FEC Approves Advisory Opinions for Independent Expenditure Committees

7/27/2010

The Federal Election Commission (FEC) recently voted 5-1 to approve advisory opinions allowing two political organizations to collect unlimited contributions for independent expenditures in federal campaigns. The groups, the conservative Club for Growth (the Club) and pro-Democratic Commonsense Ten, will disclose their donors and spending to the FEC. The opinions provide some guidance to entities that wish to raise and spend unlimited amounts of money to run ads supporting or opposing candidates for federal office.

In May, the Club filed an advisory opinion request asking the FEC to rule on the group's plans to establish a new political committee that will only make independent expenditures, without coordinating with campaigns, political parties, or other outside groups. The group asked the FEC whether the Club may solicit unlimited donations from the public to finance such expenditures. Specifically, the Club's request said, "There is a new, constitutionally-mandated entity that, although registering and reporting as a political committee, is protected by the First Amendment from contribution limits and other substantive campaign finance restrictions. This new entity is the independent expenditure-only political committee."

Commonsense Ten also noted that it will only make independent expenditures and seeks to raise unlimited money from unions, corporations, and individuals.

These new independent expenditure committees are the result of recent court decisions. The U.S. Supreme Court ruling in Citizens United v. Federal Election Commission lifted the ban on corporate and union campaign spending. In addition, decisions by the U.S. Court of Appeals for the DC Circuit in SpeechNow.org v. FEC and EMILY'S List v. FEC established that groups sponsoring independent campaign advocacy can collect unlimited contributions from their supporters. Despite providing greater freedom for campaign spending, the court decisions rejected challenges to FEC disclosure rules.

Taking advantage of the rulings, the groups wanted the FEC's permission to accept unlimited contributions, promising to only use the money for broadcast messages supporting or opposing federal candidates. Subsequently, the FEC concluded on July 22 that the independent expenditure committees "may solicit and accept unlimited contributions from individuals, political committees, corporations, and labor organizations."

The approved advisory opinions directly extend the reasoning of the court decisions in Citizens United, SpeechNow.org, and EMILY's List. The Commonsense Ten advisory opinion states, "Given the holdings in Citizens United and SpeechNow, that 'independent expenditures do not lead to, or create the appearance of, quid pro quo corruption,' the Commission concludes that there is no basis to limit the amount of contributions to the Committee from individuals, political committees, corporations and labor organizations."

The groups' requests also asked for guidance on reporting requirements. The court decisions upheld disclosure requirements but did not detail how reporting requirements would apply to activities that were previously illegal. The FEC rulings notify the organizations that they can use the current registration and reporting forms for political action committees to provide disclosure on their financial activity.

The FEC also provides a template for the suggested text of a letter committees may use to clarify plans to accept unlimited contributions for making independent expenditures. The applicant organization would state in the letter that it "intends to raise funds in unlimited amounts" but to use the money solely for independent expenditures.

Democratic commissioner Steven Walther voted against the advisory opinions and issued a statement that the FEC went beyond the legal issues settled by the courts. He wrote that "the landscape of federal campaign finance regulation has undergone a paradigmatic shift," and the commission should instead engage in a full rulemaking process to implement the court decisions rather than create individual, case-by-case opinions.

Walther also wrote a separate draft opinion in response to the Club's request, questioning whether the independence of the committee's spending will be compromised. The Club plans to have its president, who serves as treasurer of the Club for Growth PAC, also serve as treasurer of the new independent expenditure committee. However, the agreed-upon opinion accepted the Club's proposal that its new committee will not coordinate its activities with the PAC.

These advisory opinions provide some of the first guidance following the recent string of court decisions on campaign finance law. After announcing plans in April to issue a series of rulemakings, the FEC has failed to draft any new rules or adopt significant new policies. Former Democratic FEC Commissioner Robert Lenhard submitted comments during the advisory opinion process and said the opinion requests were "an opportunity to provide a clear workable system for the exercise of rights enunciated" by the court rulings.

However, the approved advisory opinions do not have the weight of formal regulations or of a law passed by Congress. Further, the opinions do not necessarily mean that it will be clear where all groups airing ads are getting their money. It seems to be up to the individual organization to follow the disclosure regime laid forth in the opinions. The FEC should clarify which groups need to register and report fundraising and spending information.

Legislation currently before Congress, known as the DISCLOSE Act, would address some of these disclosure concerns by setting up a new disclosure system for organizations spending money to influence federal campaigns. The measure passed the House in late June; it faces a procedural vote on July 27 in the Senate, though at press time, its fate remained unclear.

The two FEC advisory opinion rulings, any additional work by the FEC in the next couple of months, and Congress's action or lack thereof on the DISCLOSE Act are all expected to greatly impact the upcoming 2010 congressional elections. Independent groups will be raising and spending money without restraint, while the candidates and the national political parties must continue to operate within limits. As a result, outside groups could play a major role in this year's campaigns.

UPDATE: The DISCLOSE Act failed to clear a key procedural hurdle in the Senate on July 27. The Associated Press has more.