Nonprofits and Disclosure in the Wake of Citizens United

A. The legal backdrop

The movement to limit corporate participation in electoral politics began in the 1890s, in tandem with the rise of corporate spending in elections. Congress banned corporate contributions to federal candidates in 1907; by 1928, twenty-seven states had banned all corporate contributions and an additional nine barred contributions from certain categories of corporations, such as banks, public utilities, and insurance companies.16 The federal contribution ban was extended to independent corporate spending—accompanied by an analogous restriction on contributions and expenditures by labor unions—by the Taft-Hartley Act of 1947. So, too, before Citizens United, roughly two dozen states prohibited corporate spending in support of or opposition to election candidates.17 Although some of these laws targeted specific categories of corporations—again, typically, banks, insurance companies or utilities—most referred to “corporations” generally and did not specifically exempt nonprofit corporations.18

The ban on the use of corporate treasury funds in election campaigns is based on the idea that corporations pose a special problem for democracy. The aggregation of wealth symbolized by the corporate war chest, the fear that huge economic resources would be translated into political power, and the concern that shareholders' funds would be diverted to the political goals of unaccountable corporate managers were all driving forces behind the early twentieth century focus of campaign finance regulation on corporations.

Since the Supreme Court's 1976 decision in Buckley v. Valeo,19 however, our campaign finance jurisprudence has been framed around the First Amendment's protection of speech and association, and has dismissed the idea that unequal campaign spending and enormous differences in the wealth available for election activity are problems that can be addressed by limits on spending. Buckley held that campaign finance activity is protected by the First Amendment; that campaign expenditures—that is, spending aimed at communicating views on electoral issues to the voters—are the highest form of campaign finance activity; that restrictions on campaign expenditures are subject to strict judicial scrutiny; and that campaign spending cannot be limited in order to equalize either the spending of or support for candidates or more generally the efforts of individuals, interest groups, or organizations to influence the electorate. Buckley also held that contributions, although constitutionally protected, are a lower order of speech than expenditures since contributions do not literally communicate the views of the donor but are more a “symbolic expression of support.”20 Moreover, the Court found that contributions present the danger of corruption and the appearance of corruption. As a result, limits on contributions could be constitutional. But the Court held that corruption concerns could not justify limits on spending by individuals, organizations, or interest groups in support of or opposition to a candidate if the spending were undertaken independently of the candidate benefited. With the anticorruption justification unavailable and equality flatly rejected as a basis for limiting campaign spending, Buckley struck down the Federal Election Campaign Act's (FECA's) limits on independent spending.21

Buckley did not address any of the older restrictions on corporations or unions, but its First Amendment framework and its outright rejection of independent spending limits did not bode well for the future of those laws. Indeed, the Supreme Court's first post-Buckley case suggested they would soon be on their way out. In First National Bank of Boston v. Bellotti,22 decided just two years after Buckley, the Court struck down a Massachusetts law banning corporate spending in support of or opposition to ballot propositions. Such electioneering, said the Bellotti Court, “is the type of speech indispensable to decision-making in a democracy, and this is no less true because the speech comes from a corporation than from an individual. The inherent worth of the speech in terms of its capacity for informing the public does not depend on the identity of the source, whether corporation, association, union, or individual.”23

Bellotti might well have sounded the death knell for the federal and state bans on corporate campaign spending but for two factors. First, the Massachusetts law dealt only with ballot proposition elections, not candidate elections. The Court left open the possibility that candidate elections might present different concerns, noting “[r]eferenda are held on issues, not candidates for public office” so that the “risk of corruption perceived in cases involving candidate elections…simply is not present in a popular vote on a public issue.”24 Second, unlike federal law,25 the Massachusetts law did not authorize a corporation to create a political action committee (PAC), the device a corporation may use to solicit, collect and pool individual contributions from its directors, executives, and shareholders and then spend on campaign activity. Arguably, by enabling campaign spending by the people affiliated with a corporation a PAC takes the sting out of the ban on the use of corporate treasury funds. Still, Buckley and Bellotti together suggested serious constitutional doubts about the special regulation of corporations.

Those doubts would not become doctrine until more than three decades later, however. Shortly after Bellotti the Court shifted gear and gave much greater weight to the longstanding congres-sional and state concerns about corporations—even in cases involving nonprofit corporations—than Bellotti suggested was likely. In Federal Election Commission v. National Right to Work Committee (NRWC),26 the Court upheld a federal law that tightly restricted the ability of a nonprofit ideological corporation to solicit donations to its PAC. Under FECA, “a corporation without capital stock” may solicit only its “members,” but NRWC also sought to solicit nonmembers for financial support. The Court found that the government's interest in “ensur[ing] that substantial aggregations of wealth amassed by the special advantages which go with the corporate form of organization should not be converted into political ‘war chests'” justified the restrictions on corporate campaign contributions, the requirement that corporations act through PACs, and the accompanying restrictions on PAC solicitations.27 The Court linked corporate war chests to Buckley's concern about the corrupting effects of large financial contributions, and accepted Congress's “judgment that the special characteristics of the corporate structure require particularly careful regulation.”28 The Court said nothing about the fact that NRWC was a nonprofit. It acknowledged that federal law “restricts the solicitation of corporations and labor unions without great financial resources, as well as those more fortunately situated.” But it concluded that it would not “second-guess a legislative determination as to the need for prophylactic measures where corruption is the evil feared…and there is no reason why” the governmental interest in preventing both actual corruption and the appearance of corruption “may not be accomplished by treating unions, corporations, and similar organizations differently from individuals.”29 The corporate form mattered, even when the corporation in question was not a business corporation but a nonprofit. The Court distinguished Bellotti as a referendum case.30

Four years later, in Federal Election Commission v. Massachusetts Citizens for Life, Inc. (MCFL),31 the Court expanded on NRWC's finding that the corporate form provides a special justification for regulation—that “concern over the corrosive influence of concentrated corporate wealth reflects the conviction that it is important to protect the integrity of the marketplace of political ideas.”32 But in MCFL the nonprofit nature of the corporation mattered. MCFL “was formed for the express purpose of promoting political ideas, and cannot engage in business activities.” It had “no shareholders or other persons affiliated so as to have a claim on its earnings,” and it did not accept contributions from business corporations or labor unions so that it would not be a “conduit[] for the type of direct spending that creates a threat to the political marketplace.” Thus, “the concerns underlying the regulation of corporate political activity are simply absent with regard to MCFL.”33 Moreover, unlike NRWC, MCFL was an independent spending case, not a contributions case. The Court distinguished NRWC, noting “[w]e have consistently held that restrictions on contributions require less compelling justification than restrictions on independent spending.”34

Four years later in Austin v. Michigan Chamber of Commerce35 the Court upheld a state law prohibiting corporate independent spending in support of or opposition to candidates. Like NRWC and MCFL, Austin emphasized the special nature of the corporate form—“the unique state-conferred corporate structure that facilitates the amassing of large treasuries.” As the resources available to a corporation reflect the economically motivated decisions of investors and customers, corporate spending raises the prospect of “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public's support for the corporation's political ideas.” As a result, “[c]orporate wealth can unfairly influence elections when it is deployed in the form of independent expenditures, just as it can when it assumes the guise of political contributions.”36 Even though it was a nonprofit, the Michigan Chamber of Commerce could not take advantage of the MCFL exception as most of its funding came from business corporations, so there was a danger that it could serve as a conduit for business corporation political spending.37 Moreover, Austin reiterated that when a legislature acts to address the problems posed by corporate wealth it need not limit itself to wealthy corporations but could address all entities that “receive from the State the special benefits conferred by the corporate structure and present the potential for distorting the political process.”38

In a pair of cases decided in 2003, the Court continued to find that Congress could treat corporations—including nonprofit corporations—as posing special problems requiring more stringent regulation. In FEC v. Beaumont,39 a case brought by North Carolina Right to Life, Inc., a 501(c)(4) nonprofit advocacy corporation, the Court held that nonprofits were not entitled to an MCFL-type exemption from the federal prohibition of corporate campaign contributions. The Court reiterated the language from its prior cases concerning the dangers of war chests accumulated due to the special advantages that go with the corporate form. Beaumont also added the concern that corporate donations could be used to evade the limits on individual donations to candidates and parties. Beaumont acknowledged that “advocacy corporations are generally different from traditional business corporations” but held that they present many of the same concerns posed by business corporations, including the use of significant state-created advantages to amass considerable resources and the possibility they could be conduits for individual contributions above the limits on individual contributions.40

Finally, McConnell v. FEC 41 upheld the extension of the federal ban on corporate and union independent spending to a new category of campaign activity known as “electioneering communication.” This provision turned less on the nature of the corporation (or union) and more on another key campaign finance law issue—how to determine when political activity is sufficiently election-related that it can be subject to campaign finance regulation. In addressing FECA's provisions dealing with limits on and disclosure of expenditures, Buckley considered statutory language that defines an expenditure as spending undertaken “for the purpose of…influencing” the nomination or election of federal candidates. The Court found that when applied to spending by entities other than candidates, political parties, or organizations with the major purpose of electing candidates, FECA's language was vague and overly broad, with the potential to regulate non-electoral political speech. To avoid these constitutional concerns, Buckley interpreted FECA to apply only to “express advocacy”—that is, “only funds used for communications that expressly advocate the election or defeat of a clearly identified candidate”42 The Court gave as examples of express advocacy language words “such as ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ ‘reject’.”43 These became known as the “magic words” of express advocacy. All other activity came to be known as “issue advocacy,” even though it need not involve the discussion of issues. MCFL subsequently applied the express advocacy standard to the prohibition on corporate expenditures.44 The express advocacy/magic words standard exempted many campaign messages from coverage. An advertisement could warmly praise or sharply criticize a candidate for office, but so long as it avoided literally calling on voters to elect or defeat that candidate it would be treated as issue advocacy, not express advocacy. Even discussion of a candidate's character, personality, or private life was issue advocacy so long as there was no call to vote for or against that candidate. As a result, the express advocacy standard proved extremely easy to evade. With most campaign professionals recognizing that many of the most successful election ads by candidates relied on more subtle pitches than literally calling on voters to vote a certain way, the express advocacy standard assured that the vast majority of election ads placed by campaign participants other than candidates would be exempt from campaign finance regulation.

In the Bipartisan Campaign Reform Act of 2002 (BCRA), Congress responded by defining a new category of campaign speech—”electioneering communications”—for purposes of the ban on corporate and union campaign expenditures as well for determining the scope of disclosure. “Electioneering communications” consist of (i) broadcast, cable or satellite communications (ii) that refer to a clearly identified candidate, (iii) are targeted on that candidate's constituency, and (iv) are aired within thirty days before a primary or sixty days before a general election in which that candidate is running. McConnell upheld BCRA's electioneering communication provisions. The Court found that “Buckley's magic-words requirement is functionally meaningless” and that as a result “Buckley's express advocacy line…has not aided the legislative effort to combat real or apparent corruption.”45 The Court agreed that the new standard avoided vagueness and was properly tailored to regulate campaign messages. The Court rejected facial challenges to the extension of both disclosure requirements and the ban on corporate and union expenditures to electioneering communications.

McConnell also reiterated the constitutionality of Congress's prohibition on corporate and union campaign spending, finding that “Congress's power to prohibit corporations and unions from using funds in their treasuries to finance advertisements expressly advocating the election or defeat of candidates in federal elections has been firmly embedded in our law.”46 Picking up on a theme previously articulated in Austin, the Court noted that since a corporation could spend through its PAC, the prohibition on the use of treasury funds was not an absolute ban on corporate election spending; the PAC provides a corporation with “constitutionally sufficient opportunities to engage in express advocacy.”47

The twenty-year period from NRWC to McConnell of Supreme Court affirmation of special restrictions on corporations (and unions) began to change sharply in 2007. That year, the Court decided FEC v. Wisconsin Right to Life, Inc. (WRTL),48 which effectively undid much of McConnell's affirmation of BCRA's extension of the ban on the use of corporate and union treasury funds to electioneering communication. WRTL agreed with McConnell that Congress could regulate spending beyond the magic words of express advocacy, but held that Congress could not apply the corporate spending ban beyond communications which were the “functional equivalent of express advocacy,” which would occur “only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”49 WRTL did not quite go back to the “magic words” test but the decision meant that Congress could not regulate much beyond the “magic words” either. The Court also broke with the idea that the availability of the PAC gives corporations a constitutionally sufficient outlet to speak: “PACs impose well-documented and onerous burdens, particularly on small nonprofits.”50

WRTL indicated that with the departure of Justice O'Connor—who had been a coauthor of McConnell—and her replacement by Justice Alito, the majority of the Court was far more skeptical of campaign finance restrictions and far more willing to find campaign finance laws violative of the First Amendment. McConnell had upheld BCRA's restrictions on corporate electioneering communications by a narrow 5–4 vote. By WRTL, the Court's views on campaign finance had switched to 5–4 in the opposite direction.

B. The decision: Corporate spending

Citizens United grew out of an action brought by a conservative advocacy nonprofit organization, tax-exempt under section 501(c)(4), to obtain an exemption from the ban on corporate electioneering communications for a film it had made, Hillary: The Movie, when Senator Clinton was running for the Democratic nomination for president. The film was not itself an electioneering communication, as it was released in theaters and on DVD but not broadcast or distributed by cable or satellite, which is a statutory prerequisite for “electioneering communication” status. However, Citizens United also wanted to distribute the film through video-on-demand (VOD) available to digital cable subscribers. Distributing the film on cable, and television broadcasts of ads promoting the film, which mentioned Senator Clinton by name, is electioneering communication within the statute if aired in any state within thirty days before a primary election in which Senator Clinton was a candidate.

There were a number of arguments that might have won Citizens United an exemption from the electioneering communication restriction without invalidating the ban on corporate electioneering. The movie could have been treated as not the functional equivalent of express advocacy—but both the district court and the Supreme Court found that the film's consistent and pervasive criticism of Senator Clinton's fitness for president eliminated that option. Citizens United could have been granted an MCFL-type nonprofit exemption. Although, unlike MCFL, Citizens United accepted “a small portion of its funds from for-profit corporations,”51 the MCFL exception could have been expanded. Indeed, a number of courts had held that the exception was available for nonprofits that receive a modest share of their total funding from for-profit corporations.52 Citizens United's expenses for Hillary: the Movie could have been treated as falling within the press or media exclusion from the definition of “electioneering communication” as Citizens United was in the regular business of making ideological films. Indeed, six months after the Supreme Court's decision the FEC issued an advisory opinion finding that Citizens United's production, distribution, and marketing costs for its films fit within the media exemption.53 Alternatively, an exemption for VOD spending could have been created as VOD involves viewer requests to receive a communication rather than a sponsor's bombardment of the viewer with an unsought message, so that VOD “has a lower risk of distorting the political process than do television ads.”54

The five-justice majority on the Supreme Court was not sidetracked by these Citizens-United-specific issues and instead addressed the fundamental constitutional question underlying the corporate spending prohibition. By a vote of five to four, the Court determined that both the prohibition on the use of corporate or union treasury funds to pay for electioneering communications and the older prohibition on the use of corporate and union treasury funds to finance independent expenditures for express advocacy violate the First Amendment. In so doing, the Court overturned both Austin and the relevant portion of McConnell.

The Court emphasized that “First Amendment protection extends to corporations” including the political speech of corporations. Citing Bellotti, it noted that the argument that the First Amendment is not available because corporations are not “natural persons” had long been rejected.55 The Court also rejected the argument it had accepted in McConnell that due to the availability of the PAC option the prohibition on the use of corporate and union treasury funds was not really a ban on corporate speech but only a channeling device: “The law before us is an outright ban.” Requiring that political spending be directed through a PAC imposed “burdensome” administrative costs so that the possibility of creating and using a PAC was not a constitutionally sufficient means for enabling corporate or union independent spending.56

The Court then considered and rejected a number of possible justifications for barring corporate election spending. First, it dismissed Austin's anti-distortion rationale—the idea that corporate wealth amassed in the marketplace and unrelated to support for the corporation's political ideas distorts the electoral process: “It is irrelevant for purposes of the First Amendment that corporate funds may ‘have little or no correlation to the public's support for the corporation's political ideas.’…All speakers, including individuals and the media, use money amassed from the economic marketplace to fund their speech. The First Amendment protects the resulting speech.”57 The Court treated the anti-distortion argument as little more than a variant on the egalitarian argument for limiting individuals' independent spending that it had rejected in Buckley.58

Second, the Court denied that corruption concerns could support a prohibition on corporate independent spending. The Court underscored the distinction, central to campaign finance jurisprudence since Buckley, between contributions and expenditures. NRWC's reference to “the influence of political war chests funneled through the corporate form” could be dismissed because NRWC “involved contribution limits” and not expenditures. An independent expenditure—that is, one that has not been prearranged or coordinated with a candidate—simply and categorically does not present a corruption danger. Even if an independent expenditure wins the spender “influence over or access to elected officials,” that is not corruption so that the anti-corruption concern cannot justify a spending ban.59

The Court also summarily dismissed an argument it had accepted in Austin that the corporate spending ban protects the interests of dissenting shareholders. Shareholder protection was rejected as both overinclusive—the statute did not exempt nonprofits or single-shareholder corporations—and underinclusive, given the temporal and media limits on the definition of “electioneering communication.”60

Citizens United did not address bans on corporate campaign contributions. The Court distinguished NRWC as a contributions case; made much of the contribution/expenditure distinction in its discussion of the anti-corruption rationale for regulation; and did not mention Beaumont—which had upheld the application of the ban on corporate contributions to nonprofit corporations—at all. As a result, the federal and many state laws banning corporate campaign contributions—including campaign contributions by nonprofits—remain valid, as least for now. If the corporate contribution prohibitions continue to stand, then similar bans on corporate coordinated expenditures—that is, expenditures undertaken in cooperation with a candidate or party—should hold up as well as the Court has held that coordinated expenditures may be regulated as contributions. To be sure, Citizens United's rejection of the idea that corporate campaign spending is more dangerous than spending by individuals does raise questions about the constitutionality of a complete ban on corporate and union contributions, as opposed to the dollar limits on contributions applicable to individuals and non-corporate and non-union associations. Still, the complete ban might be sustained under the secondary rationale put forward in Beaumont—that it is necessary to prevent circumvention of the limits on individual contributions that might result if an individual who has given the maximum permitted amount uses a corporation as a conduit for giving additional money.61 As Beaumont noted, “nonprofit advocacy corporations are…no less susceptible than traditional business companies to misuse as conduits for circumventing the contribution limits imposed on individuals.”62 As this article was going to press two circuit courts of appeals have held that even after Citizens United, Beaumont continues to be good law and provides sufficient support for laws banning corporate contributions to candidates.63

C. The decision: Disclaimer and disclosure requirements

Citizens United had also challenged the application to Hillary: the Movie of BCRA's disclaimer and disclosure provisions. The disclaimer measure requires that any electioneering communication funded by anyone other than a candidate include a statement that the ad is not authorized by a candidate and that the spender is responsible for its content. The ad must also display the funder's name and address or Web site address. The disclosure provision requires that anyone who spends more than $10,000 on electioneering communications in a calendar year must file with the FEC a statement identifying the person making the communication, the amount spent, the election at which it was directed, and the names and addresses of certain contributors. The Court upheld the application of the disclaimer and disclosure provisions to the movie and to the television ads promoting the movie. In so doing, the Court emphasized the value of dis-closure. Not only is disclosure “a less restrictive alternative to more comprehensive regulations of speech,”64 disclosure provides voters with information relevant to their voting decisions, and so is entirely consistent with, indeed, supportive of, the First Amendment:

The First Amendment protects political speech; and 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.65

The Court determined the voter informational purposes of the disclaimer and disclosure laws would be served by applying them not just to the movie but to the ads, even though the ads were arguably commercial—aimed at selling a product—and not political. “At the very least, the disclaimers avoid confusion by making clear that the ads were not funded by a candidate or political party.”66

The Court also addressed an issue implicitly raised by WRTL's limiting definition of “electioneering communication.” WRTL had dealt with the use of “electioneering communication” to extend the ban on the use of corporate and union treasury funds on campaign expenditures—now invalidated by Citizens United. But BCRA also extended federal disclosure requirements concerning election spending from express advocacy to electioneering communications. Did WRTL's gloss limiting electioneering communication to “the functional equivalent of express advocacy” apply to disclosure, too? If so, at least the Hillary ads might have been exempted from the disclosure requirement. But the Court expressly “reject[ed] Citizens United's contention that the disclosure requirements must be limited to speech that is the functional equivalent of express advocacy.” Disclosure doesn't burden political speech in the same way that spending limits do, and it also serves to inform the voters. “Even if the ads only pertain to a commercial transaction, the public has an interest in knowing who is speaking about a candidate shortly before an election.”67 As a result, electioneering communications as broadly defined in the statute may be subject to disclosure.

Although Citizens United confirmed that corporations that engage in election spending may be subject to disclosure, actually obtaining effective disclosure has proven difficult in practice. There is considerable evidence that business corporations prefer not to spend in their own names but, instead, to act through nonprofit intermediaries, such as (c)(4) advocacy organizations or (c)(6) trade associations and chambers of commerce.68 This can facilitate the pooling of funds from many like-minded corporate donors and the hiring of political strategists to determine where those funds can be used to the greatest political effect. Under current law, it may also make it possible for the corporations actually funding the nonprofit nominally engaged in campaign spending to avoid disclosure. So, too, the federal disclaimer requirement is focused on the entity formally sponsoring a campaign ad. It must disclaim that it is affiliated with a candidate or party and identify itself. But with many current speakers actually nonprofits with anodyne names—American Crossroads, Americans for Prosperity, the American Future Fund—the disclaimer provides little information to voters about who is really paying for the ads. Indeed, as will be discussed in the next Part, legal developments since Citizens United have actually made it easier for electorally active corporations to avoid disclosure. Even as the Citizens United Court assured the public that “modern technology makes disclosure rapid and informative,”69 so that disclosure would be an effective response to any corporate spending that might be unleashed by the Court's decision, federal campaign law as currently interpreted enables many of the nonprofit corporations that sponsor campaign ads to avoid disclosure of their donors.70

A. Invalidation of limits on donations for independent expenditures

Under campaign finance law, expenditures enjoy the highest level of First Amendment protection; expenditure restrictions are subject to strict judicial scrutiny; and, with Citizens United, there is currently no accepted justification for limiting or prohibiting campaign expenditures. Contributions, on the other hand, are less protected; restrictions on contributions are subject to less stringent review; and contributions may be limited to prevent corruption or the appearance of corruption. What, then, of contributions that are used to finance independent expenditures, e.g., where donor A gives to spender B who takes out an ad calling for the election of candidate C? Can A's donation to B be subject to contribution limits? Can such a limit be supported by the anticorruption justification?

Surprisingly, this issue had not been squarely faced until recently. Since 1974, FECA has imposed monetary limits on individual donations to political committees, including noncandidate, nonparty committees such as PACs. In 1981, in California Medical Ass'n v. FEC (CalMed),71 the Court upheld application of the limit to a donation by a trade association to its own PAC, emphasizing that the limit was necessary to avoid circumvention of the limits on individual donations to candidates. The key fifth vote was provided by Justice Blackmun who, in a concurring opinion, indicated that the result would be different if the PAC undertook only independent expenditures and did not make contributions to candidates.72 That same year, in Citizens Against Rent Control (CARC) v. City of Berkeley,73 the Court also held that donations to committees formed to support or oppose ballot propositions may not be limited because spending in ballot proposition elections poses no question of corruption. But it has only been in the last few years that the lower federal courts and the FEC have determined that donations to pay for independent expenditures in candidate elections cannot be limited.

In 2008 in North Carolina Right to Life, Inc. v. Leake,74 the Fourth Circuit held that a North Carolina law limiting donations to political committees could not, constitutionally, be applied to committees that engage only in independent expenditures. In 2009, in Emily's List v. FEC,75 a panel of the United States Court of Appeals for the District of Columbia Circuit struck down multiple FEC regulations dealing with political committees that both contribute to federal candidates and make independent expenditures. The court held that the FEC could require such a committee to pay for its contributions to candidates and parties and the associated administrative costs with so-called “hard money,” that is, funds that are subject to federal dollar limits and source prohibitions (e.g., no corporate or union money). But the court determined that the First Amendment bars the FEC from imposing such restrictions on the sources or amounts of donations used for “generic get-out-the-vote efforts and voter registration activities,” that is activities not promoting a specific candidate or party.76 Similarly, political committees could not be required to use only hard money to pay the costs of advertisements that merely “refer” to candidates.77

Then, in March 2010, the D.C. Circuit, sitting en banc, held in SpeechNow.org v FEC78 that the federal statutory limit on donations to political committees could not, consistent with the First Amendment, be applied to committees that make only independent expenditures. Relying on Citizens United's determination that there is no anti-corruption interest in limiting independent expenditures,79 the court concluded there is no anti-corruption interest in limiting contributions to committees that make only independent expenditures. The following month a Ninth Circuit panel followed suit, holding that a city ordinance imposing a monetary cap on contributions to independent expenditure committees violates the First Amendment.80

The FEC declined to seek Supreme Court review of SpeechNow and instead followed it with two important advisory opinions authorizing political committees that intend to make only independent expenditures to accept unlimited donations. In Club for Growth, Inc.81 the Commission agreed that the Club for Growth—a 501(c)(4) organization which already had a PAC that made campaign contributions—could set up another committee that would make only independent expenditures. That independent expenditure committee could accept unlimited donations, could solicit and accept donations from the general public, and could solicit and accept unlimited donations even if earmarked for independent expenditures concerning specific candidates. In addition, the Club's president could serve as treasurer both of the PAC that makes contributions and of the independent expenditure committee, provided he pledges the two committees will not coordinate. In Commonsense Ten,82 issued the same day, the Commission confirmed that an independent expenditure committee could accept unlimited donations from corporations and unions as well as individuals.

Technically, these cases and FEC advisory opinions deal only with “political committees,” that is, organizations whose major purpose is electoral and, accordingly, are required to register with the FEC and abide by the organizational, record-keeping, and reporting rules applicable to such committees. But the principle that an organization that engages only in independent expenditures and does not make contributions to candidates or parties may accept contributions in unlimited amounts seems generally applicable to all politically active organizations. Indeed, the day after the two FEC advisory opinions were released, a federal district court in Michigan, in a case brought by the Michigan Chamber of Commerce, held that after Citizens United Michigan's prohibition on corporate campaign contributions cannot constitutionally be applied to corporate contributions to a committee that makes only independent expenditures.83

Thus, although many laws on the books, like FECA itself, may include provisions limiting contributions to organizations that make independent expenditures or barring corporations from doing so, the emerging doctrine is that contributions to organizations that make only independent expenditures may not be limited. Even if an organization makes both contributions and expenditures, if the funds for the two activities are carefully separated, the organization can accept uncapped contributions for its independent spending, including from business corporations. In any event, there appears to be nothing to prevent such an organization from setting up two affiliated committees—one that makes contributions and one that makes only independent expenditures—and soliciting and collecting unlimited contributions for the latter. Or, considered from the perspective of the donors, multiple individuals, multiple corporations, or multiple corporations and individuals may, without monetary limit, pool their funds in nonprofit organizations that finance independent expenditures—and, of course, those independent expenditures may not be subject to a monetary limit either.84

B. Limited disclosure of donations used to pay for electioneering

Federal law requires that any person who spends more than $10,000 on electioneering communications in a calendar year must, within 24 hours, file with the FEC a report that inter alia includes the names and addresses of all persons “who contributed an aggregate amount of $1000 or more to the person making the disbursement” since the start of the preceding calendar year.85 The Supreme Court upheld the application of this provision to a nonprofit (c)(4) in Citizens United, but the Court did not address which donors to the organization would be subject to disclosure.

This provision was adopted concurrently with BCRA's ban on corporate and union electioneering communications and so the disclosure measure did not address disclosure by corporations or unions. When WRTL relaxed the electioneering communication restriction, the issue arose as to how to apply the contributor disclosure requirement to corporations and unions, which are not formed for or primarily engaged in electoral activity, and receive funds from sources—shareholders, customers, members, “or in the case of a non-profit corporation, donations from persons who support the corporation's mission”86—that do not necessarily intend to fund electioneering. Accordingly, after WRTL, the FEC adopted a regulation limiting the disclosure of donations only to those “made for the purpose of furthering electioneering communications.”87

In 2010, a closely divided FEC declined to require an independent committee to disclose its donors when the donations were not made expressly “for the purpose of furthering the electioneering communication that is the subject of the report.” The case involved Freedom's Watch, Inc., a nonprofit advocacy corporation that spent $126,000 on electioneering communication ads in a Congressional special election in the spring of 2008. Freedom's Watch filed the required electioneering communication report concerning its spending but did not disclose any donors. Indeed, Freedom's Watch did not disclose any donors for any of its 2008 electioneering communications because it contended all the donations it received were to support the organization's general purposes, and none were earmarked for specific electioneering communications.88 Three members of the FEC concluded that under those circumstances Freedom's Watch was under no duty to disclose its donors; only two commissioners thought that disclosure was required. As a result, the complaint brought against Freedom's Watch because of its failure to disclose its donors was dismissed. Although not a formal ruling of the commission, Freedom's Watch indicates that under the current FEC at least, a nonprofit corporation that accepts donations not specifically earmarked for electioneering communications is under no federal election law requirement to disclose the identities of its donors or the amounts donated. Indeed, Freedom's Watch effectively protects even those donations given for the purpose of electioneering communications generally so long as the donor has not indicated that it wants its funds used in a particular contest.

Freedom's Watch involved the FEC's interpretation of its own regulations. It is not a constitutional case; it does not affect state disclosure laws or even limit the ability of the FEC to adopt new regulations that would require the disclosure of donations used to pay for electioneering communication. However, the decision and the FEC rule it construes point to what is a central disclosure question resulting from Citizens United: whether and how to require the disclosure of the identities of the corporations and wealthy individuals who finance electioneering communications through contributions to nonprofit intermediary organizations that are not primarily electoral and take funds for a mix of both electoral and nonelectoral purposes.

A. Definition of electioneering message

A central campaign finance law issue is what sort of communication can be treated as an election-related message that can be regulated. As already discussed, (i) Buckley initially embraced a narrowing “express advocacy” requirement; (ii) Congress expanded that in BCRA to include “electioneering communication;” (iii) McConnell sustained that broader definition; and (iv) WRTL held that the First Amendment required that “electioneering communication” be sharply pared back to the “functional equivalent of express advocacy” in a case involving the prohibition of the use of corporate and unions treasury funds to pay for express advocacy. Left unaddressed in WRTL was whether the First Amendment limited disclosure to the “functional equivalent of express advocacy.” Several lower courts held that WRTL did not narrow the scope of disclosure requirements,96 and Citizens United resolved that issue conclusively. Disclosure and disclaimer requirements can be required beyond the “functional equivalent of express advocacy” and at least as far as the “electioneering communication” defined in BCRA.97

However, there are still limits on what can be deemed electioneering even just for purposes of disclosure. In 2010, a federal district court invalidated a portion of Maine's law requiring an organization to register as a political committee if it spends more than $5,000 a year “for the purpose of promoting, defeating or influencing in any way the nomination or election of any candidate to political office.”98 The court found that “influencing in any way” was unconstitutionally vague and struck it down; however, the United States Court of Appeals for the First Circuit subsequently reversed, reinstated the “influencing” phrase, and determined that the entire provision is constitutionally acceptable.99 A pre-Citizens United decision struck down West Virginia's definition of “electioneering communication” because it applied not just to broadcast media but to mass mailings, telephone banks, billboard advertisements, newspapers, and magazines. The court determined that under WRTL the state bore a heavy burden of proving that it had an interest in requiring disclosure beyond the broadcast media covered by BCRA, and it followed the Fourth Circuit’s Leake decision in treating BCRA's definition of “electioneering communication” as the outer limit of regulation, even just for disclosure. However, the court garbled WRTL's narrow tailoring requirement for anti-corruption regulation with the more relaxed standard of review applicable to disclosure.100 Citizens United undermines this decision.101 Indeed, a federal district court in South Carolina Citizens for Life, Inc. v. Krawcheck relying on Citizens United found that South Carolina could include telephone banks, direct mail, and any paid advertisements “conveyed through an unenumerated medium that cost more than five thousand dollars” in its statutory definition of electioneering communications subject to disclosure. The court agreed that South Carolina could apply a slightly wider pre-election period than does BCRA, when it held that the state could regulate messages identifying state candidates disseminated within 45 days before a primary, even though BCRA had adopted a 30-day window.102

As these cases indicate, the principal new electioneering definition issues involve (i) the regulation of nonbroadcast media and (ii) the expansion of the pre-election period. The North Carolina reform law adopted in 2010 defines “independent expenditure” to include “mass mailing” and “telephone banks,”103 and West Virginia's law includes newspapers, magazines, and other periodicals.104 In the DISCLOSE Act, the House of Representatives sought to extend the statutory pre-general-election period from 60 days to 120 days105—in other words, to treat as electioneering communications those ads that mention candidates (including incumbent officeholders) as early as July of an election year. This would cut fairly deeply into the year, including periods when Congress will almost surely be in session. This does, however, reflect the political reality that significant electioneering activity, particularly at the state level, may involve nonbroadcast media, and that general election campaigns, particularly at the federal level, seem to start earlier and earlier.

It is difficult to predict how these measures would fare in court. Although they do not bar speech, reporting and disclosure requirements do impose a burden on speech. With respect to the reporting of electioneering communications, the burden—saving for the moment the question of the reporting of the identities of donors—is fairly modest. Typically, an independent expenditure filing lists the name and address of the spender, the amount and date of the expenditure (above a threshold level), the recipient of the disbursement, the election affected, and the candidates supported or opposed. These are not particularly onerous obligations;106 certainly they are much less so than the PAC organizational and reporting requirements discussed in Citizens United. And, as in Citizens United, these expansions of the definition of the spending subject to disclosure advance the public's “interest in knowing who is speaking shortly before an election”—although the long pre-election period proposed in DISCLOSE does push out the envelope of “shortly before.”

The expansion of the media regulated from broadcast to print, mailers, and telephone banks should pass muster, provided the laws target mass mailings, general circulation newspapers and periodicals, etc., rather than more individualized communications, and there is an appropriate regulatory threshold, such as dollars spent, or volume of messages sent, to avoid regulating individual or small group activity.107 The expansion of the regulatory period may be more questionable, since it seems likely to pick up considerable grass-roots legislative lobbying as well as electioneering. Much might turn on the facts of specific cases, such as the length of the legislative session, or the content of the ads so regulated.

B. Donor disclosure

Citizens United confirms that nonprofits that engage in independent electioneering can be required to disclose the identities of the donors who finance those electioneering messages. But can such disclosure be obtained from an organization that is primarily non-electoral and engages in both electoral and non-electoral activities? Can it be required to disclose all donors who give above a certain dollar threshold? Or, can it be required to disclose only the names of those who give expressly for the purpose of financing electioneering—which, as Freedom's Watch suggests, may mean no disclosure at all. Is there some intermediate position for distinguishing electoral from non-electoral donors to organizations that combine electoral and non-electoral activities?

Recent legislation and legislative proposals suggest four possible strategies for obtaining disclosure of those who pay for campaign ads: (i) widen the definition of the “political committee” subject to reporting and disclosure requirements; (ii) provide standards for determining whether a particular donation was given for an electoral purpose; (iii) encourage or require nonprofits to create electoral activity accounts that would be the sole source of electoral activity and require the disclosure only of donors to those accounts; (iv) presume that unless a donor, above a dollar threshold, has asked that her donation not be used for political purposes, her money is one of the sources for electioneering and require its disclosure. These alternatives are discussed more fully below.

C. Disclaimers/attribution provisions

Citizens United upheld the current BCRA provision requiring that a televised electioneering communication funded by anyone other than a candidate include a disclaimer that the independent organization (and not a candidate) “is responsible for the content of this advertising.” The required statement must be made in a “clearly spoken manner” and be displayed on the screen in a “clearly readable manner” for at least four seconds. It must also state that the communication is not authorized by a candidate and must display the name and address (or Web site) of the person or group that paid for the ad.135 The problem for many reformers is that telling viewers that “Citizens United,” “Americans for Prosperity,” or the “American Future Fund” is responsible for the content of the ad doesn't tell them much. It certainly doesn't tell them who Citizens United or Americans for Prosperity or the American Future Fund are.

Thus, a recurring theme in the reform legislation taken up since Citizens United has been to force greater disclosure of the identities of the donors contributing to organizations that engage in independent expenditure or electioneering communications in the body of their ads. Rather than relying on voters—or more plausibly the media, bloggers, public interest organizations, or competing interest groups—to ferret out and publicize the donor information from campaign finance filings with federal or state regulators, these measures would make the identities of the principal donors immediately apparent in the ads. Although still sometimes referred to under the rubric of disclaimer measures—because they involve disclaiming that a candidate has paid for the ad—these laws are probably better referred to as attribution measures.

The most prominent and complex of these provisions was in the DISCLOSE Act, which sought to require that a radio or television independent expenditure or electioneering communication paid for by a nonprofit organization include a “significant funder disclosure statement” or a “Top Five Funders list” in the ad.136 The determination of whether a donor is a “significant funder” would vary according to both the size of the donation and the degree to which the donor specifies the campaign use of the money so provided. Thus, if a nonprofit engaged in independent spending or electioneering communication, and received one or more donations of $100,000 or more from an individual or another organization, and those donations specify that they are to be used for a “specific” independent expenditure of electioneering communication, then the person (including an organization) that provides the largest such donation would have to appear in the radio or TV ad. If the significant funder is an individual, the donor would have to give his/her name and home city and state and say “I helped to pay for this message and I approve it.” If the significant funder is an organization, then a representative of the organization would have to appear in the ad, give his or her name and title, provide the name and location of the principal office of that organization, and state that the organization helped pay for the ad and approves of it.

If there were donors who gave more than $100,000 and no one of them directed that it be used for a specific ad, but one or more of them specified that it be “used for campaign-related activity with respect to the same election or in support of the same candidate” as addressed in the ad, then the largest such donor would be the “significant funder” who would have to make the individual or organizational “significant funder” statement. If no donors fell into that category, but there were donors of $10,000 or more who gave simply for the purpose of being used for campaign-related activity or in response to a solicitation to funds for campaign-related activity—but not earmarked for a specific ad, election, or to discuss a specific candidate—then the largest such donor would have to make the significant funder disclaimer.

If no donors fell into any of the preceding categories, then the largest donor of more than $10,000 in unrestricted funds would have to make the significant funder disclosure statement. If no donor gave more than $10,000, the “top five funders” provision would apply. The names and addresses of the five persons (two in the case of a radio ad) who provided the largest payments of any type in an aggregate amount equal to or greater than $10,000 that would have to be reported as for independent expenditures or electioneering communication would also have to be included in the ad.

Although this extremely complex measure has not become law, a number of states have adopted more streamlined requirements intended to get the names of the principal funders of independent electioneering messages into those ads. For example, Alaska requires that when a campaign ad is taken out by a “person other than an individual or candidate,” the ad must identify the name, and city and state of residence, or the principal place of business, of the sponsor's three largest contributors.137 If the ad has a “video component,” then the list of top three donors must be read aloud. Connecticut's new law provides that in the case of a TV or Internet video ad paid for by a section 501(c) or a section 527 organization,138 the ad must visibly display the statement: “The top five contributors to the organization responsible for this advertisement” followed by a list of the five people or entities making the largest reportable contributions during the preceding twelve months.139 A radio ad by a section 501(c) or section 527 organization must include a similar audio statement, and the narrative by a robocall by a 501(c) or 527 must include a message indicating “the top five contributors responsible for this telephone call are.…”140 North Carolina now requires the disclosure of the top five donors within the preceding six months to the sponsor of a print ad that is an independent expenditure or electioneering communication.141 Television or radio ads must include a disclaimer spoken by the chief executive or principal decision maker of the sponsor, and “[i]f the sponsor is a corporation that has the purpose of promoting social, educational, or political ideas,” the ad must also include a legible list for TV or an audible statement for radio indicating that the viewer or listener “may obtain additional information on the sponsor and the sponsor's donors from the appropriate board of elections” including the statement “for donor contact [name of the board of elections with whom information filed].”142

The current federal disclaimer law143 was adopted as part of BCRA in 2002; it was sustained with virtually no discussion in McConnell,144 and Citizens United summarily rejected Citizens United's challenge to the application of that law to the ads for Hillary. It is surprising that the Court has given so little attention to the constitutional issues raised by forced disclosure of the sponsors of an ad in the body of the ad itself. Indeed, the case against the disclaimer requirement is easy to make. The information the disclaimer is said to provide is usually already available or could be made available when the sponsor of an ad reports its expenditure to the FEC or the appropriate state regulator. Moreover, the disclaimer directly intrudes into the sponsor's message; as a result it can distract the audience's attention from that message. For radio and TV ads, it consumes precious (and expensive) on-air seconds.145 Of course, the case for the disclaimer is also straightforward and strong. The disclaimer makes disclosure of the identity of the sponsor more effective by bringing it home to the voter as she listens to, watches, or reads an ad. Moreover, as Citizens United points out, a disclaimer/attribution requirement can help dissipate the confusion as to whether an ad that discusses a candidate was sponsored by a candidate, party, or independent organization.

The post-Citizens United disclaimer laws and proposals, however, go further than the measure sustained in Citizens United. Some would require not simply that a representative of the sponsoring organization take responsibility for the message, but that the funders (or senior officers of corporate funders) of these organizations appear personally, or that their names and addresses be listed in the ad. Again, these requirements just repeat already-disclosed, or otherwise-disclosable, information; take up space in, intrude on and potentially distract from the organization's message; and focus greater attention on the top contributors, particularly, in the case of the DISCLOSE Act, the significant funder who must actually appear personally in the ad.

The two post-Buckley cases in which the Supreme Court struck down disclosure requirements146—McIntyre v. Ohio Elections Commission147 and Buckley v. American Constitutional Law Foundation (ACLF)148—are relevant but not exactly comparable.149 McIntyre involved anonymous leaflets an individual composed and printed on her home computer and placed on cars parked in the lot of a middle school at the time of a meeting concerning a proposed school tax levy. The Court struck down the Ohio law banning the distribution of anonymous literature which McIntyre had violated because “in the case of a private citizen who is not known to the recipient, the name and address of the author add little, if anything, to the reader's ability to evaluate the document's message.”150 By the same token, “compelled self-identification” on a “personally crafted statement” struck the Court as “particularly intrusive” and likely to chill political speech by ordinary citizens.151 The new disclaimer laws and proposals, on the other hand, focus on sophisticated broadcast and other mass media ads and on “significant funders” whose names might mean something to viewers, who are unlikely to be chilled by the disclaimer, and who are subject to disclosure anyway.

ACLF is closer. In that case, the Court struck down a requirement that referendum petition circulators wear identification badges stating their names and indicating whether they were paid or volunteers. The Court concluded that the badges imposed a significant burden on political activity given the reluctance of potential circulators “to face the recrimination and retaliation that bearers of petitions on ‘volatile’ issues sometimes encounter.” Moreover, they provided the public with no new information since a circulator was already required to give her name in an affidavit filed with the state when she submits the signatures she has collected. That much less intrusive form of disclosure satisfied the public's informational interest.152 As in ACLF, there are less intrusive means of obtaining the names and addresses of the significant funders and/or top contributors. However, unlike in ACLF the new disclaimer laws and proposals apply only to mass media activity and so do not threaten the contributors whose names are so disclosed with the personal discomfort of “volatile” encounters with other individuals.

The Supreme Court has accepted the principle of disclaimer/attribution requirements, notwithstanding the interference with the ad sponsor's message. The issue posed by these laws is whether the important public purpose of making disclosure more effective can justify including the names of top contributors in an ad and, in the most extreme case, requiring the most significant funder to appear personally in the ad (or to have a top executive appear if the funder is an organization). Requiring nonprofits to include the names of their top funders in their ads could pass constitutional muster. With many electorally active nonprofits operating under non-descriptive names, the statement that a particular nonprofit paid for an ad may not actually tell the voters “who is speaking about a candidate.”153 Many electorally active nonprofits are operating in effect as pools of electorally active firms or wealthy individuals. If an individual firm or person were to pay for an independent expenditure or electioneering communication directly, that sponsor would have to make the necessary disclaimer. But if those firms or individuals pool their funds and channel their expenditures or communications through an intermediary organization with an anodyne name, the disclaimer does not disclose their role. Thus, extending the disclaimer to include the most significant funder or the top three to five donors is consistent with the principle supporting disclaimer, subject to the limitation that the required list not be so long or time-consuming as to unduly eat into the campaign message.

But it is hard to see what justifies mandating that “an unobscured, full-screen view” or a “voice-over accompanied by a clearly identifiable photograph or similar image” of the individual “significant funder” or the CEO of an organizational significant funder appear in a television ad, as the DISCLOSE Act would have required.154 Given that most funders probably are not celebrities, it is not clear that showing the funder's picture gives the voter more information than the funder's name. Putting the significant funder personally in the ad may be a way of making the funder take responsibility for the content of the ad, but the significant funder is not a candidate, not necessarily the head of the nonprofit sponsor, and need not even be the source of a majority of the funds used to pay for the ad. The requirement seems more likely to have the effect—if not the intent—of discouraging large donations, which would be unconstitutional.