Political Law Alert Series
Land mark Development: The US
Supreme Court Strikes Down
Limits on Corporate and Union
Independent Expenditures
In a far-reaching decision, on January 21, 2010, the US Supreme Court overturned
decades-old precedent in Citizens United v. Federal Election Commission and
ruled that the First Amendment protects corporate speech as vigorously as it
protects individual speech. The practical result is that corporations and labor
unions may now make unlimited “independent expenditures” and “electioneering
communications” regarding federal candidates. This means that corporations may
either expressly advocate an election or defeat of clearly identified candidates,
or simply mention candidates in the course of discussing political issues or
policy, even within the last days before an election. This constitutional protection
applies to both for-profit and nonprofit corporations, such as incorporated 501(c)
organizations, although tax law restrictions remain on nonprofit groups.
Some key notes on the decision include the following:
„„No Coordination: The Court extended constitutional protections to
independent expenditures, meaning that corporations may not “coordinate”
their spending with any candidates. Thus, ensuring lack of coordination (a
term that the Federal Election Commission (FEC) has defined heretofore
quite broadly) with candidates will be a critical requirement for corporations
wishing to place campaign ads.
„„Protects All Communications/Speech: This historic decision not only
protects broadcast ads by corporations, but also any type of communications,
including print ads, the Internet, On-Demand video, pamphlets and leaflets.
„„Direct Contributions and Coordinated Expenditures Still Banned: The
Court kept intact the law’s limits on direct contributions to candidates—
including in-kind ones. Therefore, corporate and labor union PACs will still
have a role in the political process.
„„Foreign Contributions Ban Intact: The Court found that there was no need
to reach the question of whether there was a compelling interest in preventing
foreign influence on the US political process, thus maintaining the ban on
state and federal contributions and expenditures by foreign nationals.
ARNOLD PORTER LLP
Landmark Development: The US Sup reme Court 2
Strikes Down Limits on Corporat e and Union
Independent Expenditu res
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„„Party Soft Money Ban Intact: Similarly, the McCain-
Feingold (or Bipartisan Campaign Reform Act (BCRA))
prohibitions on political party soft money are still in
effect.
„„Hard Money Ban Not Affected: The contribution
limits that apply to hard money remain untouched by
the Supreme Court’s decision.
„„Disclosure Still Required: Disclosure, including
the names of donors, is still required for corporations
engaging in certain political speech.
„„State Laws in Peril: The decision referenced the 26
state laws that do not restrict corporate independent
expenditures, intimating that the remaining states will
be responding to this decision, thus prompting a fury of
state and local legislative activity on this issue.
„„Unknown Effect on Other Businesses Such as
Non-Corporate Federal Contractors: The Court’s
ruling was limited to corporate and labor union spending
in campaigns. It did not touch upon, for example, the
restrictions imposed on federal contractors that are
not incorporated entities, such as partnerships and
unincorporated associations, which are governed by
separate provisions of the law. Whether and how this
will be resolved is unclear. On one hand, the decision
stood for the proposition that the government cannot
restrict speech based on the speaker’s identity. And
treating federal contractors distinctly would contradict
this principle. On the other hand, there arguably is a
different compelling government interest in restricting
communications by those with federal government
contracts, as there is with foreign contributors. If
the latter rationale is employed, however, fairness
would dictate that corporate entities that are federal
contractors also be subject to these restrictions, which
the Citizens United decision would clearly not permit.
Because the Court was silent on this issue, it is possible
that Congressional action, not simply FEC regulations,
may be required to address this inconsistency.
„„Charitable Nonprofits Will Still Be Constrained
by Federal Tax Laws: While the FEC restrictions on
corporate spending will no longer apply to nonprofits,
the Internal Revenue Code provisions remain the law.
In effect, 501(c)(3) organizations and foundations will
not benefit greatly, if at all, from this ruling.
„„Other Nonprofits Will Be Freed from Campaign
Speech Restraints: While the headlines prophesize
a fury of corporate and union spending on campaign
ads, the fact remains that interest groups organized in
the form of 527, 501(c)(4) corporations, and 501(c)(6)
trade associations also will be able to spend treasury
funds now on ads that not only suggest a candidate
preference, but clearly state one.
These, and many other issues and unanswered questions,
will need to be resolved by the FEC, and perhaps the
Congress, which has already promised to step into the
debate to somehow counteract the decision. And, as
noted above, the states may be brought into the fray with
respect to their own campaign finance laws.
We therefore urge you to consult with counsel before
exercising your newly validated rights to campaign speech.
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