Tuesday, April 3, 2012

FEC Limited Reporting Reg Goes Down

Judge Amy Berman Jackson (D.D.C.) on Friday ruled that the FEC exceeded its regulatory authority by requiring corporations and labor unions to report only contributions made for the purpose of furthering electioneering communications, and not all contributors.

The ruling in Van Hollen v. FEC ends the case, at least for now, in favor of Maryland Representative Chris Van Hollen (D) against the FEC. Under Judge Jackson's ruling, the FEC could not limit reporting requirements by corporations and labor unions only to those contributions made for the purpose of furthering electioneering communication. Instead, under the Bipartisan Campaign Reform Act, or BCRA, corporations and labor unions who do not segregate their funds for electioneering communication (which segregation is no longer required under Citizens United) must report all contributions of $1,000 or more, apparently including "contributions" by customers, members, or others who give money, for whatever reason, to a corporation or labor union. (Recall that Citizens United held that the First Amendment allows corporations and labor unions to use general treasury funds for electioneering communication and thus did not require segregated funds for that purpose.)

Recall that Rep. Van Hollen sued the FEC over its December 26, 2007, disclosure regulation, which reads:

If the disbursements were made by a corporation or labor organization pursuant to 11 CFR Sec. 114.15, the name and address of each person who made a donation aggregating $1,000 or more to the corporation or labor organization, aggregating since the first day of the preceding calendar year, which was made for the purpose of furthering electioneering communication.

11 CFR Sec. 104.20(c)(9). The problem, according to Rep. Van Hollen, was that the italicized limit on the disclosure requirement effectively allowed corporations to dodge disclosure requirements under the plain language of the BCRA. BCRA says:

(E) If the disbursements were paid out of a segregated bank account which consists of funds contributed . . . directly to this account for electioneering communications, the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more to that account . . . .; or

(F) If the disbursements were paid out of funds not described in subparagraph (E), the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more to the person making the disbursement during the period beginning on the first day of the preceding calendar year and ending on the disclosure date.

2 USC Sec. 434(f)(2). The parties didn't dispute that BCRA defined "person" to include corporations and labor unions. Thus under (F) any corporation or labor union that used non-segregated funds for electioneering communication must report contributors who contributed $1,000 or more. Rep. Van Hollen argued that the FEC reporting reg was inconsistent insofar as it limited reporting only of those who contributed for electioneering communication purposes.

Judge Jackson agreed and ruled that the FEC exceeded its authority by limiting the reporting requirement only to those contributions made for the purpose of furthering electioneering communication. Judge Jackson ruled that the FEC regulation violated the plain language and legislative purpose of the BCRA, and she rejected arguments that broader reporting requirements would be unduly burdensome and thus violate the First Amendment under Citizens United. (She ruled that Citizens United itself answered this question by upholding BCRA reporting requirements.)

Part of the analysis turned on the definition of the word "contributor," used the BCRA. Judge Jackson said that "contributor" does not contain a purpose or intent element and therefore covers anyone who gives money for any purpose to a corporation or a labor union.

The ruling, if upheld on appeal, means that the FEC must go back to the drawing board on this regulation and that it would have to require disclosure for all contributions, for any purpose, to any corporation or labor union that uses general, unsegregated funds for electioneering communication. That would certainly promote transparency. (Maybe even too much, without further requirements for disclosure by purpose of contribution (i.e., for electioneering purposes, or other purposes). Consider trying to make sense of a list of undifferentiated contributors to any major corporation, for example, when many contributors (e.g., ordinary customers) may have no idea how or even if the corporation spends money for electioneering communication.)

It may also encourage corporations and labor unions to create a segregated fund for electioneering communication (even though they don't have to under Citizens United) in order to avoid the hassle of reporting all their contributors. (Under (E), they'd only have to report those who contributed for electioneering communication.) On the other hand, it could encourage corporations the other way, because reporting on all contributors might help them better conceal those contributors who contributed only for the purpose of electioneering communication among their many other contributors who contributed for other purposes.

Another possibility: Congress could change the BCRA--either consistent with the FEC's rejected approach or in some other way. But don't look for this to happen anytime soon, and certainly not before the FEC can file an appeal. (No word yet whether the FEC will appeal.)

SDS

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