U.S. Senate: CLC Urges Senators to Pass DISCLOSE Act

CLC Staff
Jul 12, 2012
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Today, the Campaign Legal Center urged Senators to vote for cloture and then pass the DISCLOSE Act of 2012 (S. 3369) when it is brought to the Senate floor early next week.  The legislation is a response to the unprecedented amounts of anonymously-funded political spending triggered by the Supreme Court’s decision in Citizens United v. FEC.  The bill would reveal the contributors behind that spending and allow voters to make informed decisions at the polls.

An initial cloture vote and debate are expected to be held on Monday.  A second vote may follow later in the week.  In an effort to encourage Republican support for the legislation, Sen. Sheldon Whitehouse (D-RI) on Tuesday introduced a modified version of the bill – S. 3369 – which removes the disclaimer provisions and shifts the effective date of the proposed legislation until after the 2012 election.

The full text of the letter follows below.

 

July 12, 2012

Dear Senator:

A revised version of the DISCLOSE Act of 2012 (S. 3369), is expected to be considered by the full Senate next week.  The vote could come as early as Monday.  The Campaign Legal Center, a nonpartisan, nonprofit organization, strongly urges you to support S. 3369 and to vote for cloture.  This measure is a fair, unbiased and urgently needed legislative response to the new types of high-dollar, anonymously-funded political spending triggered by the Supreme Court’s decision in Citizens United v. FEC.

Hundreds of millions of dollars will be spent to influence the outcome of the elections over the next four months.  Neither the candidates being attacked with these millions of dollars nor the public will have complete, accurate, meaningful information about the sources of such money.  Only the contributors and the beneficiaries will be in the know.  Passage of S. 3369 will mean that in future election cycles those funding these shadow campaigns will be disclosed to the public so that voters can make informed decisions at the polls.  As we get closer to the 2012 elections, the amount of federal campaign-related spending using funds from undisclosed sources continues to rise.  Especially troubling is the lack of transparency regarding the expenditures of so-called “Section 501(c) groups” this election cycle, such as Priorities USA and Crossroads GPS. 

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The DISCLOSE Act of 2012 would require any “covered organization”—a corporation, labor union, 501(c) organization (other than a (c)(3)), Super PAC and section 527 organization—that spends $10,000 or more on a “campaign-related disbursement” to file a disclosure report with the Federal Election Commission (FEC) within 24 hours of the spending, and to file a new report each time an additional $10,000 or more is spent.  The FEC must post the report on its website within 24 hours of receipt.

Under S. 3369, a covered organization may set up a segregated bank account to make its campaign-related disbursements and is then required only to disclose the donors of more than $10,000 to that segregated account.  If, however, the campaign-related disbursement is paid for out of its general treasury fund, the organization must disclose the source of all donations totaling more than $10,000.  But if a donor requests that his donation not be used for campaign-related disbursements, and the covered organization segregates his donation from the funds they use for campaign-related spending, then the donor need not be reported.  Transfers between covered organizations for the purpose of funding campaign-related spending are also subject to disclosure, with the exception of certain internal transfers between affiliated organizations.  In an effort to encourage Republican support for the legislation, Sen. Sheldon Whitehouse (D-RI) yesterday introduced a new version of the legislation—S. 3369—removing the disclaimer provisions and shifting the effective date of the proposed legislation until after the 2012 election.

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While the Supreme Court in Citizens United struck down restrictions on election-related independent spending by corporations and unions, the Court overwhelmingly upheld the associated disclosure requirements.  Indeed, the high Court twice upheld challenged disclosure requirements by 8-1 votes in 2010 alone, in Citizens United and Doe v. Reed.  In Citizens United, the Court highlighted how the vital speech interests advanced by disclosure also serve the democratic process: 

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. 

The ability to “make informed decisions” is a cornerstone of democratic self-government.  As Justice Scalia opined in Doe, “Requiring people to stand up in public for their political acts fosters civic courage, without which democracy is doomed.”   

Since Buckley v. Valeo (1976), the Justices have firmly endorsed meaningful disclosure, subjecting disclosure laws to a more lenient standard of review than other forms of campaign finance regulation.  Under Buckley, disclosure laws are upheld unless the “threat to the exercise of First Amendment rights is so serious and the state interest furthered by disclosure so insubstantial that [the challenged disclosure requirements] cannot be constitutionally applied.”  Indeed, the Court has not only repeatedly rejected First Amendment challenges to political disclosure laws, but has affirmatively found that such laws promote First Amendment values.  As the Court held in McConnell v. FEC (by an 8-1 vote):

Plaintiffs never satisfactorily answer the question of how ‘uninhibited, robust, and wide-open’ speech can occur when organizations hide themselves from the scrutiny of the voting public.  Plaintiffs’ argument for striking down [the challenged] disclosure provisions does not reinforce the precious First Amendment values that Plaintiffs argue are trampled by [those provisions], but ignores the competing First Amendment interests of individual citizens seeking to make informed choices in the political marketplace.

Because disclosure serves critically important First Amendment interests for society as a whole, exemptions from disclosure requirements are rarely justified.  In rare circumstances, however, disclosure will present such a severe burden on a group’s ability to speak and associate that a group-specific, “as applied” exemption is warranted.  To obtain this exemption, a group must present evidence showing “a reasonable probability that the compelled disclosure of [its] contributors’ names will subject them to threats, harassment, or reprisals.”  In formulating this exemption, the Supreme Court drew upon its decision in NAACP v. Alabama (1958).  There, the Court held that the compelled disclosure of the names of the NAACP’s members in Alabama was unconstitutional in light of “uncontroverted” evidence presented by the NAACP that disclosure would likely expose them to violent attacks and other threats to their physical safety.  Thus, subjective fears of harassment, without more, would not meet the high bar set byNAACP and have never been sufficient to qualify a group for this exemption from disclosure.

Neither can public criticism, protests and boycotts—all of which represent protected First Amendment activity—serve as grounds for exemption.  As the Court plainly stated in NAACP v. Claiborne Hardware Co. (1982), “Speech does not lose its protected character . . . simply because it may embarrass others or coerce them into action.” 

Public protests, in fact, are powerful democratic tools routinely utilized by groups across the political spectrum.  Recently in Minnesota, for example, a conservative group called Minnesota for Marriage organized a “Dump General Mills” boycott and rally after leaders of General Mills announced the company’s opposition to an amendment to ban same-sex marriage.  Meanwhile, the liberal MN Forward and MoveOn.org organized a boycott of Target in late 2010 after the company donated money to a group supporting Minnesota gubernatorial candidate Tom Emmer, who opposed same-sex marriage.

Boycotts and protests have long been mechanisms used, both historically and lawfully, to voice dissent.  They number among some of the most iconic episodes in our history, from the colonies’ boycott of British-made goods to the Civil Rights Era Montgomery bus boycott.  Renouncing this heritage of public action to shield large campaign donors from scrutiny would transform our nation into one that, as Justice Scalia wrote in Doe, “does not resemble the Home of the Brave.”

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The Supreme Court’s support for transparency notwithstanding, current federal campaign finance and tax laws have not been updated to accommodate the impact of the Citizens United decision and its progeny. 

Since Citizens United, almost half of all the independent spending in federal elections has been conducted by groups organized under Section 501(c) of the Internal Revenue Code, principally, Section 501(c)(4) social welfare groups and Section 501(c)(6) trade associations.  Federal tax law allows these groups to spend unlimited amounts on campaign advertisements, provided that campaign intervention is not their primary activity, but does not require the groups to publicly disclose their donors.

The remainder of the independent spending in federal elections is attributable to political committees, often so-called “Super PACs,” which are subject to significant reporting requirements under federal campaign finance law.  But even these reporting requirements do not require complete transparency.  Current law requires only that political committees disclose their immediate sources of funding—not that those funders in turn disclose their own donors.  Because political committee reporting requirements thus penetrate only “one level” of contributions, the real interests funding Super PACs often remain opaque.  A PAC receiving contributions from a shell corporation or 501(c) organization only has to disclose the often uninformative name of that corporation or organization, and generally those entities do not themselves publicly disclose the sources of their funds.  For example, if a Super PAC discloses that it received a $5,000 contribution from “Anonymous Corp.,” it has fulfilled its current statutory requirements.  However, that disclosure reveals nothing about the funders or political interests of Anonymous Corp. 

S. 3369 closes both of these loopholes.  Section 501(c) groups that make over $10,000 in campaign-related disbursements in federal elections will be required to publicly disclose all of their donors of over $10,000 (or, if they use a segregated fund, all donors of over $10,000 to this fund).  And a covered group that gives money to another covered group for the purpose of funding campaign-related disbursements—such as Anonymous Corp.’s contribution to the hypothetical Super PAC above—will be required to report such a transfer and publicly disclose its donors.

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Corporations and unions routinely participated in federal elections before theCitizens United ruling.  They could control and pay the administration costs of political action committees that could spend unlimited money on campaign advertising, but the funds had to be voluntarily contributed by their restricted class and meaningfully disclosed to the American public.  Today, however, corporations and unions are finding new avenues to spend large amounts of money to influence the outcome of federal elections with no obligation to comply with even basic federal disclosure requirements.

The Supreme Court has been unusually clear:  it is constitutional to require the sources of political campaign spending to be disclosed.  This applies not only to Super PACs, but also to unions, 501(c)(4)s and (c)(6)s, and other groups running campaign ads.

The Campaign Legal Center urges you to support S. 3369, a measure that will bring our outdated campaign finance disclosure laws into the 21st Century.  At the very least, the Legal Center urges you to vote for cloture so that this critically important bill can move forward.  Substantive issues can then be addressed through the amendment process.  A vote against cloture is a vote to allow huge amounts of secret money to pour into federal elections. 

The Legal Center would be pleased to answer any questions you may have and to provide any assistance you may need as you consider this legislation.

Sincerely,

J. Gerald Hebert                                                          Meredith McGehee 

President                                                                      Policy Director

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