With under 100 days before the November elections, campaign fundraising, convention events, and poll watching now take center stage in the compliance arena. In the 15-month period from January 1, 2011 through March 31, 2012, candidates, parties, and PACs collected $2.9 billion worth of contributions and disbursed over $2 billion. Independent expenditures and electioneering communications total $101.5 million in the current election cycle with more to come. This unprecedented amount of spending to date for the 2012 election cycle will only increase as Members of Congress return home to campaign for most of the next three months and the presidential campaign kicks into high gear.

This issue of the SNR Denton US Political Law Compliance and Risk Management alert discusses recent attempts to enhance and clarify campaign finance transparency at the congressional, agency, and state level.

Congressional Update

As anticipated, two attempts in the Senate to move forward on the DISCLOSE Act in July failed on party-line votes. The bill would require enhanced disclosure and disclaimer requirements for corporations, labor organizations, and Super PACs, including 501(c)(4) organizations that engage in federal political campaign activity. The measure is not likely to be brought up again before the November elections.

Notwithstanding the failure to advance the DISCLOSE Act, the Senate Judiciary Committee, Subcommittee on the Constitution, Civil Rights, and Human Rights held a hearing on July 24 entitled "Taking Back Our Democracy: Responding to Citizens United and the Rise of Super PACs." The hearing focused on how to best remove corruption from elections and how to combat secret funding of campaigns. Witnesses included current Members of Congress, Former Republican Louisiana Governor Buddy Roemer, a Harvard Law professor, and a senior fellow from the Cato Institute. The discussion, led by Democrats, emphasized the need for enhanced disclosure and regulation, citing the pervasive influence of a few wealthy donors in the 2012 election cycle. Most of the witnesses and Members called for a constitutional amendment that would give Congress the authority to regulate political spending, essentially reversing the US Supreme Court’s Citizens United decision.

Legal Developments

Aggregate Contribution Limits Challenged

After the FEC unanimously approved an Advisory Opinion (AO), 2012-14, affirming the campaign contribution cap of $46,200 by individuals to federal candidates per election cycle, the Republican National Committee joined in a new lawsuit against the FEC challenging the $117,000 per cycle aggregate limit on contributions to candidates and political parties. The suit, McCutcheon v. Federal Election Commission, was brought by the Republican contributor who requested the AO, Sean McCutcheon, and challenges both the limit on contributions to federal candidates, and the $70,800 aggregate limit per cycle on contributions to political party committees. The lawsuit requests a preliminary injunction that would prevent the FEC from enforcing the contribution cap. A hearing date has been set for September 6, when a three-judge panel of the district court will consider the case as well as the motion for a preliminary injunction.

Attorneys for the plaintiffs argue that the limits are unconstitutional and should be lifted in order to level the playing field in light of the unlimited fundraising ability of Super PACs. The FEC, which has been joined by campaign reform groups in the suit, filed a motion noting that the US Supreme Court upheld an aggregate contribution limit as constitutional under the First Amendment in Buckley v. Valeo.

PAC/Independent Expenditure Contribution Limits Challenged

On July 10, a lawsuit was filed against the FEC in the US District Court for the District of Columbia challenging certain contribution limits to PACs. Specifically, the Stop This Insanity Inc. Employee Leadership Fund wants to solicit unlimited contributions from its restricted class for the purpose of making independent expenditures. This group filed an Advisory Opinion request, AO Request 2012-01 (Stop This Insanity, Inc. Employee Leadership Fund) with the FEC earlier this year requesting clarification, however, the Commission deadlocked on the request.

Corporate Campaign Contribution Ban

On June 28, the US Court of Appeals for the Fourth Circuit upheld the longstanding ban on direct corporate campaign contributions (US v. Danielczyk). Overruling the lower court judge, who had ruled the corporate contribution ban unconstitutional, the Court of Appeals held that the ban on corporate campaign contributions given directly to federal candidates was not impacted by Citizens United and remains in effect.

Federal Communications Commission: Broadcast Disclosure Update

As noted in previous alerts, the Federal Communications Commission (FCC) recently approved a rule that would require certain broadcasters to upload their public "political files" to the FCC's website. The FCC rule would require online disclosure by TV stations of all requests to purchase time for political commercials, how the stations responded to such requests, the schedule and classes of times purchased and the rates charged, and whether a station granted free time to a candidate. The rule would not apply to cable channels, websites, satellite providers, the internet, or radio, but became effective August 2 for the top four networks in the top 50 markets. All other stations would have to comply beginning July 1, 2014. The National Association of Broadcasters (NAB) filed a lawsuit in the US Court of Appeals for the District of Columbia challenging the rule. On July 27, the Appeals Court denied a request by the NAB to issue an emergency stay of the FCC rule pending the outcome of the lawsuit. However, the Appeals Court denied the NAB's request.

Developments in the States

As the US Congress and FEC largely remain deadlocked on substantive campaign finance policy, several states have recently enacted new campaign finance laws, grassroots ballot initiatives continue to move forward, and enhanced disclosure has caught the attention of the New York Attorney General.

Connecticut

Campaign finance reform legislation passed in Connecticut will have to wait until next year for another chance to become law. The Governor of Connecticut vetoed a bill passed by the Connecticut General Assembly that would have revamped the state’s campaign finance law. In his veto message, Governor Dannel Malloy (D) said he could not support the bill due to its multiple legal and practical problems, including its potential unconstitutionality. Among other provisions, the bill would have required corporations to obtain board approval for campaign-related expenditures exceeding $4,000. The votes of individual board members would have to be published on a company’s website. The bill also would have implemented additional reporting and disclaimer requirements for independent expenditures and expanded the definition of ‘expenditure’ and ‘contribution.’ Regarding contribution limits, the legislation would have raised the limits on how much individuals could give to PACs and party committees. Neither the House nor the Senate attempted to override the veto. The chairman of the House committee with jurisdiction over such legislation already has announced that he plans to introduce a new campaign reform proposal during the 2013 legislative session.

District of Columbia

The District is joining the trend of enhancing campaign finance laws at the state and local level. The November ballot is likely to include a measure that would ban corporate political contributions made directly to campaign committees, exploratory committees, inaugural committees, and elected officials’ constituent services programs. Over 30,000 signatures have been collected in an effort to add the initiative to the ballot; less than 24,000 signatures were needed. Observers expect the ballot initiative to be successful.

Illinois

A campaign finance bill passed by both chambers of the Illinois legislature has been enacted into law upon the signature Governor Pat Quinn (D), and will be in effect for the 2012 elections. As mentioned in our last update, Senate Bill 3722 bill eliminates campaign contribution limits for candidates if third party groups have exceeded a certain spending threshold in support of another candidate. The legislation moved forward in response to the Illinois Supreme Court decision in Personal PAC v. State Board of Elections. This decision held that state political contribution limits are not applicable to Super PACs that make independent expenditures in the absence of candidate coordination, and was expressly based on the ruling in Citizens United. The new Illinois law is meant to level the playing field for candidates, allowing a candidate to raise money beyond the current caps in order to match the uncapped spending of Super PACs. The rationale is similar to that underlying provisions which allow relief from contribution limits for candidates who face an opponent who self-funds a campaign at a high level. Reform groups have decried the governor’s signing of the bill, saying it will open the floodgates to special interest funding in elections. The new law also calls for a review to be conducted examining independent expenditures, and for a report on the issue to be submitted to the governor and to the General Assembly by February 1, 2013.

Montana

Montana is not giving up in the wake of the US Supreme Court’s decision to strike down a state ban on certain corporate political contributions. A ballot initiative establishing a state policy that corporations are not human beings and do not enjoy constitutional rights has obtained a sufficient number of signatures and will appear on Montana’s November ballot. The initiative instructs the elected officials responsible for implementing the policy to treat money as property, not as speech, and effectively would reinstate the ban on corporate contributions and expenditures. It also directs the state’s congressional delegation to draft a constitutional amendment that would reverse the US Supreme Court’s decision in Citizens United. Both Governor Brian Schweitzer (D) and Lieutenant Governor John Bohlinger (R) support the measure.

New York

The issue of political activity by 501(c)(4) organizations may soon emerge on the national stage, due to an investigation launched by New York Attorney General Eric Schneiderman (D). The investigation focuses on the US Chamber of Commerce and a loan it received from the National Chamber Foundation, as well as loans provided to the Chamber from the Starr Foundation. Schneiderman has issued a subpoena requesting emails, bank records, and other documents for use in the investigation, which was likely prompted by multiple complaints filed regarding the Chamber’s loan transactions. While campaign reform groups have repeatedly raised concerns with campaign activity undertaken by tax-exempt groups due to the anonymity allowed to donors, the IRS has not indicated that enforcement or further regulation is a priority. Schneiderman’s investigation may raise the profile of this issue, although any impact on the 2012 elections will likely be nominal.

Rhode Island

Legislation aimed at increasing the disclosure of political funding sources has been signed into law in Rhode Island. Governor Lincoln Chafee (I) signed the bill at the end of June, with an immediate effective date. The law requires any person, business entity, or PAC making independent expenditures or electioneering communications to report all such campaign finance expenditures exceeding $1,000 in a calendar year to the Rhode Island State Board of Elections. The measure also provides for disclaimers identifying the person, business entity, or PAC responsible for funding a written independent expenditure or electioneering communication. Such ads funded by 501(c)(4) groups and 527 groups also must list the five persons or entities making the largest aggregate donations during the previous year. Independent expenditures and electioneering communications on television or on the internet must include a photo or image of the CEO or equivalent of the entity making the communication, as well as an audio message by the CEO identifying the entity paying for the expenditure and his/her approval of the content of the message. Television or internet ads made by 501(c)(4) groups or 527 groups also must identify the top five donors to the entity from the previous year. This legislation is intended to inform viewers and voters about the groups behind the messages heard during a campaign, and is intended to target those ads funded by Super PACs.

Developments at the FEC

Electioneering Communications Disclosures (Van Hollen v. FEC)

The FEC has issued a statement outlining how it will comply with the opinion and order issued by the United States District Court for the District of Columbia in Van Hollen v. Federal Election Commission, a case addressing whether tax-exempt organizations that run election-related television ads must disclose their donors. Effective March 20, 2012 (the date the District Court handed down its decision), persons making disbursements for electioneering communications should report the name and address of each donor who donated an amount aggregating $1,000 or more to the person making the disbursement, aggregating since the first day of the preceding calendar year. This rule mirrors the Commission’s regulation that was in effect from 2003 through 2007. The FEC announced that until the Van Hollen case is resolved on appeal or the Commission adopts a new regulation or explanation of its rules, the term ‘contributor’ is considered to apply to all contributors regardless of their subjective purpose in contributing – meaning that not only those giving a contribution with the expressed purpose of funding an electioneering communication are subject to the rule.

Two intervening groups have appealed the latest ruling in the case—a decision in May from the US Court of Appeals for the DC Circuit upholding the District Court’s March ruling. As mentioned in our May update, oral arguments have been set for September 14.

National Right to Life Committee, Inc. (AO 2012-18)

The National Right to Life Committee (NRLC), which maintains the NRLC PAC, requested an Advisory Opinion regarding a independent expenditure-only committee, Victory Fund. The AO request seeks clarification as to whether the NRLC could finance the establishment, administration, and solicitation costs of the Victory Fund, similar to a separate segregated fund such as the NRLC PAC, or whether these costs would be considered contributions to the Victory Fund. The FEC noted that the costs of establishing, administering, and soliciting contributions to an independent expenditure-only fund would be considered contributions and must be reported as such.

m-Qube, Inc., Armour Media, Inc., and the Cooper for Congress Committee (AO 2012-26 request)

On June 11, the FEC approved AO 2012-17, which paves the way for campaign contributions to be made by text message. Under the AO, text message contributions will be permitted provided the amount is: (1) between $10 and $50 per mobile number; (2) per candidate or committee; and (3) per billing cycle. Republicans, Democrats, and campaign finance watchdog groups all supported the use of text messaging to make campaign contributions. However, wireless carriers remain concerned with their potential obligations or violations of FECA as conduits of these contributions. As a result, a request for an expedited AO was filed on July 18 by two of the groups requesting AO 2012-17 and by Congressman Jim Cooper’s (D-TN) campaign committee. This AO request (2012-26) seeks clarification on several issues, including whether the responsibility for determining whether a text contribution is from a prohibited source remains with the political committee and whether compliance with recordkeeping and reporting requirements rests with the political committee.

Because the expedited AO request was filed by a candidate for Congress within 60 days of an election, the FEC must issue an opinion by August 13, 2012. While the FEC unanimously approved AO 2012-17, it is unclear how the Commission will respond to this request or how this decision ultimately will impact text contributions in the upcoming election.

FEC Filing Dates

The following are key filing deadlines for 2012 PAC reports:

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Political committees that make independent expenditures during 2012 are required to disclose this activity at any time up to and including the 20th day before an election each time the expenditures aggregate $10,000 or more. This disclosure is required within 48 hours. Committees that make independent expenditures aggregating $1,000 or more during the last 20 days of, and up to 24 hours before, an election must disclose this activity with 24 hours. Entities that make disbursements for electioneering communications in 2012 that aggregate $10,000 or more must disclose this activity within 24 hours of public distribution of the communications.

Future FEC Meeting Dates

The following are upcoming dates for FEC open meetings and closed executive sessions for the remainder of 2012:

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Regulation of Lobbying

The following are the Lobbying Disclosure Act (LDA) filing deadlines for the remainder of 2012 lobbying activity:

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