus far totaling nearly $60,000.

Its only other expenditures are for legal services, which are provided by Perkins Coie, an international law firm whose clients include nearly all Democratic members of the United States Congress and several presidential campaigns, including Barack Obama’s.

Peterson did not respond to repeated requests to comment for this story.

For the Republicans

In 2008, the Iowa Leadership Council has raised $476,000 and spent nearly $440,000, according to the Center for Responsive Politics. Its biggest donor was Reynolds American Inc., parent company of RJ Reynolds Tobacco Co., which gave $40,000. Other prominent donors include corporations that also gave to Midwest Enterprise Group, including Hawkeye Renewables and Iowa Health Care Association.

Several casinos also gave the 527 money, but not nearly as much as they gave to their Democratic counterpart. This could be due to the fact that state Democrats helped pass a statewide smoking ban that exempted casinos.

House Minority Leader Christopher Rants, R-Sioux City

This group was started in 2006 with a $1,000 donation from House Minority Leader Christopher Rants. At the time, he said the group would serve as the first conservative counter to liberal national organizations such as MoveOn.org. Prominent Democrats condemned the group, with House Speaker Pat Murphy telling the Cedar Rapids Gazette on Sept. 2, 2006, that the group takes “payoff money” from gambling, predatory lending and tobacco interests.

From July 1 to Sept. 30, Iowa Leadership Council spent $169,804 on polling and research. The IECDB’s Smithson said the group is then legally permitted to turn that information over to candidates or parties, a major difference between Iowa campaign law and federal campaign law.

“Iowa does not regulate coordinated activities between a 527 and a candidate, but 527s would have to be careful what they gave to the candidate to avoid it being an in-kind contribution which would trigger campaign laws,” he said.

Polling is considered informational and not a form of express advocacy, Smithson said.

So while corporations can’t donate to a candidate to pay to conduct a poll in the field, they can donate to a 527 that can do the poll and give the information to any candidate of its choosing.

The contact person listed for the group is Allison Kleis, who works in Rants’ legislative office. She did not respond to a request for comment.

Some of the research produced by the Iowa Leadership Council can be found on Web sites — like this one — which the group created to target select House Democrats.

From Obama earlier today:

“John, yesterday, said he didn’t believe in 527s. Those are these independent groups that raise money without disclosure … We found out today that there’s an outside group that’s funding $750,000, just bought three-quarters of a million dollars worth of television time, and the individual running the group used to be John Edwards’ campaign manager.”

This video is John Edwards’ first response to the questions from Obama on the so-called 527s or soft money groups:

He was asked about Obama’s 527 criticism following an event in Lisbon, Iowa, and said, “I found out about this probably after most of you did through the news media.”To begin the brief press conference following his speech and question and answer period, Edwards introduced a stimulus package to boost the economy.

He was joined at the event by James Lowe, Des Moines attorney Roxanne Conlin, and the Lakey family.