On January 20, 2011, almost one year to the day after the U.S. Supreme Court’s landmark decision in Citizens United v. FEC, 130 S. Ct. 876 (2010), the Federal Election Commission (FEC) deadlocked 3-3 along party lines on a vote to move forward with proposed regulations to implement this decision. The FEC indicated in February 2010 that a Citizens United rulemaking would be forthcoming. Although FEC Chair Cynthia L. Bauerly indicated she remains “hopeful” that a consensus will be reached on this proposed rulemaking, it is unclear when or if this rulemaking will occur after this deadlock. Without a rulemaking, the FEC will be unable to provide comprehensive guidance to the regulated community. However, as noted below, the FEC has provided some limited guidance in the form of two advisory opinions.

In the absence of a formal Citizens United rulemaking, organizations may still pay for independent expenditures but should exercise caution. Those wishing to pay for independent expenditures should carefully review relevant FEC advisory opinions, apply industry best practices and consult with counsel.

Independent Expenditures

An “independent expenditure” is a communication that expressly advocates for the election or defeat of a candidate (express advocacy) and is not coordinated with any candidate, campaign or political party.

Citizens United v. FEC

On January 21, 2010, the Supreme Court handed down Citizens United v. FEC, the most significant campaign finance case since Buckley v. Valeo, 424 U.S. 1 (1976). This decision allows corporations and labor unions to use corporate treasury funds to pay for independent expenditures.

Contrary to some news reports, the decision does not allow corporations or labor unions to contribute directly to federal candidates. Direct corporate contributions have been banned since 1907 and direct labor union contributions have been banned since 1943. Accordingly, corporations and labor unions must still use federal PAC funds, which are comprised of individual contributions, to make direct contributions to federal candidates.

Citizens United Advisory Opinions

After the Supreme Court’s decision in Citizens United and the D.C. Circuit’s decision in SpeechNow.org v. FEC, 599 F.3d 686 (D.C. Cir. 2010) allowing unlimited individual contributions to independent expenditure committees, the FEC applied these legal holdings in two advisory opinions.

On July 22, 2010, the FEC approved advisory opinions formally recognizing independent expenditure committees for the first time at the federal level. Prior to these opinions, independent expenditure committees had only existed at the state or local levels. The Club for Growth advisory opinion (AO 2010-09) allows 501(c)(4) organizations to establish a separate independent expenditure committee. The Commonsense Ten advisory opinion (AO 2010-11) allows independent expenditure committees to accept unlimited contributions from individuals, political committees, corporations and labor unions. The FEC also provided guidance as to how independent expenditure committees may register and report activity with the FEC using existing registration and disclosure forms.

In addition to contributing to an independent expenditure committee registered with the FEC, corporations and labor unions may pay directly for independent expenditures. All independent expenditures must contain certain disclaimers and must be properly disclosed to the FEC and/or the U.S. Senate. Additional Federal Communications Commission and Internal Revenue Service disclosures may also be required.

DISCLOSE Act

The DISCLOSE Act, which was passed by the House of Representatives on June 24, 2010, proposed significant changes to federal campaign finance law as it relates to independent expenditures and corporate and labor union political activity. Particularly noteworthy is the fact that this legislation would require additional contributor disclosure for independent expenditures. A procedural vote on the Senate version (S. 3628) failed in a 57-41 party-line cloture vote on July 27, 2010. Based on this vote and subsequent Republican gains in the 2010 general election, it appears unlikely the DISCLOSE Act in its current form will be enacted. However, it is possible that more limited disclosure-related legislation may be pursued in the 112th Congress.