New Court Decision Is a Blow to Political Spending Transparency Requirements that Were Already Being Evaded

9/25/2012

On Sept. 18, the D.C. Circuit Court of Appeals overturned Van Hollen v. Federal Election Commission (Van Hollen), a lower court ruling that effectively required more disclosure of political spending. But the Court of Appeals' blow to political spending transparency is mostly a symbolic one: over the last six months, most nonprofit political advocates have found ways to skirt the disclosure requirements and keep their donors anonymous.

A bit of history: the rule at issue in Van Hollen was written as a result of the Bipartisan Campaign Reform Act (BCRA), often called "McCain-Feingold." According to BCRA, if an organization spends more than $10,000 per year on "electioneering communications" – that is, broadcast political ads that are aired close to the election and refer to a federal candidate but do not expressly call for the candidate’s election or defeat – then it must disclose the name and address of anyone who gave it $1,000 or more.

The Federal Election Commission (FEC) rewrote this rule and limited its application in 2007, in response to the U.S. Supreme Court's decision in Wisconsin Right to Life v. FEC. Three years later, the Supreme Court's decision in Citizens United v. FEC unleashed political spending – not only via independent expenditure-only political action committees (commonly called super PACs), but also via nonprofit organizations, which are not required to disclose their donors. As reported by Mother Jones:

For all the headlines and hand-wringing about super-PACs, it is dark-money nonprofits like Karl Rove's Crossroads GPS and Americans for Prosperity that dominate the political money wars. These politically oriented groups, which keep their donors secret, outspent super-PACs 3-to-2 in the 2010 elections. Through the spring of 2012, 91 percent of advertising by independent groups came from nonprofits and big business trade groups. And a growing pile of evidence suggests that it's these nonprofits, not super-PACs, hauling in the bulk of corporate political cash.

Yet in Citizens United itself, the Supreme Court suggested that it would support robust disclosure rules, like those required by BCRA – and perhaps even regard them as essential checks on abusive political spending. The court stated that "prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters."

The District Court's March 30 decision in Van Hollen directed the FEC to reinstate the original BCRA regulations, ruling that the agency, just like other regulatory agencies, is bound to implement the expressed will of Congress. The D.C. Circuit decision on Sept. 18 reversed this, allowing the narrower FEC disclosure rules first issued in 2007 to remain in effect.

It took nearly four months for the FEC to react to Van Hollen by announcing that it would enforce its BCRA (or pre-2007) disclosure rules for any electioneering communications made after March 30, 2012. Within that time, a ThinkProgress investigation found every group making electioneering communications except one tweaked their ads so that they would be considered "independent expenditure" advertisements – which are similar to electioneering communications but do expressly ask viewers to vote for or against someone. What this meant in practice was that these groups were maneuvering to evade the disclosure requirements even before the FEC announced them.

There are, of course, other rules about how nonprofit and for-profit corporations can engage in political spending. One example is the requirement that the majority of a 501(c)(4) organization's work benefit the public, not a single candidate or party. However, the Internal Revenue Service (IRS) definitions are complex and opaque, and it seems that many of the 501(c)(4)s now making independent expenditures have electioneering as their primary purpose. Yet it is virtually certain that the IRS will not take enforcement action until long after the 2012 elections, if ever.

Some advocates, frustrated with the continual deadlocks at the FEC and the slow pace of the IRS, have begun looking to other agencies like the Federal Communications Commission and the Securities and Exchange Commission to try to restrict, or at least learn more about, the cash being dumped into the political system. One commentator has described this disjointed system of political spending regulations as a game of whack-a-mole that ultimately allows huge amounts of money to flow into our political system with little restriction or transparency.

Even now that the FEC's limited disclosure rules are back in place, the agency has not shown any particular desire to enforce them. Freedom Path, a conservative 501(c)(4) organization, which made electioneering communications in support of Sen. Orrin Hatch (R-UT) and Mitt Romney, is the only organization subject to the Van Hollen disclosure rules. It has not amended its reports to comply with the rules – yet ThinkProgress reports the FEC has not contacted the group about its flawed reports and has taken no public enforcement action.

For that reason, the practical effect of the Court of Appeals' reversal of Van Hollen will be small. Given the ongoing deadlocks at the FEC, the agency is unlikely to improve its disclosure rules anytime soon or even enforce the ones that do exist. The symbolic effect, however, should not be underestimated. As Nov. 6 approaches and money pours into the political system, the Court of Appeals has reinforced the idea that big-money donors should be allowed to stay anonymous, keeping voters from knowing who's behind which candidates – an undemocratic position that not even Citizens United could justify.