Washington - In a 6-3 decision today, the U.S. Supreme Court struck down a California reporting rule designed to prevent charitable fraud and self-dealing. In doing so, the Court sidestepped established precedent recognizing the important public interests in nonprofit reporting and relatively minimal burdens such reporting imposes. This limited, nonpublic information served a key role in helping the state maintain oversight over organizations soliciting donations.

However, this decision does not call into question the longstanding laws and regulations requiring public disclosure of campaign spending. The standard of review applied by the Court is one transparency laws in the electoral context easily meet, limiting the reach of this case.

Americans for Prosperity Foundation v. Bonta addressed nonpublic tax reporting by charities, not public disclosure by those spending money to influence elections. Still, this ruling needlessly brushes aside precedent in favor of wealthy special interests—toughening the standard of scrutiny applied to California’s law beyond what the Court’s earlier disclosure decisions would have required.

“Some could worry that this case might have an impact on other states and their efforts to prevent charitable fraud and self-dealing,” said Tara Malloy, senior director for appellate litigation and strategy, Campaign Legal Center. “But, the Supreme Court has repeatedly upheld that public interests tied to electoral transparency justify laws governing disclosure. There is really no reason to believe this ruling will have a broad impact on electoral transparency measures.”

"We’re disappointed with today’s decision, which departs from precedence to protect super wealthy donors from accountability. Still, it is clear that election related disclosure easily meets the Court’s standard: only fulsome disclosure of the financial backers to a candidate can protect our democracy," said Stuart McPhail, CREW Senior Litigation Counsel.

“The Supreme Court’s decision to reject California’s disclosure requirement is disappointing and, although narrow, could open the door for further exploitation by wealthy special interests,” said Stephanie Doute, executive director of the League of Women Voters of California. "The League will continue to advocate for transparent campaign finance rules that let voters know who is seeking political influence.”

“It is disappointing that the Court missed an opportunity to reaffirm the freedom of states to monitor fundraising by nonprofit organizations for compliance with state laws, including “dark money” groups that raise and spend unlimited money in politics,” said Common Cause President Karen Hobert Flynn. “But it’s important to emphasize that this was not a campaign finance disclosure case, and campaign finance laws remain constitutional and vitally important despite the Court’s decision today.”

As American voters continue to overwhelmingly support transparency measures that seek to fight fraudulent activities—understanding them to be essential to governmental integrity—the desire of wealthy special interests to make anonymous political contributions cannot be permitted to overrule well-established precedents. 

At Campaign Legal Center, we are advancing democracy through law. Learn more about our work.

WASHINGTON – Today, the U.S. Supreme Court upheld two Arizona policies that make it harder for Latino, Native American, and Black voters to vote. The decision establishes strict guideposts to assess challenges to election law in the future, making it more difficult to bring challenges to discriminatory voting laws under Section 2 of the Voting Rights Act.

“In a setback for voters, the U.S. Supreme Court decided to let discriminatory voting policies in Arizona stand,” said Paul Smith, vice president of Campaign Legal Center (CLC). “This decision will not simply make it more difficult for people to vote in Arizona. It makes it more difficult – but not impossible – to protect voters from discrimination under the Voting Rights Act (VRA) nationally. The fact that the legal landscape for voters continues to erode reinforces how important it is for Congress to strengthen national protections against discriminatory policies. Passing the For the People Act and the John Lewis Voting Rights Advancement Act has never been more urgent.”

Campaign Legal Center (CLC) filed a brief in Brnovich v. DNC on Jan. 20, 2021.

At Campaign Legal Center, we are advancing democracy through law. Learn more about our work.

Washington - Today, Campaign Legal Center (CLC) and Center on Science & Technology Policy (CSTP) at Duke University filed a rulemaking petition with the Federal Election Commission (FEC) asking the agency to close transparency loopholes that have allowed campaigns and PACs to disguise millions of dollars in political spending.

Although campaigns, PACs, and other political groups are required to report payments to vendors over $200, the FEC has created a loophole: if the vendor then subcontracts with a third party, payments to that subcontractor need not be disclosed.

This loophole is not absolute — a vendor cannot lawfully act as a conduit to disguise a campaign's spending. Although there are recent examples of campaigns violating the law by routing spending through LLCs controlled by senior officials, other campaigns and PACs have stayed within legal lines while nonetheless obscuring the ultimate recipients of their spending.

As a result, transparency suffers and voters, donors, and researchers are denied essential information. The effect of this loophole is that voters are deprived of basic information about how candidates and committees are operating and donors are left in the dark about how their contributions are being spent. It disguises whether campaign funds are being routed to the candidate’s businesses, to the candidate’s family members, or to firms owned by a “scam PAC’s” operators.

Moreover, as CSTP has described, this loophole makes it nearly impossible for academics and researchers to track digital political advertising, because FEC reports routinely only disclose a committee’s digital advertising payments to a consulting firm, without separately itemizing that firm's “subcontracted” payments to digital advertising platforms on the committee’s behalf.

Increased transparency means less influence for wealthy special interests and less political corruption, allowing for increased opportunities for academics and researchers to follow the money and more ways to identify bad actors.

The petition from CLC and CSTP asks the FEC to adopt rules making clear that all expenditures or disbursements made on behalf of or for the benefit of a campaign, PAC, or other reporting entity must be disclosed in full, regardless of whether they are made via an agent, independent contractor, vendor, or subvendor.

“Voters have a right to know where campaign money is coming from, as well as how it is being spent.” said Brendan Fischer, director of the federal reform program at the Campaign Legal Center. “The FEC created this transparency loophole decades ago, and it is about time that they close it.”

“Our recent report estimated that 94% of advertising money in the last month of the 2020 election passed through communication consultancies, making this less of a loophole and more of a black hole in the middle of our election oversight system,” says Scott Babwah Brennen, Senior Policy Associate with CSTP.

Earlier this year, CLC and CSTP hosted a panel discussion featuring FEC Chair Shana Broussard on the regulations that govern federal reporting of political sub-vendor spending. The panelists offered insight on current and potential reforms of political ad regulations and highlighted how those regulations could increase public transparency.

Increasing disclosure around subvendors is an excellent example of an easily achievable transparency increase.

At Campaign Legal Center, we are advancing democracy through law. Learn more about our work.