W ashington Watch Corporate Political Giving In 2010, the United States Supreme Court handed down its decision in Citizens United v. FEC (referred to hereafter as CU). The court held that, for the first time in a century, corporations can spend unlimited amounts of money on independent expenditures. This decision will have an enormous effect on the money spent in US elections. To get a sense of the enormity of the CU decision, one must first look at the Supreme Court’s 1990 decision in Austin v. Michigan Chamber of Commerce, which was directly overturned by CU. In Austin, the court upheld a state law banning corporations from making independent expenditures from general treasury funds. The court found that even though the state laws burdened corporate speech, they were justified by a compelling state interest in preventing corruption or the appearance of corruption. According to the court, the laws were necessary because corporate treasury funds could be unfairly used to influence election outcomes, even though corporate funds are often amassed with the aid of state laws that have little to do with the public’s support for the corporation’s political ideas. Subsequently, in 2002, Congress passed the McCain-Feingold Bill, which was officially called the Bipartisan Campaign Reform Act of 2002 (BCRA). The law made it illegal for both for-profit and not-for-profit corporations to expressly advocate for the election or defeat of political candidates if the communication was paid for from the corporation’s general treasury. Corporations were permitted to set up separate segregated funds (SSF) to finance communications, but BCRA restricted the amount of contributions that SSFs could collect. In 2009, Citizens United, a nonprofit corporation, created a documentary entitled Hillary: The Movie, which was critical of then-presidential candidate Hillary Clinton. The documentary had previously been distributed to movie theaters and through DVD, but Citizens United wanted to further distribute it to cable television subscribers through video on demand. The group planned to pay cable companies to provide
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access to the documentary, but BCRA’s restrictions against corporate independent expenditures prevented them from doing so. As a result, Citizens United sued the Federal Election Commission (FEC), the agency in charge of enforcing US campaign finance laws, to overturn BCRA’s ban on corporate independent expenditures. From the start, the CU case was different from most other Supreme Court cases. The court heard oral arguments in March 2009, and most court watchers assumed a decision would be quickly issued. However, in June 2009, in a rare move, the court ordered a rehearing before its fall 2009 term was to begin. The court also asked the parties to submit supplemental briefs on whether Austin should be overturned, an issue that had not been included in the litigants’ original briefs. In January 2010, the Supreme Court issued its opinion in CU. The court held it unconstitutional for Congress to forbid corporations from spending money from general treasury funds on independent expenditures. While corporations are still not permitted to directly contribute money to federal candidates, the decision allows corporations to run advertisements supporting or opposing any federal candidate as long as the ad is not coordinated with the candidate’s campaign. Because the CU decision was issued during the 2010 midterm election year, its effects were felt immediately. Reports indicate that outside spending (i.e., non-party and non-candidate spending) during the 2010 midterm elections surpassed all outside spending in 2008, a presidential election year that traditionally has much higher levels of outside spending. Further, outside spending during 2010 was four times higher than the 2006 midterms, and for the first time outside groups spent more than the Democratic or Republican parties. While outside spending rose to record heights, many corporations were hesitant to enter the political arena for fear of unwanted publicity resulting from political donations. The perils of corporate giving were apparent when, in 2010, Target Corp. donated $150,000 to a business group that was supporting a Minnesota gubernatorial candidate. The candidate had previously supported a state amendment banning
Joshua B.Smith gay marriage and had proposed that sex offenders be chemically castrated. When Target’s contributions were revealed, the company’s employees and other activists responded with a boycott, and Target was forced to issue a public apology. Corporations have some ability to shield themselves from the negative press inherent in making direct expenditures. Corporations can contribute to political action committees that make expenditures, though these contributions must be reported to the FEC. Corporations can also contribute to so-called 501(c)(4) groups, organizations that are formed under the Internal Revenue Code. These groups are permitted to engage in political activity as long as this activity is not the organization’s primary purpose, but the groups do not have to reveal their donors. For example, Crossroads GPS, a 501(c)(4) group formed by former presidential advisor Karl Rove, reportedly raised $43.2 million from contributors who do not have to be disclosed. Moreover, donations to 501(c)(4) groups spiked during 2010; according to a report by Public Citizen, a nonprofit watchdog group, only 53 percent of outside groups provided any information about the sources of their funding. The report also found that groups that made political expenditures but disclosed nothing spent roughly $135.6 million, 52 percent of the entire amount spent by outside groups during the 2010 election cycle. As the 2012 presidential election approaches, corporate political giving is in a state of flux. While some corporations will continue to refrain from political spending, many others will contribute to political action committees and 501(c)(4) groups. Regardless of the mode of corporate giving, the Supreme Court’s Citizens United decision will affect all Americans through substantial increases in election spending. If you think you were inundated with television ads in 2010, just wait until 2012! Joshua B. Smith is a political law attorney in Washington, DC. He enjoys traveling and sampling international cuisine with his wife and daughter.