Last night, Texas voters who would be adversely impacted by the law, civil rights organizations, elected representatives and a Texas county filed an amended challenge to Texas’ controversial voter ID law.  The amended complaint challenging the constitutionality of the law was filed in in the United States District Court for the Southern District of Texas in Corpus Christi on the same day the U.S. Department of Justice (DOJ) filed its own challenge to the law known as Senate Bill 14 (“SB14”).  Both the amended complaint and the DOJ lawsuit include a request that the court order bail-in relief under Section 3 of the Voting Rights Act.

Prior to the U.S. Supreme Court’s decision in Shelby County v. Holder, a three-judge federal court in the Washington D.C. blocked the Texas photo ID bill from taking effect, ruling that the law would have a discriminatory impact on minority voters.   The Supreme Court’s ruling in late June, however, struck down a key provision of the Voting Rights Act that subjected Texas and fifteen other states to obtain approval of its voting practices and procedures.  Consequently, the DC federal court’s decision blocking the SB 14 from going into effect was vacated by the Supreme Court Within hours of the decision, Texas Attorney General Greg Abbott announced that Texas would immediately implement SB 14, even though the federal court had concluded the law was discriminate against minority voters. 

“This law was found by a federal court to be  discriminatory against racial and language minorities.  Yet once the decision was vacated, the State of Texas made no effort to mitigate the harmful aspects of the photo ID bill that the DC court identified in this blatantly discriminatory law,” said J. Gerald Hebert, Executive Director of the Campaign Legal Center, which is a part of the plaintiffs’ legal team.  “Minority voters will be impacted and disenfranchised at vastly disproportional rates by this law.  We cannot stand idly by and let the voting rights of racial and language minority voters be trampled under this draconian law.”   

The original complaint was filed on June 26, 2013, the day after the Supreme Court’s Shelby County decision and the announcement that SB 14 would be implemented by Texas.  The suit was filed by Texas voters, U.S. Representative Marc Veasey and other elected officials in the state.  The amended complaint filed last evening added as plaintiffs additional voters adversely affected by the law, the League of United Latin American Citizens (LULAC) and Dallas County, Texas.  The expanded complaint argues that SB 14 violates the 1st, 14th, 15th and 24th Amendments to the Constitution, as well as Section 2 of Voting Rights Act by denying and abridging the right to vote on account of race and language minority status.

The Campaign Legal Center is part of the legal team that includes Chad Dunn and K. Scott Brazil (Brazil & Dunn), Neil G. Baron, David Richards (Richards, Rodriguez & Skeith), Armand Derfner (Derfner, Altman & Wilborn), Luis Roberto Vera, Jr. (LULAC) and Craig M. Wilkins and Teresa G. Snelson (Dallas County District Attorney’s Office).

To read the amended complaint, click here.

Today, Representative Chris Van Hollen (D-MD), joined by the Campaign Legal Center, Democracy 21 and Public Citizen, filed a lawsuit today in federal district court in Washington, D.C challenging the IRS regulations that govern eligibility for tax-exempt status as a section 501(c)(4) “social welfare” organization.

Attorneys from the three organizations are representing the plaintiffs in the case, with Scott Nelson of Public Citizen serving as the lead counsel.

The existing IRS regulations were adopted more than a half century ago in 1959 and the lawsuit charges that the regulations are contrary to the explicit statutory language of the Internal Revenue Code and to court decisions interpreting the Code.

The lawsuit comes more than two years after Democracy 21 and the Campaign Legal Center filed a petition at the IRS on July 27, 2011 challenging the regulations at issue in the case and calling on the IRS to conduct a rulemaking proceeding to adopt new regulations that properly interpret the statute. The IRS did not act on the rulemaking petition.

Since the Citizens United decision in January 2010, there has been an explosion in the number of groups claiming tax-exempt status as “social welfare” organizations under section 501(c)(4). This has included a number of organizations who have abused the tax laws to claim section 501(c)(4) tax-exempt status in order to keep secret from the American people the donors financing their campaign expenditures.

According to Campaign Legal Center Senior Counsel Paul S. Ryan:

This flawed IRS regulation on the books for more than a half-century, together with recent Supreme Court decisions in Wisconsin Right to Life(2007) and Citizens United (2010) permitting 501(c)(4) corporations to pay for election ads, have produced a perfect storm that has flooded recent elections with funds from undisclosed sources.

In the 2012 cycle, federal election-related spending by section 501(c)(4) organizations exceeded $256 million, triple the amount spent by such groups in the 2008 presidential election cycle ($82.7 million) and an astounding thirty-three times the amount spent by such groups in the 2004 presidential cycle ($7.6 million).

According to Democracy 21 President Fred Wertheimer:

Democracy 21, joined by the Campaign Legal Center, petitioned the IRS more than two years ago to issue new regulations to stop the tax laws from being misused by section 501(c)(4) groups to launder secret contributions into federal elections.  If the IRS had acted on our petition it would have shut down the massive abuses of the tax laws that resulted in more than $250 million in secret contributions being spent by section 501(c)(4) groups in the 2012 federal elections. The IRS also would have avoided the issues that have arisen regarding the targeting of certain groups.

Today’s lawsuit would force the IRS to take the action we petitioned the IRS for two years ago and would require the IRS to issue new regulations to put an end to huge sums of secret money being spent in federal elections. Until this problem is addressed, the big losers here are voters being denied the campaign finance information they have a basic right to know and taxpayers seeing the tax laws being seriously abused by section 501(c)(4) groups for their own political purposes.

According to Public Citizen attorney Scott Nelson:

Congress has specified in the Internal Revenue Code that a section 501(c)(4) organization must devote itself “exclusively” to social welfare activity, yet the IRS has for decades allowed (c)(4)’s to engage in substantial electoral spending even though electoral activity falls outside the agency’s own definition of social welfare activity. And the IRS has done nothing to correct the mismatch between the law and its regulations even after it received a rulemaking petition explaining the problem and the urgency of addressing it to prevent (c)(4) organizations from being transformed into vehicles for massive electoral spending without donor disclosure. 

It shouldn’t take many years for the IRS to understand that when a law passed by Congress says one thing and the IRS’s regulations and policies allow just the opposite, something needs to be done.

According to the lawsuit:

Section 501 of the IRC provides that organizations meeting specified criteria are exempt from federal income taxation. Section 501(c)(4) provides such tax exemption to “civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare ….” (Emphasis added.)

The social welfare activities to which the IRC requires section 501(c)(4) organizations to be “exclusively” devoted do not include intervention in election campaigns. IRS regulations provide that “[t]he promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of or in opposition to an candidate for public office.” TR § 1.501(c)(4)-1(a)(2)(ii)

The IRS has not enforced section 501(c)(4)’s requirement that a tax-exempt organization be operated “exclusively” to promote social welfare. Instead, contrary to the plain meaning of the statute, the IRS has permitted section 501(c)(4) organizations to engage in substantial activity that does not qualify as promotion of social welfare, including election campaign intervention. In 1959, the IRS promulgated TR § 1.501(c)(4)-1(a)(2)(i), which provides that “[a]n organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community” (emphasis added). As the IRS explained in an August 24, 2012, letter to U.S. Senator Carl Levin, the IRS has “interpreted ‘exclusively’ as used in section 501(c)(4) to mean primarily.”

The effect of the IRS’s regulatory redefinition of section 501(c)(4)’s exclusivity requirement is to allow section 501(c)(4) organizations to engage in substantial amounts of activity that does not promote social welfare as long as they are “primarily” engaged in social welfare activities. Thus, although by the IRS’s own definition social welfare activities do not include participation or intervention in election campaigns, the IRS takes the view that “an organization may carry on lawful political activities and remain exempt under section 501(c)(4) as long as it is primarily engaged in activities that promote social welfare.” Rev. Ruling 81-95, 1981-1 C.B. 332.

The substantial spending on election campaign intervention in which the IRS permits a section 501(c)(4) organization to engage is contrary both to the statutory requirement that section 501(c)(4) organizations must be operated “exclusively” to promote social welfare and to court decisions interpreting that statutory requirement to prohibit “substantial” non-social welfare activity.

The IRS’s replacement of the statutory requirement that section 501(c)(4) organizations operate exclusively to promote social welfare with a regulatory standard that allows them to engage in substantial election campaign activity has resulted in a flood of electoral spending by ostensible section 501(c)(4) organizations. Because these organizations do not report the sources of their contributions, as is required of political committees and other section 527 organizations, election-related spending by section 501(c)(4) organizations deprives other participants in the political process, including voters, candidates, and political organizations, as well as persons and organizations who desire to study the sources of influence on the political process, of critical information about the financial interests served by electoral campaign spending.

The increase in election campaign activity by section 501(c)(4) organizations is primarily responsible for a corresponding increase in electoral spending that is not accompanied by donor disclosure. Because section 501(c)(4) organizations, unlike political parties, political candidate committees, other FECA-regulated political committees (including PACs and “Super PACs”) and other section 527 tax-exempt political organizations, are not required to disclose their donors publicly, their electoral campaign expenditures are almost entirely unaccompanied by donor disclosure.

The huge electoral campaign expenditures without donor disclosure by section 501(c)(4) organizations are directly attributable to the IRS’s regulation permitting such organizations to engage in substantial electoral campaign activity as long as they are “primarily” engaged in promoting social welfare. Politically active section 501(c)(4) organizations operate on the understanding that they will retain their tax exemption as long as they can plausibly maintain that more than 50% of their activity is aimed at promoting social welfare, even though they engage in substantial election campaign intervention that itself is outside the scope of social welfare activity under section 501(c)(4). If the IRS were instead to enforce the requirement that section 501(c)(4) organizations engage exclusively in activity to promote social welfare, and thus refrain from engaging in substantial amounts of election campaign activity and expenditures, much of the electoral campaign spending currently carried out by section 501(c)(4) organizations would shift to other types of organizations—specifically, political committees regulated by FECA and other section 527 tax-exempt organizations—that are subject to donor-disclosure requirements. The resulting disclosures would materially advance the public’s “interest in knowing who is speaking about a candidate shortly before an election.”Citizens United v. Federal Election Comm’n, 558 U.S. 310, 369 (2010).

To read the complaint, click here.

To read the complaint attachments, click here.

Today, the Campaign Legal Center, joined by Democracy 21, filed a complaint with the Federal Election Commission (FEC), against Rick Santorum and campaign staffers for directing a donor to make a $1 million campaign contribution to a super PAC supporting Santorum’s 2012 presidential run.  Federal candidates and their staff are prohibited by the McCain-Feingold law’s “soft money” ban from directing more than $5,000 to a super PAC.

According to a published report, energy executive Bill Doré told Santorum at a January 2012 dinner meeting that he wanted to contribute $1 million to Santorum’s campaign.  Given that contributions to federal candidate campaigns are limited to $2,500, Doré reportedly stated in an interview that either Santorum or unnamed staffers told Doré to send his $1 million check to the Red, White and Blue Fund super PAC.

“Mr. Doré’s account of his interaction with Mr. Santorum and his staff, if true, reveals a clear violation of federal campaign finance law,” said Paul S. Ryan, Campaign Legal Center Senior Counsel.  “Federal law prohibits candidates and their staff from directing more than $5,000 to a super PAC and either Mr. Santorum or his staff seemingly directed a $1 million contribution to the Red, White and Blue Fund.”

A recent report by the Sunlight Foundation Reporting Group’s Keenan Steiner, The $1 million dinner: When big donor Bill Dore meets Rick Santorum, based on several interviews with Doré,  outlines this apparent violation of federal law.  According to the piece, Bill Doré initially told the reporter that upon learning of Doré’s willingness to make a $1 million contribution, Santorum told him about the super PAC.  After hearing the reporter’s surprise regarding Doré’s account of his conversation with Santorum, Doré reportedly backtracked and said it was “Santorum’s aides” who did so and even provided a mailing address for the Super PAC.  Doré sent the million dollar check that same day and ultimately contributed $2,250,000 to the super PAC over the next two and a half months.

Federal law clearly states that a “candidate, individual holding Federal office, agent of a candidate or an individual holding Federal office, or an entity directly or indirectly established, financed, maintained or controlled by or acting on behalf of 1 or more candidates or individuals holding Federal office” shall not “solicit, receive, direct, transfer, or spend funds in connection with an election for Federal office . . . unless the funds are subject to the limitations, prohibitions, and reporting requirements of this Act.”  2 U.S.C. § 441i(e)(1)(A) (emphasis added).  FEC regulations define “direct” to mean “guide, directly or indirectly, a person who has expressed an intent to make a contribution, donation, transfer of funds, or otherwise provide anything of value, by identifying a candidate, political committee or organization, for the receipt of such funds, or things of value.”  11 C.F.R. § 300.2(n).

An FEC advisory opinion issued in the wake of the Supreme Court’s Citizens United decision, AO 2011-12, states emphatically that while super PACs may accept unlimited contributions, the McCain-Feingold law’s soft money restrictions and the federal law $5,000 contribution limit remain applicable to federal candidate fundraising for super PACs.

To read the report, click here.

To read the complaint, click here.

Today, the Campaign Legal Center, joined by Democracy 21 and Public Citizen, filed an amici brief in Wagner v. FEC in the D.C. Circuit Court of Appeals to oppose an effort to overturn the 70-year-old ban on political contributions from federal contractors to federal candidates, parties and other political committees. 

“Multiple courts nationwide have recognized the inherent susceptibility of the government contracting process to corruption and have repeatedly upheld federal, state and local restrictions on contractor campaign contributions,” said Tara Malloy, Campaign Legal Center Senior Counsel. “Plaintiffs ask the Court of Appeals to ignore both this legal precedent and the realities of the pay-to-play system and overturn the longstanding contractor contribution ban.  The federal ban is a bulwark against corruption and a check on the seemingly endless string of scandals that has seen government officials going to jail for almost as long as government contracts have been handed out.”

This restriction on campaign contributions from persons and entities contracting with the federal government was enacted in 1940 to address corruption in federal contracting in the wake of persistent scandals, most notably the “Democratic campaign book” scandal.

In November 2012, the district court granted summary judgment in favor of the FEC, finding that the federal ban was enacted to “prevent corruption and the appearance thereof and, in so doing, to protect the integrity of the electoral system by ensuring that federal contracts were awarded based on merit.”  But on May 31, 2013, a three-judge panel of the D.C. Circuit Court of Appeals vacated the district court decision on procedural grounds, holding that the plaintiffs should have instead proceeded under 2 U.S.C. § 437h to the en banc Court of Appeals.  The case was remanded to the district court, which then certified constitutional questions back to the Court of Appeals pursuant to Section 437h.    

The Legal Center, along with Democracy 21 and Public Citizens, previously filed amici briefs in this case in the district court and in the Court of Appeals in defense of the contractor contribution ban.

To read the amici brief filed today by the groups, click here.

Today, the Campaign Legal Center joined with ten other reform groups to urge FEC Chair Ellen L. Weintraub not yield to political pressure from Rep. Candice Miller (R-MI) to undermine the enforcement of the nation’s campaign finance laws.

Rep. Miller, Chairman of the House Administration Committee, criticized the FEC for failing to adopt amendments to an agency Enforcement Manual and urged the Commission to act promptly on the matter. The letter to Chair Weintraub urged her to wait until the Commission had a full complement of Commissioners before voting on changes to the FEC’s Enforcement Manual proposed by the Republican Commissioners seeking to take advantage of a temporary 3-2 majority on the Commission.

“This is a clear attempt by a Member of Congress to apply partisan political pressure to the FEC and the agency should not bow to it – particularly as the proposed enforcement policies would inhibit the government’s ability to enforce the campaign finance laws passed by Congress,” said Legal Center Senior Counsel Paul S. Ryan. “Rep. Miller has been conspicuously silent on the glacial pace of FEC enforcement in general but suddenly chooses to apply pressure when she sees the opportunity for partisan political gain.”

The proposed changes to the manual would stop the longstanding free exchange of information between FEC professional staff and the Department of Justice, United States Attorneys and other federal agencies, thus hindering enforcement of federal campaign finance laws. Internally, the proposal would remove the ability of the agency’s dedicated professional staff to consider publicly available information in its investigations without a vote of approval from the Commission, effectively giving investigative veto power to the three Republican Commissioners who have repeatedly refused to enforce current campaign finance laws.

The reform groups sending the letter with the Legal Center include Americans for Campaign Reform, the Brennan Center for Justice, Citizens for Responsibility and Ethics in Washington, Common Cause, Democracy 21, Demos, the League of Women Voters, Public Citizen, Sunlight Foundation and U.S. PIRG.         

To read the letter, click here.

Today, the Campaign Legal Center, joined by Democracy 21, filed comments with the Federal Election Commission (FEC) in response to an Advisory Opinion Request (AOR) 2013-10, in which both the Democratic and Republican parties seek to use their segregated “recount funds” to pay for office building expenses and in effect double their federal contribution limits.

The AOR submitted on behalf of the Democratic Senatorial Campaign Committee (DSCC), Democratic Congressional Campaign Committee (DCCC), the National Republican Congressional Committee (NRCC), and the National Republican Senatorial Committee (NRSC) seeks permission to build upon an existing regulatory loophole allowing parties to raise “recount funds” under separate contribution limits, to use such “recount funds” to pay for “office building expenses,” which of course have nothing at all to do with recounts. In short, the parties seek permission to effectively double their contribution limits and convert “recount funds” into general purpose slush funds.

“The parties are asking the FEC to create a new soft money system, effectively doubling their contribution limits by regulatory sleight of hand. Their request is outrageous and should be rejected by the Commission,” said Paul S. Ryan, Campaign Legal Center Senior Counsel. “The parties shamelessly seek to use an ill-conceived FEC-created loophole allowing parties to raise ‘recount funds’ under a separate contribution limit to now pay for ‘office building’ expenses that have nothing to do with recounts. The parties’ request is all the more audacious considering that Congress explicitly outlawed separate “office building” accounts in 2002, when it dismantled the corrupt soft money system.”

An old “office building” exemption from the statutory definition of “contribution” gave birth to the “soft money” system in the late 1970s, which grew and grew with the FEC’s support, until unlimited soft money accounted for more than 40% of the funds raised and spent by national parties in 2000. Congress dismantled the soft money system in 2002 by passing the Bipartisan Campaign Reform Act and, in doing so, explicitly repealed the “office facility” exemption. The parties are now asking the FEC to recreate the exemption, based on “recount fund” regulations and advisory opinions having nothing to do with office building expenses.

The comments filed by the Legal Center and Democracy 21 today strongly criticize the Commission’s current recount regulations, which in defiance of logic take the position that recount activities are not “for the purpose of influencing” federal elections, even though they are “in connection with” elections.

The groups urge the Commission to reject the parties’ request in this AOR and further urge the Commission to initiate a rulemaking proceeding to reconsider the severely flawed recount regulations.

To read the comments, click here.