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 states tight fund-raising caps through the newly established groups; the ceiling for the governors 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 website. 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 governors race that November.

Collins group, “Leadership for New Jerseys 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.