Fred Thompson's Disclosure Conundrum: Solved

As co-architect of McCain-Feingold-Thompson, the federal campaign finance reform legislation, would-be presidential candidate Fred Thompson has skirted the interstitial space between the Internal Revenue Service and the Federal Election Commission, using a mish-mash of competing laws to avoid disclosing his donors.

That ends on July 31, according to Thompson campaign sources. His "Friends of Fred Thompson Inc." plans to file form 8872 -- a schedule of contributions and expenditures -- with the IRS that day, which will give him leeway to formally announce his candidacy whenever he wants.

On June 4, Thompson's finance committee organized a 527 committee with the IRS after incorporating in Tennessee. Friends of Fred Thompson Inc." is a "testing-the-waters" committee, and regulations allow Thompson to raise and spend money to take the temperature of the electorate -- he can poll, he can travel to early primary states, he can hire a small staff.

If Thompson files with the FEC as a candidate, he'd lose the residuals he's paid by NBC for Law and Order. He'd also be a real candidate and there’d be pressure on him to "launch" his candidacy immediately. At the same time, if he files with the FEC before July 31, he gets an exemption from having to disclosure and contributors until October 15.

If he doesn't file with the FEC in July, his testing-the-waters committee is required to tell the IRS the identity of donors and the size of their donations about $500. If he's not raised that much, he could be embarrassed by a poor showing. If he’s raised a lot, it’s fodder, along with his own statements and language on his website, for a charge that his actions have lifted out of the testable waters and thrown him into the candidate ocean. That could cost him his residuals, too.

For example: his campaign website allows potential donors to sign up to make automatic monthly contributions. But testing the water candidates aren't allowed to line up seed money. Also: a legal disclaimer on his website cautions that contributions "will be used in connection with federal elections" and are "subject to the limits and prohibitions of federal law."

If the campaign does nothing -- if they fail to file as a federal candidate and fail to file form 8872 -- all contributions would be subject to a 35% tax and Thompson could be liable for civil penalties.

The politics of filing an FEC complaint over Thompson is sketchy, so don't expect any rival campaigns to bother.

But they'll watch the issue of residuals closely.

One scenario has Thompson waiting until the new season of Law and Order kicks off -- September -- before formally opening his campaign. But that would open him up to charges that he cares more about his Hollywood money than he does his presidential campaign.