The U.S. Supreme Court this week left in place a lower court ruling that expands donor disclosure for advocacy groups that fund independent expenditures. While the full effect of the ruling may not be known for some time, groups in the throes of an election season suddenly have to reconsider their electoral spending plans and fundraising practices, and donors to politically active 501(c)(4) social welfare organizations or 501(c)(6) business leagues have to account for an increased risk that their donations will be publicly disclosed.

What Does the Ruling Do?

Groups that are not registered with the Federal Election Commission (FEC) as campaign committees, party committees, or PACs are nonetheless required to file reports if they make an expenditure of more than $250 that expressly supports or opposes a federal candidate. These “independent expenditure” reports must itemize disbursements to each vendor involved in the creation and distribution of an ad (or other public communication), and identify the election involved and whether the organization supports or opposes the featured candidate.

In addition, a long-standing FEC rule requires that these reports identify donors who gave more than $200 to the organization in the calendar year for the purpose of funding the particular ad that is being reported. As a practical matter, donors seldom know that their funds will be used to pay for a specific ad, and thus donors have rarely been disclosed.

The district court struck down the FEC donor-disclosure rule, concluding that it applied the statutory disclosure requirement too narrowly. The court concluded that independent expenditure reports filed by groups that are not registered political committees must identify all donors who (1) give to the organization for the purpose of influencing a federal election, or (2) give for the purpose of funding the group’s independent expenditures, whether tied to a specific ad or not. The court stressed, however, that contributors to an organization’s “general programs” need not be identified.

The court deferred the effective date of the ruling for 45 days, giving the FEC time to adopt a new donor disclosure rule. That period came and went with no new rule or interpretive guidance. Crossroads GPS, which intervened in the case, has appealed the ruling to the D.C. Circuit.

Continue Reading U.S. Supreme Court Allows Expanded Donor Disclosure Rules to Take Effect

The Federal Election Commission (FEC) this week issued a Notice of Proposed Rulemaking, asking for public comment on proposals for requiring “disclaimers” on online ads and fundraising. Under each of two similar proposals, paid Internet ads that expressly advocate for candidates or that solicit political donations must state who paid for the ad and whether it was authorized by a candidate. The rules would impact websites, blast emails, and ads paid for by a political committee, regardless of their content.

The FEC rulemaking responds to mounting concerns about the influence of Russian-linked social media activity during the 2016 presidential election, as well as years of ambiguity about when and how the agency’s rules apply to emerging platforms and technology.

Which Ads Require Political Disclaimers Under Current Law?

Under current law, the FEC requires disclaimers on three types of advertisements:

  • Communications by Political Committees: Disclaimers are required on all “public communications” paid for by a registered political committee, as well as the committee’s own website and blast emails sent to more than 500 recipients.
  • Express Advocacy by Any Person: Regardless of the ad’s sponsor, “public communications” must include a disclaimer if they expressly advocate for or against a candidate.
  • Solicitations by Any Person: Regardless of the ad’s sponsor, “public communications” that solicit a contribution to a registered political committee must include a disclaimer.

A “public communication” includes Internet communications only when one person pays a fee to place the communication on another person’s website. The law does not require disclaimers on communications that do not involve a fee, such as unpromoted or unsponsored tweets, blogs, or Facebook posts.

The FEC has also concluded that certain communications are exempt from disclaimer requirements for practical reasons, such as for SMS text messages and Google’s text ads.

Which New Types of Ads May Be Covered?

The regulations proposed this week do not significantly alter the types of advertisements that would require political disclaimers; however, they would limit the circumstances under which an Internet ad could omit a disclaimer due to size constraints, which would have the effect of expanding the universe of Internet ads that would carry disclaimers.

What Must a Disclaimer Say?

Current law requires disclaimers to include the name of the person who paid for the ad, the person’s telephone number, address, or URL, and a statement indicating whether the communication was authorized by any candidate or a candidate’s committee, where applicable. This would remain unchanged, and Internet ads would include the same information when space permits.

However, the proposed rules would add specificity to how Internet disclaimers may be displayed. One proposal would apply the current requirements for the size, duration, and appearance of television, radio, and print disclaimers to their Internet-based analogs. For example, an ad on a video streaming platform would require a disclaimer to appear in the same way as disclaimers on television ads.

In the event an ad is character-limited, or too short or small to include the full disclaimer, both proposals allow for an “adapted disclaimer”. The proposals do not specify what format this abbreviated disclaimer must take but would permit the use of a hover-over, link, icon, or other feature that would lead the viewer to the full disclaimer.

Next Steps

The FEC has asked for written comments on its proposals and has scheduled a hearing for late June. After the hearing, the Commission will work to find consensus on a final rule, a process which would require unanimity among the four sitting Commissioners, unless the two vacant seats on the Commission are filled in the coming months. Given the timing of the hearing and the challenges of working out an agreement on final language, it is unlikely that final rules will take effect in time for the mid-term elections. But if adopted, they will certainly have an effect on the 2020 elections.

Venable’s Political Law Group is closely monitoring this rulemaking and can assist clients in navigating the rules governing Internet advertising and fundraising.

The question of when a politically-active, nonprofit 501(c)(4) group must publicly disclose its donors has been on the front burner in various states—most, like New York and California, have called for greater regulation, while others like Arizona have loosened the reins. At the federal level, silence has been the norm because the statute is generally read as only requiring disclosure by a 501(c)(4) (or other nonprofit such as a 501(c)(6)) if a donor contributes for the purposes of funding a particular ad. The FEC has consistently deadlocked on complaints alleging either that a donor gave for the purpose of supporting an ad or that a 501(c)(4) should be treated as a political committee and disclose all of its donors.

Last week, however, details were released from an FEC enforcement matter that met this stringent test and, as a result, the Commission levied fines totaling $233,000 against three nonprofit groups for failing to identify donors behind specific advertisements. These three settlement agreements, released as a group, provide significant guidance to nonprofit 501(c)(4)s and other actors as to what type of conduct will trigger donor disclosure at the federal level.

Continue Reading The FEC Levels Fines on Nonprofits over Donor Disclosure

Interested in what it takes to set up a federal Super PAC? Take a look at Venable’s recently released white paper summarizing the key rules of the road, including:

  • Steps for creating a federal Super PAC
  • Avoiding illegal coordination with candidates
  • FEC and IRS reporting obligations
  • Advertising disclaimers

For those interested in Maryland elections, please also see our white paper summarizing the rules of the road for setting up and operating Maryland Super PACs.

With extensive experience advising federal, state, and local Super PACs and their donors, Venable’s Political Law Practice Group is ready to assist with all of your Super PAC legal needs in the 2016 election cycle and beyond.

moneyhandsOver the last few years, the courts have loosened campaign finance laws and the agency charged with enforcing them is frequently gridlocked. However, one campaign finance violation that can still get you in big trouble is reimbursing contributions, particularly when the reimbursing is done by a corporation.

In settling a recent enforcement matter involving the Fiesta Bowl, the Federal Election Commission (FEC) obtained fines of nearly $100,000 from the corporation and the CEO and restitution by the CEO of over $60,000. A parallel criminal case resulted in guilty pleas that landed the former CEO in jail for eight months, community service for one executive, and two years of probation for another (who would have also faced a $15,000 penalty from the FEC, but she was able to demonstrate an inability to pay).

The case is not really new – the settlements occurred in 2012 and 2013 – and the FEC has yet to release the documents on its website, but the organization that filed the complaint with the FEC made them available to the public. The documents show a scheme that the FEC says included:

Continue Reading The Big No: Reimbursing Contributions

Ramping Up for the 2016 Cycle Make Compliance a Priority for LobbyingThursday, March 26, 2015
1:30 p.m. – 2:30 p.m. ET – Webinar

The Justice Department recently announced its first criminal prosecution for coordination. States like Virginia are revamping their ethics laws and California recently imposed new restrictions on lobbyists. Although the IRS has yet to issue regulations for 501(c)(4)s, many states have created new disclosure requirements for politically active nonprofit groups. Maryland has imposed tough new disclosure requirements on state contractors that make campaign contributions.  Continue Reading Please Join Us: WEBINAR – Ramping up for the 2016 Cycle: Make Compliance a Priority for Lobbying and Political Activity

b2tfIn January 2010 –  as almost everyone already knows by now – the Supreme Court struck down major portions of campaign finance laws, allowing corporations to make independent expenditures in support of, or opposition to, candidates for federal office. Super PACs that could accept unlimited individual and corporate contributions soon followed based on lower court decisions.

Interestingly, the FEC never changed its rules to implement the Court’s decision. Pick up the Code of Federal Regulations from 2011, 2012, 2013, or 2014 and you will find very clear statements that corporations may not make independent expenditures or electioneering communications.

At long last, in October of last year, the FEC got around to making some changes to its regulations to account for Citizens United. They became effective on January 27, 2015, but the FEC just released the notice setting the effective date. You can now read in the regulations something that has been true for five years: “A corporation or labor organization may make independent expenditures or electioneering communications.”

As it has done every two years since the Bipartisan Campaign Reform Act indexed contribution limits for inflation, the FEC has announced revised contribution limits for the 2016 election cycle. In addition to the traditional limits for candidates, PACs, and parties, the FEC also set the indexed limit for the new special accounts created at the end of 2014 for the national political parties. This first chart shows the limits for individual and PAC contributions to candidates, PACs, and state and local party committees:

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This next chart shows the amounts that an individual may give to the national party committees. The general fund is the account that has always existed, while the other funds are the new accounts Congress created in 2014 to help the parties to defray certain costs: Continue Reading More to Give: FEC Raises Contribution Limits

aftershockThe Supreme Court yesterday struck down the limit on the total amount an individual may contribute to federal candidates, PACs and political parties in a two-year election cycle. The 5-4 ruling is unlikely to have a major impact on political giving this year, but casts serious doubt on the constitutionality of similar state contribution schemes and paves the way for further challenges to federal campaign finance laws.

The case has sparked heated comment, not least by the four dissenting justices who charge that yesterday’s ruling “eviscerates our Nation’s campaign finance laws.” We do expect the ruling to prompt more donors to give the maximum contributions to the national committees of the Democratic and Republican parties (DNC, RNC, and their House and Senate committees), which the aggregate limits precluded donors from doing. Beyond that, the impact on federal elections will probably not be great. Few individuals come close to maxing out under the two-year election cycle limit, which in the current cycle allows individuals to give up to $123,200, of which $48,600 could be given to federal candidates. On top of that, the Federal Election Commission has never bothered to monitor or enforce this limit.

Also worth noting is that corporations are still barred from contributing in federal elections, and individuals interested in supporting candidates at these higher levels have better options available, such as Super PACs and 501(c) groups.

State Laws in Jeopardy

The more immediate and potentially significant impact of the ruling will be on state laws that apply calendar year or election cycle limits on political contributions. As we have previously written, at least 12 states have such limits, almost all of which are much lower than the overturned federal limit. In fact, Massachusetts wasted no time in announcing that based on the Supreme Court’s ruling, it will no longer enforce the state’s $12,500 limit on the total contributions an individual can make in a calendar year. We expect other states will follow suit.

Likely Reaction

While these state aggregate limits will likely fall, we expect states to propose new laws to bolster disclosure and limit the impact of the ruling. In yesterday’s ruling, as in the Citizens United case, the Supreme Court touted Internet disclosure as a potent protection against corruption. This favorable view of disclosure is likely to fuel efforts to force more groups involved in election activity to publicly reveal their donors and detail their spending. In addition, the Court suggested potentially acceptable ways that Congress could address concerns about donors funneling contributions through multiple PACs and party committees to support a particular candidate. While none of these ideas is likely to get traction in Congress, some states are sure to jump at the Court’s invitation to restrict the transfer of funds among candidates and political committees, or bar contributions to PACs that have indicated they will support candidates to whom the donor has already contributed.

Future Challenges

Finally, the parade of lawsuits seeking to dismantle federal campaign finance restrictions is likely to continue. The Supreme Court held on Wednesday that any regulation of campaign finance activity must satisfy a very high bar — namely, it must target quid pro quo corruption or its appearance. This places in the crosshairs such current restrictions as the ban on state party use of funds raised under state law to support or oppose federal candidates, the soft money ban that applies to the national parties, and the ban on contributions from contractors and corporations.

increaseLast week the Federal Election Commission increased the reporting threshold for contributions bundled by lobbyists to $17,300 (up from $17,100). Candidates, leadership PACs, and federal party committee must file lobbyist bundling reports if during a six-month reporting period they receive two or more bundled contributions exceeding the $17,300 threshold. We have written here about the reporting and fundraising issues that can arise with bundling.

The FEC also increased the amount that a national or state party committee may spend in coordination with its 2014 general election nominees. These expenditure limits are separate from the $5,000 limit on direct contributions by a party committee. The coordinated limits allow the party to pay expenses for activities coordinated with a candidate, such as the costs of a fundraiser and media efforts. For example, a party committee could discuss the content and timing of a direct mail piece with the candidate and then spend party money up to the limit to produce and send the mailer. With the FEC’s increase for inflation, the limits are now:

  • Senate Nominee – Ranges from $94,500 – $2,755,200 depending on the voting age of the population. The full list can be found here.
  • House Nominee in State with Only One Representative – $94,500 (up from $93,100 in 2013)
  • House Nominee in Other States – $47,200 (up from $46,600 in 2013)

Independent expenditures by the parties in support of candidates are not subject to limits, but may not be coordinated with the candidate.

*Admitted in Maryland; not yet admitted in D.C.