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D.C. Circuit Overturns Donation Limits for Groups Doing Political Work

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The landmark January Supreme Court decision in Citizens United v. FEC got its first major application in a D.C. Circuit decision striking down donation limits for individual groups advocating for candidates.

In SpeechNow.org v. FEC, the appeals court ruled in March that SpeechNow.org, a group planning to run ads attacking candidates who support campaign finance reform measures, can accept unlimited donations, but must still register as a political committee and disclose those contributions accordingly. This ruling relied on Citizens United, a January Supreme Court decision striking down expenditure limits for groups and corporations, provided those groups and corporations weren't coordinating their efforts with candidates' campaigns.

The Federal Election Commission (FEC) unsuccessfully argued that Citizens United, in which a group made a film critical of then-presidential candidate Hillary Clinton, shouldn't be used as precedent because it relates to expenditure limits and SpeechNow.org to contribution limits--a distinction that goes back to the 1976 Supreme Court decision in Buckley v. Valeo. But the en banc D.C. Circuit disagreed. In a unanimous decision, the court said that because Citizens United found there's no anti-corruption interest in limiting independent groups' expenditures, there can't be an interest in limiting the contributions those groups receive.

Determining what is a legal independent expenditure and what is a campaign expenditure that violates the McCain-Feingold finance reforms is no longer a matter of how the money is used, but of whether the group making the expenditure or collecting the donation is truly independent from political campaigns. The attorney who argued the case for SpeechNow.org and its five plaintiffs says this opens up a "sticky and developing" legal area in keeping groups and candidates with identical goals in compliance with the coordination requirements.

"You're setting up a Chinese wall between the group, and the candidate, and the people who work with them, and that's an area that attorneys have to be aware of," says Steve Simpson, senior attorney at the Institute for Justice.

No Limits

Tara Malloy, associate legal counsel at the Campaign Legal Center, wrote an amicus brief in the case. She says the decision requires the groups and candidates to work separately, however it still allows groups to buy influence "even without quid pro quo corruption proved."

"It doesn't mean candidates will not know, appreciate and reward people who spent a lot of money to influence a campaign," she says.

SpeechNow.org, which still has not incorporated and has not yet raised any funds, asked the FEC in November 2007 for an advisory ruling on whether it must register as a political committee. It had planned to collect donations from individuals for a series of commercials in the 2008 election season. The $400,000 ads would have been funded solely by individual donations, avoiding all corporate or union money.

"Since it wasn't clear the FEC would bless our model, we had the question about whether we could operate the way we want to operate," says SpeechNow.org President David Keating, who is also treasurer of the group and a plaintiff in the case.

The FEC did not have enough commissioners to issue an opinion, but issued a draft advisory opinion saying SpeechNow.org would need to file as a political committee, abiding by the same limits as candidates' campaign committees. This would have limited an individual's contribution to SpeechNow.org to $5,000 per year. The five plaintiffs each planned to donate to the group, with the top donation $110,000 from plaintiff Fred Young. Keating planned to donate $5,500.

The decision sided with the plaintiffs in removing the $5,000 yearly limit to a particular group and the $69,900 biennial limit to all groups, but it rejected the plaintiffs' claim that filing with the FEC as a political committee and meeting disclosure requirements violated the First Amendment. SpeechNow.org must now file as a political committee as soon as it collects $1,000, rather than after it expends $1,000, which the plaintiffs argued for.

The group already has $121,700 in planned donations from the plaintiffs alone, with 75 other people saying on the group's website that they plan to donate.

This has created a new type of organization, one that collects money like a non-profit, but spends and discloses like a campaign committee, Malloy says.

"The interesting aspect is, what do you do with a group that can accept unlimited contributions but has greater disclosure requirements?" Malloy says.

Sideways Slaps

One expected result of SpeechNow.org is a reduction of what Malloy calls "sham issue advocacy." To circumvent the contribution restrictions, groups would declare tax exempt status under Section 527 of the tax code, then run ad campaigns ostensibly about issues that really were sideways slaps at candidates. Among these groups are the Swift Boat Veterans for Truth and the MoveOn.org Voter Fund, both of which were fined for illegal activities during the 2004 presidential elections.

Keating predicts SpeechNow.org will end the practice.

"[Sham issue advocacy is] really just a thing to get around this restriction, that they can't expressly advocate," Keating says. "SpeechNow.org makes everything really honest and in the open."

Malloy says there are still disclosure rules groups may try to avoid.

"Contribution limits were clearly the greatest incentive to try and evade the law, but we can't discount the effect of disclosure requirements," she says.

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