DISCLOSE Act Seeks to Blunt Impacts of Citizens United

5/4/2010

To blunt the impacts of the U.S. Supreme Court decision in Citizens United v. Federal Election Commission, Rep. Chris Van Hollen (D-MD) and Sen. Charles Schumer (D-NY) recently introduced companion bills, both called the DISCLOSE Act (the Democracy Is Strengthened by Casting Light On Spending in Elections Act). The legislative response would create new, rigorous campaign finance disclosure requirements meant to prevent moneyed interests from drowning out the voices of citizens and smaller advocacy organizations.

The Citizens United decision in January struck down parts of the Bipartisan Campaign Reform Act (BCRA), which prohibited corporations (including nonprofit organizations) and labor unions from airing any "electioneering communications" – broadcast messages that refer to a federal candidate in the weeks before a general election or primary. The Court also ruled that corporations can use unlimited funds from their general treasuries to expressly advocate for the election or defeat of candidates for federal office as long as the actions are independent of campaigns.

During a press conference held outside the Supreme Court on April 29, Schumer said, "No longer will groups be able to live and [be] spending in the shadows." To offset the January ruling, the DISCLOSE Act (S. 3295) would strengthen financial disclosure and establish disclaimer requirements while setting new limits on political involvement by government contractors and foreign-controlled corporations. 39 Democratic senators and one independent have co-sponsored the bill thus far.

All corporations and 501(c)(4), 501(c)(5) (unions), 501(c)(6) (trade associations), and 527 organizations that spend money on independent expenditures or electioneering communications to influence a federal election are "covered" under the bill. The legislation expands the definition of an independent expenditure to include both express advocacy and the functional equivalent of express advocacy "because it can be interpreted by a reasonable person only as advocating the election or defeat of a candidate."

The companion bill in the House, H.R. 5175, was announced with two Republicans signing on as co-sponsors, Reps. Mike Castle (R-DE) and Walter Jones (R-NC). Upon releasing the bill, Van Hollen stated, "Every citizen has a right to know who is spending money to influence elections, and our legislation will allow voters to follow the money and make informed decisions."

Specifically, the DISCLOSE Act would require more explicit disclaimers. The CEO or highest-ranking official of a corporation would be required to appear on camera to say that he or she "approves this message." The top funder of the ad would also have to record a "stand-by-your-ad" disclaimer, and the top five donors to an organization that purchases campaign-related TV advertising would be listed on the screen at the end of the message.

Part of the goal of the bill is to provide the public with complete information regarding the funding sources of campaign-related expenditures and rein in entities that try to hide their activities by donating to an intermediary. This is done, in part, by increasing the information that has to be disclosed to the Federal Election Commission (FEC).

If an organization such as a 501(c)(4) or 527 group spends more than $10,000 in a 12-month period on independent expenditures or electioneering communications (including transferring funds to another organization for the purpose of influencing an election), all donors who have given $1,000 or more to the organization during that period would have to be disclosed.

Expenditures of $10,000 or more made more than 20 days before an election, and expenditures of $1,000 or more made within 20 days before an election, would also have to be reported to the FEC within 24 hours.

Additionally, the DISCLOSE Act would allow a donor to specify that a contribution may not be used for campaign-related activity. An organization would then be restricted from using the donation for that purpose and would not disclose the donor's identity.

Other provisions include:

  • Corporations can establish a separate "Campaign-Related Activity" account to receive and disburse political expenditures
  • Federally registered lobbyists must disclose any election spending costing more than $1,000, as well as the name of the candidate or campaign supported or opposed
  • All campaign-related expenditures must be disclosed on an organization's website with a link on the homepage within 24 hours of reporting the information to the FEC
  • Expenditures must also be disclosed to shareholders and members of the organization in periodic or annual financial reports
  • Political parties can spend unlimited amounts of their own funds in support of the party's candidates, as long as a candidate or group of candidates does not "control" the spending

The DISCLOSE Act goes beyond disclosure and would prohibit corporations that receive federal contracts worth more than $50,000 from spending money to influence federal elections. Companies that have received and not paid back funds from the federal Troubled Asset Relief Program (TARP) would also be forbidden from spending money on elections, as would companies that have 20 percent foreign voting shares, a majority of foreign directors, or foreign nationals controlling U.S. operations of foreign-based corporations.

The Senate version also includes two provisions that are absent from the House bill. First, senators would be required to file their campaign finance reports electronically to the FEC. House and presidential candidates have had to file electronically since 2001. Second, if an organization spends $50,000 or more on airtime to run ads that support or oppose a candidate, the targeted candidate would be entitled to lower rates for broadcast ads.

Many have criticized the legislation for requiring "too much" disclosure. Numerous reactions suggest that the bill will effectively infringe upon First Amendment rights and ultimately chill speech. Some advocacy groups are also concerned that, if enacted, the DISCLOSE Act could potentially deter donors who do not want to be identified in television ads.

For example, the U.S. Chamber of Commerce promised to fight the legislation even before it was introduced. U.S. Chamber President and CEO Thomas J. Donohue said, "Stifling free speech is an abuse of the legislative process and is unconstitutional. It will not stand."

However, the Court in Citizens United upheld disclosure requirements as constitutional. Specifically, the majority opinion said that "disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages."

President Obama, who has criticized the Citizens United decision, issued a statement noting that with the DISCLOSE Act, "The American people can follow the money and see clearly which special interests are funding political campaign activity and trying to buy representation in our government." Obama also urged Congress to act quickly. "Passing the legislation is a critical step in restoring our government to its rightful owners: the American people," he said.

Sponsors hope Congress can pass the bill before the July 4 recess in order to have a new law in place for the upcoming 2010 congressional elections. However, this is an ambitious schedule, as the legislation is already facing tough opposition. House Administration Committee Chairman Robert Brady (D-PA) announced that the committee will hold a hearing on the bill on May 6. The legislation lacks bipartisan support in the Senate, but Schumer predicted it will ultimately be enacted with backing from some Republican senators.