On Thursday, January 21, 2010, the U.S. Supreme Court handed down Citizens United v. FEC, the most significant campaign finance case since Buckley v. Valeo in 1976. This decision allows corporations to participate in the political process in a more direct way. A corporation may now use corporate treasury funds to pay for ads that urge voters to support or oppose federal candidates. Contrary to some reports, the decision does not allow corporations to contribute directly to a federal candidate. In addition, it has been underreported that Citizens United applies equally to both corporations and labor unions.

Before Citizens United

Corporations have been banned from making direct contributions to federal candidates since 1907, and a similar ban on labor union contributions has been in place since 1943. In addition, prior to this decision, corporations and labor unions could not generally pay for “express advocacy” – speech that advocates the election or defeat of a federal candidate. In fact, corporations and labor unions that paid for express advocacy ran the risk of both civil enforcement by the Federal Election Committee (FEC) and criminal enforcement by the Department of Justice.

Corporations and labor unions have been permitted to establish Political Action Committees (PACs) to make direct contributions using employee or member contributions. In addition, they have been allowed to pay for “issue advocacy” – speech that discusses issues relevant to the campaign, but stops short of express advocacy. Similarly, corporations and labor unions have been able to pay for express advocacy using PAC funds.

After Citizens United

The profound change brought about by Citizens United is that corporations and labor unions may now pay for express advocacy using treasury funds so long as this advocacy is not coordinated with any campaign or political party. The ban on corporate and labor union direct contributions to federal campaigns remains, and corporations and labor unions may continue to use PAC funds to make direct contributions.

State and Local Law

While the issue before the Court in Citizens United dealt with a federal candidate and federal campaign finance law, the decision likely makes it impossible for states or localities with identical or similar bans on corporate and labor union express advocacy to enforce their laws or ordinances. The presumption is that these restrictions are unconstitutional, but determining precisely how Citizens United applies at the state and local level will take time.

Reporting and Disclaimers

FEC disclosure and disclaimer requirements apply to most political ads, and in Citizens United the Court specifically upheld the disclosure and disclaimer requirements for ads run within 30 days of a primary or 60 days of an election. In addition, the Federal Communication Commission has its own separate disclosure and disclaimer requirements.