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July 26, 2010
WHAT NEXT AFTER CITIZENS UNITED?
Daily Journal Staff Writer
WASHINGTON - As election season approaches, confusion reigns over how the U.S. Supreme Court's recent landmark campaign finance ruling that eased restrictions on independent corporate-funded expenditures will influence events.
Multiple questions are being debated by campaign finance experts, including whether corporations and unions will seek to exploit their new freedoms, how the Federal Election Commission will respond, and how much information the public will have about the paymasters behind TV attack ads.
In January's ruling, the court ruled 5-4 that unions and corporations, both for-profit and non-profit, have the right to use their general treasury funds to pay for television spots that criticize or praise a particular candidate. Citizens United v. FEC, 2010 DJDAR 949.
In previous elections, corporations and unions could only participate in federal elections by setting up political action committees, or PACs, which could then be used to make donations to candidates or fund independent expenditures. PACs are subject to regulation by the Federal Election Commission and can only accept up to $5,000 a year from each individual donor, thereby restricting how much they can spend.
The Supreme Court ruling gives unions and corporations the opportunity to play a much more significant role in endorsing or opposing a particular candidate, but it's not yet clear how much that will affect the November mid-term congressional elections.
According to FEC data, some unions and corporations have made direct independent expenditures already, but the vast bulk of election spending occurs in two months prior to Election Day.
"The real test is going to come in the weeks immediately preceding the November mid-term elections," said Dave Levinthal, the communications director for the Center for Responsive Politics, an elections watchdog group.
The big question is whether corporations and unions "come out full force" in making independent expenditures, or whether the landscape remains more or less unchanged, he added.
Many experts don't expect a deluge of corporate cash, a scenario that Democratic politicians, including President Barack Obama, have predicted.
That's because the vast majority of businesses do not necessarily want to get directly involved in the political process, according to campaign finance attorney Joseph Sandler, a member of Sandler, Reiff & Young in Washington and former general counsel of the Democratic National Committee.
"It's fair to say it appears unlikely that individual corporations will avail themselves of this decision," he said. "It will be trade associations, business groups, and unions."
What may also make corporations and unions think twice before spending is that the FEC has yet to formally respond to Citizens United. Therefore, there are no rules in place for such organizations to report independent expenditures out of their general treasury funds. There is also uncertainty over how much information politically active groups have to disclose about corporations or unions that donate money for use in elections.
"Most companies are waiting to see what the FEC does," said Brett G. Kappel, an expert in campaign finance law at Arent Fox in Washington.
The FEC is working on new rules, with draft proposals due by the end of September, said spokeswoman Judith Ingram.
In the meantime, there is some evidence that politically oriented groups are gearing up to take advantage of the new leeway they have to solicit money from corporations and spend those funds on political ads during election season.
Commonsense Ten, a Democratic group, and the conservative Club for Growth have both recently notified the FEC that they intend to form committees that will solicit unlimited donations. Commonsense Ten specifically stated that it wants to accept money from unions and corporations.
Experts predict any corporations that do want to engage in the political process in a more direct way are likely to contribute to groups like Commonsense Ten or set up arms-length organizations in order to distance themselves from whatever political speech they make.
Businesses, in particular, would not want to alienate potential customers by associating too closely with a particular campaign, said election law expert Rick Hasen, a professor at Loyola Law School in Los Angeles.
Ideally, companies want an outcome where the candidate they support "knows what you are doing but no one else does," he added.
Although the arms-length group would in most cases have to disclose to the FEC which corporations contributed funds, that information would only become available later and only then to those who are inclined to search through the agency's data. Businesses can also donate money to trade associations and related groups, such as the U.S. Chamber of Commerce, which - even before Citizens United - spent millions on federal elections, usually to the benefit of the Republicans. Likewise, unions have always been a major source of cash in support of the Democratic Party.
As corporations and unions digest what exactly Citizens United allows them to do, the waters are further muddied by efforts in Congress to pass legislation intended to restrict the decision's impact.
Known as the DISCLOSE Act, it would, among other things, impose new disclosure requirements on independent expenditures. Among the provisions is one that would require corporate CEOs to appear on camera if their company is a major source of funding for an ad.
If enacted, the law would significantly blunt the impact of the Supreme Court ruling because it would increase the scrutiny of corporations that are politically active, said Arent Fox's Kappel.
"I think it would discourage people from contributing," he said.
The legislation has passed the House of Representatives but Democrats are struggling to attract the 60 votes needed to pass the Senate version. It is unlikely to become law in time for November's election, and those following the issue say that even if it did, it may be amended so that it doesn't go into effect until the 2012 elections.
Uncertainty over what Congress will do could deter corporations and unions from spending much this year, according to Loyola's Hasen. In fact, most experts agree it won't be until 2012, a presidential election year, that the real repercussions of Citizens United will be felt.
"There's still some wait-and-see that's going to happen," Hasen said.