Assessing the Impact of Citizens United: What Does it Mean for My Corporation?
On January 21, the United States Supreme Court issued a landmark ruling in Citizens United v. FEC that affects the rights of corporations and unions looking to have direct influence in federal elections. The case has received significant attention because it recognizes that corporations and unions have a First Amendment right to use unlimited corporate funds to finance “independent expenditures” (principally advertising) that expressly advocates the election or defeat of a clearly identified federal candidate. Historically, corporate participation in federal campaigns was limited largely to corporate or industry PAC contributions and the individual efforts of senior executives. That has now changed. The following represents a brief analysis of the new opportunities available to corporations and the aspects of federal and state campaign finance laws that have not changed.
Corporations May Now Finance Independent Federal Political Advertising and Other Political Communications. Without question, the most significant impact upon corporations emanating from Citizens United is the recognition that corporations have a First Amendment right to finance independent advertising that expressly advocates the election or defeat of a clearly identified candidate, and to disseminate such information, at any time up until election day. Historically, corporations faced potential exposure to prosecution even when financing “issue advertising,” or when financing media expenditures referring to a clearly identified federal candidate, within certain time periods before federal elections. Those restrictions - whether imposed by federal law through the Bipartisan Campaign Finance Reform Act or by operation of state law - have now been deemed unconstitutional. This new corporate freedom to communicate is not limited to broadcast or print advertising, which many corporations may be reluctant to sponsor. Read broadly, Citizens United empowers corporations to vastly expand their political communications with vendors, distributors, employees, customers, and the general public (as long as such communications do not cross the line into fund raising, are not coordinated as discussed below, and do not utilize campaign provided materials).
Corporations and Individuals May Now Finance Tax Exempt Groups to Advocate in Federal Elections. Many corporations remain reticent to engage directly in federal campaigns for fear of alienating a segment of their customer base. Citizens United recognizes that Section 501(c)(6) trade associations and Section 501(c)(4) tax exempt social welfare organizations have a similar First Amendment right, subject to certain IRS limitations on “major purpose,” to use corporate funds to finance media advocacy directly for or against federal candidates. Where such activity is expected to be substantial, the use of a Section 527 political organization may be the best alternative. Because IRS regulations do not require 501(c)(4) and 501(c)(6) groups to disclose their members, many corporations and individuals are considering the formation or funding of such groups to advocate in elections of consequence to them. It is important to note, however that FEC independent expenditure reporting requirements may in some instances challenge that expected confidentiality of donors where funds are contributed “for the purpose of furthering electioneering communications” immediately before an election.
Federal Laws Governing Candidate Contributions remain UNCHANGED. While Citizens United recognizes that corporations have a First Amendment right to finance independent expenditures, the law does not alter the current prohibition on corporate contributions to federal candidates or the financing of expenditures coordinated with federal candidates and parties. Direct contributions to candidates must still be made through political action committees made up of funds contributed by employees and by individuals subject to existing source and amount limitations.
Disclosure and Disclaimer Requirements Remain UNCHANGED. Existing laws requiring the disclosure of the entity paying for independent expenditures remain in place. As noted above, however, this requirement often requires only that the entity paying for the advertising be disclosed - not individuals or corporations contributing to those groups unless the funds are contributed “for the purpose of furthering electioneering communications” immediately before an election.
Groups of Individuals Now Have the Same Rights as Individuals. One of the more controversial aspects of the pre-Citizens United political world was that individuals possessed an undeniable right to use their resources to finance political speech of any manner (limited only by FCC obscenity laws) while similar rights were denied to unions and corporations seeking to pool their resources to engage in identical speech. Those limitations have now been lifted and groups can freely associate and organize into corporate or other groups that engage in political speech.