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Campaign Finance Post-Citizens United
Since the U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission, 130 S.Ct. 876, much has been made of the newly minted ability of corporations to spend money supporting and opposing federal candidates. Companies and their executives are receiving requests to engage in political activity while facing questions, and even shareholder demands, regarding their decision to do so. At the same time, a number of cases challenging the restrictions and limitations of federal campaign finance laws continue to wind through the courts threatening to further change the political landscape, including a challenge to contribution limits that was recently granted review by the U.S. Supreme Court.
While Citizens United opened the door to broader corporate spending in certain contexts, understanding the limitations of that decision, and the myriad cases that followed, is critical for any corporation wishing to avoid becoming the subject of a legal enforcement action or negative press coverage.
What Citizens United Held
For more than seven decades, federal law has prohibited corporations and labor unions from making contributions or expenditures to influence federal elections. Corporations and unions are even prohibited from using their funds to "facilitate" private contributions, such as by using employee time to help organize a fundraiser. While corporate entities and unions can sponsor a political action committee, those PACs are limited in the size of contributions they can accept and the universe of persons from whom they can solicit contributions.
In Citizens United, the Supreme Court held that corporations and unions could not be prohibited from using their treasury funds to make "independent expenditures" expenditures for communications supporting or opposing federal candidates, which are not coordinated with any candidate or political party because such communications present no threat of quid pro quo corruption. Thus, a corporation or union can use unlimited funds, for example, to produce and to air a television ad encouraging the public to vote for a presidential candidate, provided the ad is not coordinated with the candidate or political party.
Post-Citizens United Developments
In Citizens United, the Supreme Court signaled a willingness to reconsider decades-old campaign finance laws and decisions, and opened the door to greater corporate and union involvement in federal elections, leading to a number of other challenges to federal campaign finance laws.
Super PAC contributions
Relying extensively on Citizens United, a federal appeals court subsequently ruled in SpeechNow.org v. FEC that individuals could make unlimited contributions to "Super PACs," that is PACs formed exclusively to make independent expenditures. The FEC subsequently concluded that the rationale of Citizens United, combined with the rationale of SpeechNow.org, necessarily led to the conclusion that corporations could also contribute unlimited amounts to PACs that make independent expenditures, in addition to making independent expenditures directly.
Another federal court has since ruled that only "nonconnected" PACs, those that are not sponsored by a corporation, union, candidate or political party, may accept unlimited contributions for the purpose of making independent expenditures, in Stop This Insanity Now Employee Leadership Fund v. FEC. That case remains pending.
Direct corporate and union contribution ban
As noted above, federal law prohibits corporations and unions from making direct contributions to federal candidates and political parties. This prohibition was upheld by the Supreme Court in a 2003 decision, FEC v. Beaumont. In Citizens United, the court expressly noted that it was not asked to reconsider that ruling.
Interpreting that caveat as an invitation, several suits were subsequently filed arguing that the rationale of Citizens United undermined, and implicitly overruled, Beaumont. However, the U.S. Court of Appeals for the Second, Fourth, Eighth and Ninth circuits ruled that the restriction on direct corporate and union contributions survives Citizens United. No appellate court held otherwise.
In February, the Supreme Court refused to review the Fourth Circuit's ruling in United States v. Danielczyk, leaving intact the ban on direct corporate and union contributions to federal candidates and political parties.
Government contractor contribution ban
Separate and apart from the ban on corporate political spending, federal contractors (whether corporate or not) are prohibited from making contributions to influence federal elections, including contributions to candidates, political parties and PACs. Citizens United and SpeechNow.org did not address whether federal contractors can contribute to PACs that make independent expenditures.
On March 5 several advocacy groups filed a complaint with the FEC, alleging that Chevron Corp., as a federal contractor, violated federal campaign finance laws when it contributed $2.5 million to the Congressional Leadership Fund, a Super PAC supporting Republican candidates for Congress. Of course, there has been no determination on the merits of the complaint, and Chevron may ultimately succeed in defeating it, but the legal and public relations battle will likely last months if not years.
The ban on contractor contributions was also challenged on constitutional grounds, in Wagner v. FEC, alleging that the ban is inconsistent with Citizens United. In November 2012 a federal court rejected that challenge with regard to direct candidate contributions, but declined to rule on the question of whether government contractors could contribute to Super PACs. An appeal is currently pending in the D.C. Circuit, with oral argument scheduled for May 16.
Individual contribution limits
Individuals, including corporate and union officers and employees (even the officers and employees of corporate government contractors), may contribute to candidates for federal office, political parties and PACs, though the corporation may not "facilitate" the contribution.
Individuals are limited in the amount they can contribute to each federal candidate, PAC and political party. For example, currently an individual is subject to a limit of $2,600 per candidate, per election. In addition, an individual's contributions are subject to biannual aggregate limits. For the 2013-14 election cycle, an individual may only contribute $48,600 to all federal candidates, subject to an overall aggregate limit of $123,200 on total federal contributions to all candidates, PACs and political parties.
The D.C. district court rejected a challenge to the aggregate contribution limits last September, in McCutcheon v. FEC. On Feb. 19 the Supreme Court agreed to review that decision. Oral argument will be heard in the court's October term, with a decision likely in early 2014.
Disclosure of contributions
Citizens United is best known for striking down prohibitions on corporate and union independent expenditures; less well-known is that the same decision upheld provisions requiring that such expenditures be reported. Corporations and unions that directly make independent expenditures have their own reporting obligations. In addition, corporations and unions that contribute to an organization making independent expenditures or "electioneering communications" (broadcast ads that mention a federal candidate and air within 30 days of a primary or 60 days of a general election) may also be disclosed, depending on the type of organization and the nature of the solicitation. A suit currently pending, Van Hollen v. FEC, seeks to force the FEC to require disclosure by certain types of organizations making electioneering communications the FEC regarded as exempt from disclosure requirements during the 2012 elections. Thus, a corporation or union that contributes to an organization making independent expenditures or electioneering communications should realize that the contribution may become a matter of public record, depending on the pertinent facts and circumstances.
"Foreign national" contribution ban
A separate provision of federal law prohibits "foreign nationals" from spending money to influence federal, state or local elections. This restriction applies to individuals who are not citizens or green card holders, as well as to foreign corporations and entities (though not necessarily their domestic subsidiaries). In 2011 the federal district court in Washington rejected a constitutional challenge to this provision in Bluman v. FEC. The Supreme Court unanimously affirmed that decision in 2012.
Prohibition on "laundered" contributions
Federal law prohibits "laundering" contributions making a contribution in the name of another, such as when a company reimburses its employees or officers for their campaign contributions without disclosing the true source of funds to the recipient of the contribution. This provision has also survived Citizens United.
Given the high price of campaigns, where it was estimated that spending in connection with the 2012 presidential campaign alone exceeded $2 billion, it is likely that the restrictions and prohibitions of federal campaign finance laws will continue to be challenged. However, it is important for any corporation wishing to take advantage of the new opportunities for corporate participation in federal elections be wary of the many remaining pitfalls to avoid running afoul of federal regulators and prosecutors.
Christopher Skinnell is a partner, and Elli Abdoli is an associate, at Nielsen Merksamer Parrinello Gross & Leoni, specializing in political, government and elections law and litigation, including corporate political law compliance.
This article originally appeared in The Recorder.