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House and Senate Respond to Citizens United Ruling

April 30, 2010, Caplin & Drysdale Political Law Alert: Important Recent Developments

House and Senate leaders yesterday released separate versions of the "DISCLOSE Act," major campaign finance legislation meant as a response to the recent and controversial U.S. Supreme Court decision in Citizens United. If enacted, the DISCLOSE Act would:

  • Substantially broaden the disclosure requirements for independent expenditures and electioneering communications. Specifically, the bill would require a corporation, labor union, 527 entity, or 501(c)(4), (5), or (6) group to make the following disclosures related to its sponsorship of election advertisements:

    • Before sponsoring an election ad, the organization's CEO must certify with the FEC under penalty of perjury that the organization is not a "foreign national" under the newly-expanded definition described below.

    • Within 24 hours of spending $10,000 or more on election ads in a calendar year, the organization must submit to the FEC a list of donors who gave $1,000 or more in the previous 12 months, including those who simply gave an "unrestricted" donation. (The organization will be subject to simpler disclosure requirements if it establishes a special "Campaign-Related Activity Account" and pays for ads only from that account.)

    • Within 24 hours of filing a newly expanded "independent expenditure" or "electioneering communication" report with the FEC, the organization must post that information on its website and keep that information up for at least one year.

    • After the organization sponsors an election ad, its CEO must quarterly certify to the FEC under penalty of perjury that, among other things, the ad was not "coordinated" with a candidate and the organization's finances have been properly disclosed.

    • The organization must disclose campaign-related expenditures in any periodic financial reports the organization already provides to its shareholders, members or donors.

    • The organization must post the details of its campaign-related activity on its website during a calendar year, categorized by the amount attributable to political parties, incumbent candidates, and challengers.

  • Compel the CEO and any "significant funder" of a corporation, labor union, 527 entity, or 501(c)(4), (5), or (6) group to make a "stand by your ad" disclaimer during any radio and television election ads sponsored by the organization (e.g. "I am John Smith, CEO of Acme Corp., and Acme Corp. approves this message.")

  • Require a corporation, labor union, 527 entity, or 501(c)(4), (5), or (6) group to list its "top five funders" during any radio and television election advertisement sponsored by the organization.

  • Extend the ban on federal and state/local election contributions, donations, disbursements, and expenditures by any corporation that is a "foreign national," which under the DISCLOSE Act would mean any corporation: (1) in which a foreign individual or corporation owns 20 percent or more of the voting shares; (2) whose Board majority is comprised of non-U.S. citizens; or (3) over which one or more foreign individual(s) or corporation(s) has the power to direct, dictate, or control the corporation's decision-making or its federal or non-federal political activities. Based on past FEC Advisory Opinions which concluded that no "foreign national" can serve as the sponsoring organization of a separate segregated fund, this newly expanded definition could be interpreted to prevent many U.S. subsidiaries from operating connected PACs.

  • Restrict political expenditures by federal government contractors and TARP recipients.

  • Impose new political-expenditure disclosures as part of a Lobbying Disclosure Act registrant's LD-203 report.

  • Bolster existing rules that limit "coordination" of advertising efforts with federal campaigns by extending applicable time windows while loosening the rules on coordination between political parties and their own candidates.
The DISCLOSE Act's principal sponsors are Senator Charles Schumer (D-NY) and Congressman Chris Van Hollen (D-MD). The House and Senate versions share the same core provisions, but differ in some respects. For example, the Senate bill would bolster existing provisions that offer candidates discounted rates for broadcast air time.

Caplin & Drysdale will provide further updates on this important legislation as it advances through the legislative process. To view our previous alerts on the Citizens United Ruling, please click on the following links:

ALERT: Schumer, Van Hollen Outline Legislative Response to Citizens United
ALERT: Practical Impact and Longer Term Consequences of Citizens United v. FEC

Please contact Caplin & Drysdale's political activity law practice if you have any questions.

Trevor Potter: 202-862-5092 or tp@capdale.com
Kirk L. Jowers: 202-862-5057 or klj@capdale.com
Joseph M. Birkenstock: 202-862-7836 or jmb@capdale.com
Stacy Q. Cline: 202-862-5033 or sqc@capdale.com
Matthew T. Sanderson: 202-862-5046 or mts@capdale.com
Kristy Tsadick: 202-862-8851 or kbt@capdale.com

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Caplin & Drysdale's Political Activity Law Group is a bipartisan practice, representing major corporate, tax-exempt and political clients. The group advises clients on regulated political activities, lobbying, and government ethics laws. The firm also maintains practices in the fields of international tax, tax controversy and fraud, tax-exempt organizations, creditors' rights and complex financial litigation, and white collar defense.

This alert is intended as a summary of legal issues for your general information. It does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

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Disclaimer
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