Citizens United Revisited?
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Another Attack on State Campaign Finance Laws Turned Back in Texas
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In a sweeping decision issued late yesterday, a Texas Court upheld numerous Texas campaign finance laws that had been challenged on constitutional grounds in Texas Democratic Party, et al. v. King Street Patriots, et al. Judge John K. Dietz of the District Court of Travis County Texas issued the final summary judgment in the challenge to provisions of Texas campaign finance law, including the state restriction on corporate contributions to candidates, officeholders and political committees, and the disclosure and organizational requirements applicable to political committees.
“The decision represents the latest in a string of victories against an aggressive nationwide litigation blitz aimed at overturning a host of state campaign finance laws in the aftermath of the Supreme Court’s Citizens United decision,” said J. Gerald Hebert, Campaign Legal Center Executive Director. “Judge Dietz saw right through the unsubstantiated attempt by attorneys for the King Street Patriots to imply that Citizens United extended to corporate contribution restrictions and disclosure requirements despite the fact that the case did not address the former and upheld the latter by an 8-1 majority.”
The Texas Democratic Party originally alleged that the King Street Patriots, a non-profit 501(c)(4) corporation, made in-kind contributions to the state Republican Party in violation of Texas’s restriction on corporate political contributions, and failed to register as a “political committee” and comply with state disclosure law. The King Street Patriots, in response, filed a broad counterclaim challenging numerous provisions of Texas campaign finance law.
The Campaign Legal Center filed an amicus brief in the case to defend the constitutionality of Texas’s campaign finance laws. The Legal Center was supported in the case by the law firm of Gray and Becker in Austin, Texas.
The summary judgment allows the original Texas Democratic Party action to move forward seeking damages and declaratory and injunctive relief in connection to several violations of state campaign finance laws allegedly committed by the King Street Patriots.
To read the summary judgment, click here.
To read the Legal Center’s amicus brief opposing the King Street Patriots’s counterclaim, click here.
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U.S. Senate: Trevor Potter Statement to Senate Rules Committee on DISCLOSE Act of 2012
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Campaign Legal Center President Trevor Potter submitted a statement on the DISCLOSE Act of 2012 (S. 2219) at the request of the Senate Rules Committee. Because Potter was unavailable to testify due to a prior out-of-town commitment, the statement will be entered into the record at the Rules Committee hearing on the bill to be held on March 29, 2012.
The statement emphasizes the Legal Center’s support for the legislation and urges the Committee to quickly move the bill on to the full Senate without weakening amendments. Potter stressed that “S. 2219 is appropriately targeted, narrowly tailored, clearly constitutional and desperately needed.”
The statement points to the broad support for disclosure traditionally from both parties in Congress and even overwhelmingly from the U.S. Supreme Court in the controversial 5-4 decision in Citizens United. “With the Supreme Court having struck down corporate speech restrictions, it is now up to Congress to supply the full disclosure the Court hailed,” Potter wrote.
The full statement follows below.
March 28, 2012
The Hon. Charles Schumer
Chair, Senate Rules Committee
Russell 305
Washington, DC 20510
Dear Chairman Schumer:
The Campaign Legal Center strongly supports S. 2219, the DISCLOSE Act of 2012, and urges the Committee to report it out expeditiously without any weakening changes. S. 2219 is appropriately targeted, narrowly tailored, clearly constitutional and desperately needed.
In the 2010 elections, corporations, unions and other outside groups spent some $300 million or more to influence the midterm elections. Those expenditures included more than $135 million in secret contributions by donors whose identities were hidden from the American people. Campaign finance expert Professor Anthony Corrado, of Colby College, estimates that 90% of the sources of funding of the ten largest independent players in the 2010 midterm election was undisclosed.
In the 2012 elections, there is now even greater secret, undisclosed spending with both the Presidency and control of Congress in play. Left unchecked, secret money spent in political campaigns will result in sharply increased power for those givers, and greater sway in the halls of Congress, skewing the political process even further.
It is well established that laws requiring disclosure of the sources of election-related expenditures are constitutional. In a series of cases, the Supreme Court has repeatedly upheld robust disclosure requirements when it comes to campaign-related spending, and has explicitly and repeatedly recognized the value of ensuring that voters have the information they need to assess a speaker and that speaker's message. Even as the Court overthrew decades of practice and jurisprudence in the Citizens United v. Federal Election Commissiondecision, it overwhelmingly endorsed disclosure of funds spent on election activity as the antidote to corruption.
In that case, the Supreme Court had only a narrow 5-4 majority to strike down the restrictions on independent political expenditures by corporations, but it had an 8-1 majority, spanning the philosophical wings of the Court, in favor of disclosure over the Internet and by other means to the public and shareholders of the details of corporate funding of such political expenditures.
With the Supreme Court having struck down corporate speech restrictions, it is now up to Congress to supply the full disclosure the Court hailed. The Campaign Legal Center is urging Congress to muster the same broad philosophical support for such disclosure, since both political parties have long favored at least that much regulation.
S. 2219, a modified version of the legislation that was introduced last year, approaches this task by ensuring that the disclosure required is specifically targeted at campaign-related activities. It does not require groups to disclose their membership lists, but does address the “Russian nesting doll” problem that current laws are not reaching – either due to lax enforcement or to partisan disagreement about what transactions are covered by current statutes. S. 2219 appropriately addresses this and other problems that have arisen in the current disclosure regime in a targeted way.
The Gap in Current Law
The Supreme Court’s decision in Citizens United and the subsequent decision by the U.S. Court of Appeals for the District of Columbia in SpeechNow.org v. FEChighlighted gaps in current disclosure laws. These gaps have been exacerbated by the actions of the Federal Election Commission (FEC).
Under current federal law, political action committees (PACs) are entities with the major purpose of influencing elections that raise or spend more than $1,000 in connection with a federal election. The same disclosure laws that cover other PACs -- disclosure to the FEC of donors who contribute more than $200 – currently cover the independent expenditure-only political action committees, now known as Super PACs. PACs are also required to disclose disbursements exceeding $200 to any individual or vendor.
This disclosure regime for PACs has worked fairly well over the past thirty years, providing the public the opportunity to obtain accurate information about the funding and spending of PACs in federal elections.
Now, however, the disclosure requirements for campaign-related contributions are being evaded because the current laws and regulations did not anticipate these new rulings. As a result, Super PACs are receiving contributions from corporate entities whose funders remain anonymous, thereby undermining the purpose and effectiveness of the disclosure. For example, a disclosure report for a Super PAC may indicate it received funding from the corporation “Americans Who Love America, Inc.,” but not reveal the funding behind that organization.
Also, entities are being established that are undertaking significant election-related activities, but that do not qualify as Super PACs under current law and practices. These “shadow PACs” are usually organized as 501(c)(4) “social welfare” organizations that claim their primary purpose is lobbying or 501(c)(6) trade associations. Contributions to these tax-exempt organizations do not have to be disclosed under current tax law. However, there are a number of these “shadow PACs” that are undertaking significant election-related activities and playing a large part in the 2012 campaigns. In essence, this new scheme is allowing corporations and individuals to evade disclosure of their electoral spending by laundering money through third-party organizations not covered by current disclosure laws.
Moreover, the FEC has played a critical and damaging role in undermining a disclosure regime that accurately reflects the activities that are being undertaken to influence the outcome of federal elections. The FEC weakened a disclosure requirement of the Bipartisan Campaign Reform Act of 2002 (BCRA) by requiring groups spending money on “electioneering communication” to disclose only those donors that specifically designate their contributions to the organization for the funding of such ads. The FEC rules thus create a roadmap for evasion of the law.
The DISCLOSE Act of 2012 would require any “covered organization” – a corporation, labor union, 501(c) organization (other than a (c)(3)), Super PAC and section 527 organization – that spends $10,000 or more on a “campaign-related disbursement” to file a disclosure report with the FEC within 24 hours of the spending, and to file a new report each time an additional $10,000 or more is spent. The FEC must post the report on its website within 24 hours after receiving it.
Under S. 2219, if a covered organization does not wish to fall under the disclosure requirements, it may set up a segregated bank account dedicated to campaign-related disbursements that only contains funds donated directly to the account and then disclose only those donors. If, however, the campaign-related disbursement is paid for out of its general treasury fund, it has to disclose the source of all donations of $10,000 or more. A donor can request for his donation to not be used for campaign-related disbursements and thus, not be included in the segregated fund. The bill does not cover certain internal transfers between affiliated organizations, unless made for the purpose of funding a campaign-related disbursement.
S. 2219 also includes improved “Stand By Your Ad” requirements for Super PACs and other outside spending groups and ensures a more timely disclosure schedule for outside spending groups.
Completing the Process Begun by the Court
In Justice Kennedy’s majority opinion in Citizens United v. Federal Election Commission, he made two things very clear: First, it is generally constitutional to require disclosure of the sources of funding for spending in federal elections, whether or not that spending “expressly advocates” the election or defeat of a federal candidate. Second, he and seven other Justices were clear that they thought such disclosure was entirely appropriate and useful in a democracy.
Justice Kennedy stated that disclosure of the sources of funding of political advertising “provide[s] the electorate with information” and “insure[s] that the voters are fully informed about the person or group who is speaking. He also cited the holding in First National Bank of Boston v. Bellotti that, “Identification of the source of the advertising may be required as a means of disclosure, so that the people will be able to evaluate the arguments to which they are being subjected.”
Justice Kennedy also rejected the argument that disclosure requirements should be limited to “express advocacy.” Justice Kennedy’s Opinion flatly declared: “We reject this contention.” He noted that the Supreme Court had, in a variety of contexts, upheld disclosure requirements that covered constitutionally protected acts, such as lobbying. “For these reasons,” Justice Kennedy stated, “we reject Citizens United’s contention that the disclosure requirements must be limited to speech that is the functional equivalent of express advocacy.”
As to the value of disclosure of political spending, Justice Kennedy was equally clear. He wrote:
With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporations political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.
Justice Kennedy concluded:
The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
Thus, Justice Kennedy binds together the two elements of his opinion—independent corporate speech in elections is a First Amendment right, and the funding sources of such speech must be fully disclosed in order to make this constitutional right function in our political system. This section of Justice Kennedy’s Opinion was the only one joined by the four Citizens United dissenters, meaning that the fundamental importance of disclosure was recognized by eight of the nine Justices. Full disclosure is one of the few concepts in this contentious area of law to receive such a broad endorsement from the Supreme Court.
This background is important to your consideration of S. 2219, the DISCLOSE Act 2012, not only because it makes it clear that the disclosure provisions of the bill are constitutional, but also because they complete the process begun by the Court.
Unrestricted corporate speech in elections without disclosure of the sources of such speech is indeed contrary to the Court’s theory in Citizens United, which paired corporate First Amendment speech rights with the virtues of disclosure of the sources of such speech—disclosure to shareholders and to the general public. (The Citizens United case referred only to corporate speech and disclosure, because only a corporation was challenging the restrictions in the law. However, the DISCLOSE Act recognizes that First Amendment rights found in Citizens United are considered by the FEC to apply to unions as well, and therefore includes unions in the Act’s provisions.)
It is notable that just months after the Citizens United decision, Justice Antonin Scalia once again took the opportunity to stress the importance of disclosure in the political arena. In the case Doe v. Reed, concerning the disclosure of petitions signers for a ballot measure, Justice Scalia rejected arguments about potential threats of harassment of signers by opponents of the petition. In that case, he wrote:
Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed. For my part, I do not look forward to a society which, thanks to the Supreme Court, campaign anonymously and even exercises the direct democracy of initiative and referendum hidden from public scrutiny and protected from the accountability of criticism. This does not resemble the Home of the Brave.
Summary
For more than three decades following the Watergate scandal, both Republicans and Democrats agreed that disclosure of money spent in politics was essential to protecting the integrity of U.S. elections and government decision-making. That disclosure consensus has now broken down in spite of strong statements and clear holdings by the U.S. Supreme Court. The partisan schism over disclosure is most revealed at the FEC where regulations have eviscerated existing contribution disclosure requirements, leaving gaping loopholes in federal disclosure laws.
It is unfortunate that there are those who attempt to cast this debate as a partisan one between Republicans and Democrats. It should not be. Many Republicans have long argued for the exact conclusion that Justice Kennedy arrived at: less restriction on political speech in return for “full disclosure.”
S. 2219 fulfills an important need by requiring disclosure of individuals and entities spending money in U.S. elections. A strong majority of the U.S. Supreme Court has stated that such disclosure is not only constitutional, but is the expected and indeed necessary counter-balance to the new corporate right to expend unlimited funds in U.S. elections.
The Campaign Legal Center urges Congress to require such complete disclosure as quickly as possible. As Justice Kennedy’s majority opinion said on this point:
The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
Sincerely,
Trevor Potter
President, Campaign Legal Center
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U.S. House: Members Urged to Support Amendment to FCC Bill Requiring Disclosure of Donors to Groups Buying TV Ads
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Today the Campaign Legal Center and other reform groups urged Members to support an amendment to require disclosure of those funding television advertisements as the House considers H.R. 3309, a bill to curb Federal Communications Commission (FCC) regulatory powers.
The amendment to improve transparency in federal elections was introduced by Rep. Anna Eshoo (D-CA). The underlying bill has drawn criticism that it will impede the FCC’s ability to protect consumers but this amendment would require groups running political ads on TV to disclose their all contributors of more than $10,000 and place a list of these funders in the political files of the broadcast stations running the ads.
“Representative Eshoo’s amendment would simply let Americans know which special interests or individuals are shelling out money to help elect which candidates,” said Meredith McGehee, Campaign Legal Center Policy Director. “Polls have shown this type of disclosure has the overwhelming support of Americans already sick and tired of campaign ads funded by groups revealing little about their backers. This is information that voters deserve, and it is information voters will increasingly demand as the November elections approach and the barrage of campaign ads spreads to cities and towns in every corner of our nation.”
The groups joining the Legal Center on the letter included, Citizens for Responsibility and Ethics in Government, Common Cause, Democracy 21, the League of Women Voters, Public Citizen and the Sunlight Foundation.
The full text of the letter follows below.
Vote for Eshoo Amendment to H.R. 3309
March 27, 2012
Dear Representative:
Today the House is scheduled to consider H.R. 3309, legislation designed to limit the ability of the Federal Communications Commission (FCC) to adopt regulations affecting the communications industry.
While there are serious concerns that the underlying bill would hamper the FCC’s ability to protect consumers, Representative Anna Eshoo (D-CA) will offer an amendment that would significantly improve transparency in our elections.
The following organizations urge you to support the Eshoo amendment: the Campaign Legal Center, Citizens for Responsibility and Ethics in Government, Common Cause, the League of Women Voters, Democracy 21, Public Citizen and the Sunlight Foundation.
The Eshoo amendment would require an entity that runs political ads on television to disclose the sources of funding for the entity of $10,000 or more and place a list of these funders in the political files of broadcast stations that run the ads. This measure would help to ensure that viewers have access to information about the donors funding ads being run to influence their votes.
Such disclosure requirements for campaign-related expenditures were explicitly upheld in the Citizens United decision by an 8-to-1 vote. The Court stated that disclosure requirements "provide the electorate with information and insure that the voters are fully informed about the person or group who is speaking" and that "transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”
Our organizations urge you to vote for the Eshoo amendment.
Sincerely,
Campaign Legal Center
Citizens for Responsibility and Ethics in Government
Common Cause
Democracy 21
League of Women Voters
Public Citizen
Sunlight Foundation
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FEC: FEC Reminded it has No Authority to Strike Down Contribution Limits in Filing by Campaign Legal Center and Democracy 21
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The Campaign Legal Center, together with Democracy 21, filed comments today with the Federal Election Commission (FEC), reminding the commission that it has no authority to strike down statutory aggregate contribution limits, or any other laws passed by Congress, as requested by Advisory Opinion Request (AOR) 2012-14.
The AOR filed on behalf of Shaun McCutcheon asks the FEC to declare unconstitutional the $46,200 biennial limit on aggregate contributions from individuals to candidates and their authorized committees, though the request both acknowledges and later ignores that a statutory aggregate contribution limit has been upheld by the Supreme Court.
McCutcheon cites no authority that would authorize the Commission to do what he asks. He acknowledges that the “Commission may be tempted to invoke ‘restraint’ and lean on both the letter of the statute and purported wisdom of Congress.” AOR 2012-14 at 9. (In this statement, he appears to ignore the ruling in Buckley upholding the section 441a(a) aggregate limit.)
“The Supreme Court in Buckley made very clear that aggregate limits are constitutional, yet this request asks the Commission to exceed its authority by declaring such a limit unconstitutional, thus opening the door for individuals to contribute millions of dollars to candidates and authorized committees every single election cycle,” said Paul S. Ryan, FEC Program Director for the Campaign Legal Center. “The FEC is an administrative agency, not a court of law. The agency clearly lacks the legal authority to adjudicate the constitutionality of a duly-enacted statute.”
“The issue raised in this AOR was squarely resolved by the Supreme Court in 1976 in Buckley v. Valeo which held constitutional the aggregate limits on contributions in federal campaign finance law,” said Fred Wertheimer, President of Democracy 21. “There has been nothing in Supreme Court rulings since then to indicate that the Court has changed its views on this matter. Even those FEC Commissioners who are consistently unwilling to properly enforce and interpret the laws cannot believe that they are empowered to overrule Supreme Court decisions.”
The comments emphasize that the FEC has no choice but to inform McCutcheon that if he exceeds the limit he will be in violation of federal law. Further they stress that if a lawsuit is filed the FEC “must meet McCutcheon in court and defend the law once again.”
To read the comments, click here.
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IRS: CLC & Democracy 21 Call on IRS to Establish Bright-Line Standard for 501(c)(4) Tax-Exempt Status
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In a letter sent today to the Internal Revenue Service (IRS), the Campaign Legal Center and Democracy 21 called on the agency to promptly initiate a rulemaking proceeding to revise and clarify its regulations that spell out how much candidate campaign activity 501(c)(4) “social welfare” organizations can engage in under the Internal Revenue Code.
The privileged tax status has been widely embraced by special interest and political operatives to fund large scale political advertising campaigns on behalf of candidates. The IRS has taken no public action to date as the number of, and spending by, these organizations continues to multiply.
On July 27, 2010, the Campaign Legal Center and Democracy 21 submitted a “Petition for Rulemaking on Campaign Activities by Section 501(c)(4) Groups” to the IRS, challenging the existing eligibility requirements for 501(c)(4) tax-exempt status.
“The inaction of the IRS is only serving to inspire further abuses of the tax code as 501(c)(4)s are misused by special interests and individuals seeking to buy influence in Congress and the White House without revealing their identities to the public,” said J. Gerald Hebert, Executive Director of the Campaign Legal Center. “The IRS needs to establish a bright-line standard on eligibility for this privileged tax status or the already flagrant abuses will become even more widespread and the damage to our democracy will be made infinitely worse.”
“Organizations are ripping off the tax laws to hide from the American people the wealthy individuals and corporations financing their campaign activities,” said Democracy 21 President Fred Wertheimer. “Yet as far as anyone knows, the IRS has failed to stop this. We again call on the IRS to replace its ineffectual regulations and restore the integrity of the tax laws. The IRS should adopt a new bright line standard, in accord with court decisions, to establish that groups spending more than an ‘insubstantial amount’ on campaign activities are not eligible for 501(c)(4) tax status.”
The letter cited additional egregious examples of abuses of 501(c)(4) tax status by groups running candidate ads across the country. It also brought to the attention of the IRS comments made by an association of legitimate 501(c)(4) organizations that the widespread misuse of the tax-status was undermining both the credibility and the fundraising of groups for which the tax status was intended.
To read the full letter, click here.
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FEC Urged to Require Registration for Obvious Political Committee in Filing by Campaign Legal Center and Democracy 21
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The Campaign Legal Center, together with Democracy 21, filed comments today with the Federal Election Commission (FEC), urging the Commission to advise the organization ‘Free Speech’ that if it engages in its proposed activities it will have no choice but to register and report as a political committee.
As the comments filed by the Legal Center and Democracy 21 point out, the Free Speech request (AOR 2012-11) is absurd in light of the laws passed by Congress and upheld by the courts:
Notwithstanding Free Speech’s claims to the contrary, it is clear from the fact that every one of its proposed ads and solicitations is focused on federal candidates and elections (with many containing “magic words” express advocacy), Free Speech clearly has the “major purpose” of influencing federal elections.
Any group that has the major purpose of influencing federal elections that spends more than $1,000 disseminating the type of express candidate advocacy ads that Free Speech plans to air must register with the FEC as a “political committee.”
“The Free Speech request spells out textbook activities of a political committee and then asks the FEC to essentially ignore the law and allow the group to avoid registering and reporting as a political committee,” said Paul S. Ryan, Campaign Legal Center FEC Program Director. “This is an open and shut case and the commissioners have no choice but to inform Free Speech that it cannot lawfully undertake the activities it proposes without registering and reporting as a political committee.”
“There is little question that Free Speech should be required to register and report as a political committee,” according to Democracy 21 President Fred Wertheimer. “No reasonable person could conclude that its ads are anything other than campaign ads that contain express advocacy. Given that its major purpose is to influence elections, it meets all of the standards for political committee status.”
To read the comments, click here.
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Reform Groups Urge Senators to Support and Promptly Pass the DISCLOSE Act Introduced Today by Senator Whitehous
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Our organizations support the DISCLOSE Act introduced today by Senator Sheldon Whitehouse (D-RI) and a number of other Senators. We strongly urge Senators to promptly consider and pass this essential campaign finance disclosure legislation.
The organizations include: Americans for Campaign Finance Reform, the Brennan Center for Justice, the Campaign Legal Center, Citizens for Responsibility and Ethics in Washington, Common Cause, Democracy 21, the League of Women Voters, People For the American Way, Public Citizen and the Sunlight Foundation.
It is a cardinal principle of campaign finance laws that citizens have a basic right to know about the expenditures being made to influence their votes and the donors funding these expenditures.
In the wake of the Citizens United decision, however, more than $135 million in secret contributions were spent to influence the 2010 congressional races. This amount of secret money is expected to greatly increase in the 2012 national elections, absent new disclosure provisions.
The Supreme Court has repeatedly supported the constitutionality and importance of campaign finance disclosure laws. In Citizens United, the Supreme Court by an 8 to 1 vote upheld disclosure laws for outside groups making campaign-related expenditures stating:
The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
The Citizens United decision, however, combined with ineffective FEC disclosure regulations to open gaping loopholes in the campaign finance disclosure laws.
The DISCLOSE Act closes these loopholes with effective new disclosure requirements.
Unlike the DISCLOSE Act considered in 2010, the legislation introduced today focuses solely on disclosure provisions and does not contain any special exceptions for any group. The legislation also fixes the problem of untimely disclosure of donors to Super PACs that surfaced during the 2012 presidential primaries.
Polls show overwhelming public support for disclosure by outside spending groups and there are no legitimate policy or constitutional grounds for opposing the DISCLOSE Act. We strongly urge Senators to support the new DISCLOSE Act and to take all necessary steps to promptly enact the legislation.
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