Legislation to Respond to the Citizens United Decision: Myths & Realities Part 2

Legislation to respond to the Citizens United decision was introduced on April 29, 2010 by Senator Charles Schumer (D-NY) and Representatives Chris Van Hollen (D-MD) and Mike Castle (R-DE).  This is Democracy 21’s second “myths and realities” release on the legislation.

Myth:  Under the new legislation, non-profit (c) (4) advocacy organizations (most are incorporated) that raise money only from individuals and accept no funds from corporations or  labor unions should be exempt from having to disclose the donors who fund their campaign-related expenditures. These advocacy groups should receive different treatment than for-profit corporations, labor unions and trade associations, or non profit (c) (4) advocacy groups that receive both individual and corporate or labor union money.

Reality: The disclosure legislation implements the fundamental principle that the public has a right to know the groups that are spending money to influence federal elections and the donors who are financing these “campaign-related” expenditures – defined in the legislation as independent expenditures and electioneering communications.

This disclosure goal is no way disappears nor is it any less relevant for (c) (4) advocacy groups that receive their funds only from individuals.  The public still has the right to know who is funding the group’s campaign-related expenditures, even if the funders are only individuals.

While incorporated (c) (4) advocacy groups that receive only contributions from individuals were exempted by the Supreme Court from the ban on corporate campaign spending prior to the Citizens United decision (so-called MCFL corporations), this exemption has never applied to disclosure.

As the Supreme Court stated in the Citizens United decision:

In Buckley, the Court explained that disclosure could be justified based on a governmental interest in “provid[ing] the electorate with information” about the sources of election-related spending.

In fact, all persons, including MCFL advocacy groups, are now and have always been required to file disclosure reports regarding the independent expenditures or electioneering communications they make, and the donors who provided the funds for the purpose of furthering these expenditures.

The problem is that the existing donor disclosure provisions are ineffective and easily evaded. The provisions require disclosure of a donor only where the donation has been given “for the purpose of” making a specific independent expenditure or “for the purpose of” of making electioneering communications. As a result donors who provide funds to finance campaign-related expenditures simply do not earmark their donations. This has resulted in widespread evasion of the donor disclosure requirements.

The Schumer-Van Hollen legislation strengthens the disclosure provisions of existing law by providing for more effective, comprehensive and timely disclosure of the donors who are financing an organization’s campaign-related expenditures. The new disclosure provisions apply to funds that are used for such expenditures regardless of whether the funds are specifically earmarked for that purpose.

If MCFL groups were given an exemption from donor disclosure, it would deprive the public of knowing who the sources are for campaign-related expenditures made by these advocacy groups. Furthermore, it would also unravel the rest of the donor disclosure regime intended to ensure the American people know the sources of funding for campaign-related expenditures.

MCFL groups would become the circumvention vehicle of choice for individual donors who want to spend money on campaign-related expenditures without disclosing their involvement. By funneling money through an exempted MCFL group, the identity of the individual donor would be hidden from the public. 

If this kind of exemption were given to MCFL organizations, furthermore, the other types of non-profit organizations would claim they are being unfairly treated and demand an exemption as well from disclosing their individual donors. We would end up with a disclosure regime for advocacy groups and trade associations in which wealthy individuals providing funds to pay for campaign ads would be hidden from public view. The use of front groups to mask the donors of funds to finance campaign ads would flourish.