The United States Supreme Court's decision in Citizens United v. Federal Election Commission issued in January, 2010, struck down federal restrictions on corporate independent expenditures to advocate for or against candidates for federal office (view the previous Calfee First Alert on this decision). On March 26, 2010, the D.C. Circuit Court of Appeals relied on the Citizens United decision in striking down federal limits on the amount of contributions that can be made to advocacy organizations that intend to operate exclusively through independent expenditures. These types of organizations are commonly known as 527s after the provision of the Internal Revenue Code under which they are organized. It is unknown at this time whether the Federal Elections Commission (FEC) intends to appeal this decision to the United States Supreme Court.

The Case

A non-profit organization called organized as a political organization for the purpose of promoting First Amendment rights of free speech and the freedom of assembly by supporting those federal candidates it believes support those rights and opposing federal candidates it believes are not committed to those rights. It petitioned the FEC for an opinion regarding whether it must register as a political action committee or PAC, follow all reporting provisions applicable to political committees, and adhere to contribution limits to political committees imposed on individuals. In particular, federal law limits individual contributions to political committees to $5,000 per calendar year, with a $69,900 biennial cap on an individual's contributions to all political committees. After the FEC answered "yes" to all questions, began its appeal through the federal courts.

The Appeal

The D.C. Circuit Court of Appeals decided that the contribution limits, as applied to a political organization intending to advocate only through independent expenditures, violate the First Amendment right to free speech. The court of appeals noted that the United States Supreme Court had found only one governmental interest sufficiently important to outweigh First Amendment interests: preventing corruption or the appearance of corruption. Yet the United States Supreme Court held in Citizens United that the government has no anti-corruption interest with respect to independent expenditures. The government has an interest in preventing quid-pro-quo corruption that could result from large contributions given directly to political campaigns. But when expenditures are independent from a campaign, the D.C. Circuit explained "that there is no corrupting 'quid' for which a candidate might in exchange offer a corrupt 'quo.'"

The Decision

As a result, the court of appeals distinguished limits on contributions made directly to candidates from limits on contributions to political organizations engaged in independent advocacy.While the former remain constitutional, the latter are not. The court of appeals sent the case back to the district court to enter an order enjoining the FEC from enforcing the contribution limits against and other similar political organizations. Technically, these limits will continue to apply until the district court issues an injunction, although the FEC is unlikely to enforce provisions found unconstitutional by the D.C. Circuit Court of Appeals. Indeed, in this case, the decision was unanimous and issued on behalf of all judges of the D.C. Circuit, not just a three-judge panel. The D.C. Circuit Court of Appeals upheld, however, the reporting and disclosure regulations imposed on and other political committees. Although these regulations burden free speech to some degree, they serve a legitimate governmental purpose of providing the electorate with information about the sources of campaign funds. Thus, although can accept unlimited contributions from individuals, it must publicly report those contributions as required by federal law.

The Impact

The decision, unless reversed by the United States Supreme Court, essentially unleashes 527 organizations to engage in political advocacy without restrictions on the flow of money into or out of these organizations. Some in the United States Congress are considering revisions of federal law to address the Citizens United decision, and the decision undoubtedly will lend encouragement to these efforts. However, any new law seeking to restrict the flow of money spent on independent expenditures likely will be found by the courts to violate the First Amendment. Thus, Congress may explore additional disclosure and reporting requirements, while others may seek to amend the Constitution to give Congress authority to regulate political speech