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FEC Backs Unlimited Use of Soft Money by Independent Expenditure Committees; DISCLOSE Act Stalls in Senate

July 29, 2010

In two advisory opinions released last week, the Federal Election Commission (FEC) ruled that independent expenditure-only political committees can solicit and accept unlimited contributions from individuals, corporations and labor unions earmarked for specific independent expenditures. In Advisory Opinion 2010-09 (Club for Growth) and Advisory Opinion 2010-11 (Commonsense Ten), the FEC determined that any limitations on independent expenditures – expenditures for communications promoting or opposing a clearly identified candidate that are made independently of any candidate, candidate's authorized committee, or political party – would be unconstitutional.

The Club for Growth, Inc. (Club), a 501(c)(4) corporation, submitted an advisory opinion request to the FEC seeking guidance on whether it would be permissible for the Club to establish an independent expenditure-only committee that would seek from individuals, not corporations, unlimited contributions, and make unlimited contributions earmarked to support a specific candidate. In the advisory opinion, the FEC concluded that pursuant to the Supreme Court decision in Citizens United v. FEC, as well as the District of Columbia Circuit's decision in SpeechNow.org v. FEC, it was legal for the Club to establish such a committee, so long as the committee operated independently of the corporation, and it did not engage in coordinated activity with candidates, candidate committees, and party committees. Interestingly, the FEC appeared unconcerned with the fact that the President of the Club, who serves as the Club PAC's Treasurer, would also serve as the committee's treasurer, and permitted the Club to pay the administrative costs of establishing the independent expenditure committee. The FEC found it sufficient that the Club represented that the committee would not engage in coordinate activity.

Additionally, the FEC determined that where a committee intends to spend funds supporting a specific candidate, an individual may contribute to the committee even where the individual has reached the federal limit on contributions made to that specific candidate, so long as the individual does not know the money "will be contributed to, or expended on behalf of, that candidate." 11 C.F.R. 110.1(h).

Commonsense Ten, a registered nonconnected political committee, went one step further in its request, seeking guidance on whether it could solicit and accept unlimited contributions from political committees, corporations and labor organizations, as well as individuals, for the purpose of making independent expenditures. The FEC ruled that it could. Noting that the Citizens United and SpeechNow decisions provide that individuals, corporations, labor organizations and political committees may make unlimited independent expenditures from their own funds, the FEC explained that they may too make unlimited contributions to organizations that will make only independent expenditures.

These two advisory opinions will undoubtedly help shape the 2010 election season.

Separately, on Tuesday, the DISCLOSE Act – Congress's response to the Citizens United decision – stalled on the floor of the Senate. With moderate Republican Senators Olympia Snowe, Susan Collins and Scott Brown voting against cloture – due to what they characterized as a lack of meaningful debate on the substantive issues – the Democrats were unable to muster enough votes to bring the bill to a final vote. The House passed its own version of the DISCLOSE Act last month by a vote of 219-206.

With the Supreme Court loosening the reigns on campaign contribution limitations – explaining in Citizens United that transparency was the remedy for all campaign finance ills – House and Senate Democrats crafted a bill that would require heightened levels of disclosure for entities making election-related expenditures. Among other things, the DISCLOSE Act would:

  • Require all corporations, unions and other organization making political expenditures to take responsibility for their ads, including a requirement that heads of those entities appear on camera in the ads;
  • Require those entities to list their top donors in those ads;
  • Bar foreign-controlled corporations, government contractors and companies that have received government assistance from making political expenditures; and
  • Exempt from the disclosure requirements certain large, national advocacy groups.

Senate Majority Leader Harry Reid also voted no – utilizing a procedural tactic that allows him to bring the bill back for reconsideration at a later date.