DISCLOSE Act - Take Two

Representative Chris Van Hollen (D-MD) has introduced the DISCLOSE 2012 Act, a more narrowly-tailored version of previous legislation aimed at increasing transparency in campaign finance. The most recent version expands the period during which communications are treated as electioneering communications and provides that independent expenditures that expressly advocate the election or defeat of a clearly identified candidate are the functional equivalent of express advocacy. The bill also contains enhanced disclosure requirements for 'covered organizations,' which includes corporations, 501(c) entities (other than 501(c)(3) organizations), labor organizations, and 527 groups. Such organizations that make campaign-related disbursements over $10,000 in the aggregate in a calendar year would have to file disclosure statements containing the amount of each campaign-related disbursement exceeding $1,000, as well as the names of all donors who contributed over $10,000 and the amount they contributed.

Under the DISCLOSE 2012 Act, entities spending money on political advertisements would have to include a statement within the ad that the organization approved the message, as well as the names of the top five or two (depending on the length of the ad) largest contributors via payments of any type equal to or exceeding $10,000 to the organization. Contents of reports detailing political spending filed by covered organizations would have to be provided to shareholders and members of such groups via periodic financial reports and through a link to FEC reports on the organization's website.

Van Hollen's new version of the bill also would make changes to the LD-203 reports filed by lobbyists. The legislation would require lobbyists to disclose independent expenditures and electioneering communications equal to or greater than $1,000, and would expand reportable contributions to include any contributions made to political committees treated as covered organizations.

Republicans have not signalled any support for the measure, suggesting that the bill may face significant hurdles to consideration by the House.

Focus on Campaign Finance Hearings

Senator Chuck Schumer (D-NY) recently announced plans to hold hearings to address and analyze the flow of unlimited contributions to Super PACs and 501(c)(4) groups. Schumer chairs the Senate Rules and Administration Committee, which has jurisdiction over campaign finance bills. Schumer had announced plans to hold hearings by the end of February that would include Super PAC donors as witnesses. Schumer also indicated that he is working on a bill that would focus on regulating Super PAC activity through disclosure requirements and restrictions on coordination efforts with campaigns. Including such provision on the STOCK Act, discussed below, is not expected.

A coalition of campaign reform groups and labor unions have requested that the Senate Banking Committee hold hearings on corporate disclosure of political spending in light of Citizens United. Pressure for hearings on campaign finance is also being felt in the House, with several Democrats on the Committee on House Administration making a request to the Committee's chairman, Representative Dan Lungren (R-CA), to hold hearings addressing the influence that undisclosed funds have in campaigns and elections. As the 2012 election heats up and spending increases, the Democratically-controlled Senate may take a more active role in examining campaign spending than the Republican-controlled House of Representatives.

Labor Union Dues

On February 8, the House Oversight and Government Reform Committee held a hearing to examine the use of labor union dues for political purposes. Witnesses who were union members testified that a portion of their dues was being used for political purposes for which they did not support, while a professor of law testified that union members have the ability to opt out of participating in union-led political activity. While Democrats on the committee assailed the hearing as an assault on labor unions, Chairman Darrell Issa (R-CA) noted that the committee will hold hearings to examine corporate political activity and may examine legislation mandating additional transparency of political activity.

Democratic Senators and 501(c)(4) Groups

On February 16, seven Democratic senators wrote a letter to the IRS calling on the agency to investigate the political activities of organizations organized under section 501(c)(4) of the Internal Revenue Code (IRC). This section of the IRC permits the tax-exempt creation of social welfare organizations provided the primary activity of these organizations is not to participate in federal election activities. Many Super PACs are aligned with section 501(c)(4) organizations, however donors to 501(c)(4)s do not need to be disclosed. Campaign finance watchdog groups and many Members of Congress have been critical that 501(c)(4)s are actually engaged primarily in election and political activities and that the IRS is not enforcing its own law and regulations. The Democratic senators encourage the IRS to consider a rulemaking to examine the tax-exempt status of such groups. On February 21, eleven Democratic senators submitted comments to the FEC regarding the proposed rule in response to Citizens United. These senators requested the FEC to consider rules requiring the disclosure of donors to 501(c)(4) organizations when that money is then contributed to a Super PAC.