August 3, 2010

FEC Approves Establishment of Independent Expenditure Committees

Holland & Knight Alert
Christopher DeLacy | Joel E. Roberson

On July 22, 2010, the Federal Election Commission (FEC) approved two advisory opinions formally recognizing independent expenditure committees for the first time. The advisory opinion requests were submitted by the Club for Growth (AO 2010-09) and Commonsense Ten (AO 2010-11). Until these opinions were issued, independent expenditure committees had only existed at the state or local levels.

The Club for Growth advisory opinion allows 501(c)(4) entities to establish a separate independent expenditure committee. The Commonsense Ten advisory opinion allows independent expenditure committees to accept unlimited contributions from individuals, political committees, corporations and labor unions. The FEC also provided guidance as to how independent expenditure committees may register and report activity with the FEC using existing registration and disclosure forms.

No federal court has explicitly ruled that federal independent expenditure committees may accept unlimited corporate and labor union contributions, and the FEC has not yet formally approved regulations regarding the establishment and operation of independent expenditure committees. However, after the Supreme Court’s decision in Citizens United v. FEC, 130 S. Ct. 876 (2010) and the D.C. Circuit’s decision in v. FEC, No. 08-5223 (March 26, 2010), the FEC applied the legal holdings in these cases to independent expenditure committees in the Club for Growth and Commonsense Ten advisory opinions. The FEC will eventually begin a series of rulemakings to adopt regulations for independent expenditure committees. However, these rulemakings will most likely be completed after the 2010 general election.

What an Independent Expenditure Committee Can Do


An independent expenditure committee may pay for communications that expressly advocate the election or defeat of federal candidates, so long as the expenditures are not coordinated with any candidate, campaign or political party. Independent expenditures and electioneering communications must contain certain disclaimers and must be properly disclosed to the FEC. Additional Federal Communications Commission and Internal Revenue Service disclosures may also be required.

With the FEC’s approval of the Club for Growth and Commonsense Ten advisory opinions, the regulatory framework for independent expenditure committees at the federal level appears to be set for the 2010 election. However, it is possible that the enactment of the DISCLOSE Act (H.R. 5175/S. 3628, the Democracy is Strengthened by Casting Light on Spending in Elections Act) could disrupt this regulatory certainty.

Legislative and Judicial Background


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. This ban includes in-kind contributions, such as coordinated communications. The decision upheld independent expenditure and electioneering communications disclaimer and disclosure requirements.

In its decision, the U.S. Court of Appeals for the D.C. Circuit struck down individual contribution limits to independent expenditure committees. The ruling required independent expenditure committees to register and report with the FEC, but did not address the solicitation or acceptance of corporate or labor union contributions by independent expenditure committees.

The DISCLOSE Act, which was passed by the House of Representatives on June 24, 2010, proposes significant changes to federal campaign finance law as it relates to independent expenditures and corporate and labor union political activity. Particularly noteworthy is the fact that this legislation would require additional contributor disclosure for independent expenditures and electioneering communications. A procedural vote on 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. (For additional details, see Holland & Knight’s July 30, 2010 Political Law Alert, DISCLOSE Act Fails in Key Senate Procedural Vote.)

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