On January 21, 2016, the United States Court of Appeals for the District of Columbia Circuit upheld the Federal Election Commission’s (FEC) rule requiring corporations and labor organizations to disclose on an electioneering communications report only those donations made to their respective treasury funds that were “made for the purpose of furthering electioneering communications.” Christopher Van Hollen, Jr. v. Federal Election Commission, No. 15-5016, slip op (D.C. Cir., January 21, 2016).

Brief Overview

In 2002, Congress passed the Bipartisan Campaign Reform Act (“BCRA”) which, in part, regulated a new category of political advertising called “electioneering communications” (commonly referred to as issue ads) defined as follows: any broadcast, cable, or satellite communication which refers to a clearly identified federal candidate and is made within: (a) 60 days before a general, special, or runoff election for the office sought by the candidate; or (b) 30 days before a primary or preference election, or a convention or caucus of a political party that has the authority to nominate a candidate, for the office sought by the candidate; and (c) for a communication which refers to a Congressional candidate, is targeted to the relevant electorate. 52 U.S.C. Sec. 30104(f)(3)(A)(i).  

BCRA included a ban on corporate and union expenditures for electioneering communications; however, through a series of U.S. Supreme Court cases culminating in Citizens United v. FEC, 558 U.S. 310 (2010), the ban on corporate and union expenditures for electioneering communications was invalidated, but the disclosure requirements were upheld. The FEC then had to decide how BCRA’s electioneering communications disclosure requirements would apply to corporations and unions. 

Under BCRA, every person who spends more than $10,000 in any calendar year to produce and air electioneering communications must file a report with the FEC within 24 hours of publicly distributing the communication. Each subsequent distribution of a communication will trigger the filing of another report if the $10,000 threshold has been exceeded. The report must include the names and addresses of (a) all contributors who contributed an aggregate of $1,000 or more since the first day of the preceding calendar year to a special segregated bank account for electioneering communications, or (b) all contributors who contributed an aggregate of $1,000 or more since the first day of the preceding calendar year to the person making the expenditure for the electioneering communication. 52 U.S.C. Sec. 30104(f)(1), (2)(F); 11 C.F.R. Sec. 104.20(a)-(b).

In applying BCRA’s disclosure obligations to corporations and unions, the FEC issued a rule limiting the disclosure requirement to the name and address of each person who made a donation aggregating $1,000 or more since the first day of the preceding calendar year to the corporation or labor union “which was made for the purpose of furthering electioneering communications.” 11 C.F.R. Sec. 104.20(c)(9).

A member of the House of Representatives challenged the FEC’s “purpose requirement” rule as an impermissible construction of BCRA and an arbitrary and capricious use of the FEC’s regulatory authority.

The Court’s Decision

In addressing the first issue, the Court explained that when construing a statute, only a reasonable interpretation by an agency, and not the best, is required. Furthermore, since Congress left the meaning of the term “contributor” ambiguous, this omission resulted in an implicit delegation from Congress to the FEC to fill in the statutory gaps. “It is a transfer of authority to the FEC, whose task it then became not to find the best meaning of the text, but to formulate legally binding rules to fill in gaps based on policy judgments made by the agency rather than Congress.” Citing to Michigan v. EPA, 135 S. Ct. 2699, 2713 (2015). Since the FEC filled the gap left in BCRA with the same purpose requirement Congress adopted in related contexts, the Court concluded that the adopted rule was not an impermissible construction of BCRA.

The Court also rejected Van Hollen’s argument that the purpose requirement rule was arbitrary and capricious. First, since the federal courts had overturned BCRA’s ban on the use of corporate and labor union funds for electioneering communications, these previously silenced speakers were now subject to BCRA’s disclosure requirements, and the FEC had the authority to decide how to apply the disclosure requirements to corporations and unions. Second, the FEC adequately explained its decision to adopt the new rule. Based on the foregoing, the Court held that the rule was neither arbitrary nor capricious.

What the Decision Means

By upholding the “purpose requirement” rule of the FEC, the limited disclosure requirements imposed on corporations and labor unions that make electioneering communications have not changed. Once the expenditures for electioneering communications exceed $10,000 in any calendar year, the corporation or labor union must file a report with the FEC within 24 hours of distributing the electioneering communication. If the expenditures were made from the corporation’s or labor union’s general treasury funds, the report must disclose, among other things, only the names and addresses of donors who donated an aggregate of $1,000 or more since the first day of the preceding calendar year to the corporation or labor union for the purpose of furthering the electioneering communications.