July 30, 2010

DISCLOSE Act Fails in Key Senate Procedural Vote

Holland & Knight Alert
Christopher DeLacy | Joel E. Roberson

The DISCLOSE Act (H.R. 5175, the Democracy is Strengthened by Casting Light on Spending in Elections Act) passed the House on June 24, 2010, but the Senate version (S. 3628) failed in a 57-41 party-line cloture vote on July 27, 2010. Senate Majority Leader Harry Reid indicated he would schedule a second vote on the legislation in September 2010.

Based on the July 27, 2010 vote, it appears unlikely the DISCLOSE Act in its current form will be enacted prior to the November 2, 2010 elections. However, it is possible that more limited legislation capable of securing 60 votes in the Senate might be pursued.

DISCLOSE Act Details

The DISCLOSE Act was drafted in response to the Supreme Court decision in Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010), which allows corporations and labor unions to use treasury funds to pay for communications that urge voters to support or oppose federal candidates (‘independent expenditures’). The Citizens United ruling was the subject of an unprecedented exchange between President Obama and Supreme Court Justice Samuel Alito during the 2010 State of the Union address, and the DISCLOSE Act has received strong support from the White House.

The DISCLOSE Act would prohibit independent expenditures and electioneering communications paid for by each of the following:

  • federal contractors
  • TARP recipients
  • “foreign controlled” domestic corporations

The latest Senate version of the DISCLOSE Act would not effect the ability of domestic subsidiaries of foreign corporations from establishing and administering Political Action Committees (PACs).

The DISCLOSE Act would require more of the following:

  • disclosure of detailed funding and transfer information to the Federal Election Commission (FEC)
  • disclaimers in advertisements
  • disclosure to shareholders, members and contributors
  • disclosure under the Lobbying Disclosure Act

The DISCLOSE Act would become effective 30 days after enactment, regardless of whether the FEC has adopted implementing regulations.

A Review of Citizens United

As a result of Citizens United, corporations and labor unions may now use treasury funds to pay for communications that urge voters to support or oppose federal candidates (‘express advocacy’). The ban on corporate and labor union direct contributions to federal candidates, political parties or Political Action Committees (PACs) remains in place. In addition, the decision upheld independent expenditure and electioneering communications disclaimer and disclosure requirements.

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