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2007 Issue 3
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The Supreme Court on Campaign Finance: Or, What does Wisconsin Right to Life really mean?
Initial Ethics Reform in the 110th Congress
The Supreme Court on Campaign Finance: Or, What does Wisconsin Right to Life really mean?
The recent U.S. Supreme Court ruling in FEC v. Wisconsin Right to Life ("WRTL") has been portrayed variously as the death-knell for campaign finance reform, a victory for free speech, an incremental adjustment to the McCain-Feingold regulatory scheme, or opening a loophole in the campaign finance law big enough to drive a truck - or perhaps just a family-sized SUV - through. While scholars debate the effect on stare decisis and the implications for how this court will treat other campaign limitations, nonprofits and political operatives need to know what the case means in more practical terms. What are the rules for this election cycle?
The FEC is about to undertake a rulemaking to flesh out the decision. It promises to have new regulations in place by the end of the year, as the 2008 election cycle really heats up. We will of course keep an eye on this rulemaking, but a few key points are worth mentioning now.
The Bipartisan Campaign Reform Act of 2002 ("BCRA") defined a new class of communications, "electioneering communications" ("ECs"). ECs are broadcast ads that refer to a person who is a candidate for federal office and run within 30 days before a primary or convention and 60 days before the general election. Notably, an EC need not refer to the person's candidacy or the election. BCRA banned the use of corporate or union funds to pay for these messages. WRTL sued, claiming that this prohibition was unconstitutional as applied to some specific lobbying ads it wanted to air.
The Court ruled in favor of WRTL. The ruling was issued in several different opinions, with no single clear majority. However, one opinion, authored by Chief Justice Roberts, appears to control the outcome and therefore sets the legal standard. The controlling opinion took the approach that ads could only be subject to BCRA's ban on the use of corporate funds if they were the "functional equivalent" of express advocacy for or against a candidate. It went on to say that an ad should be treated as such a "functional equivalent" if it "is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate."
Legal Standard for Regulating Issue Speech
This is a very exacting standard. Read literally, it would allow the FEC to regulate much less speech than it has tried to do in recent years, and would greatly expand the area of permissible nonprofit issue advocacy. Indeed, the opinion gives no basis for applying this standard only in the area of broadcast messages. Thus, it seems likely that "no other reasonable interpretation" may be the standard used to judge regulation of all political speech under federal or state and local campaign finance laws. The court also explained in detail why these ads should be considered "genuine issue advocacy." Supporters of campaign finance restrictions will likely argue in the FEC rulemaking that the Commission should adopt a standard exempting only "genuine" issue ads with certain characteristics, instead of following the relatively bright line of "no other reasonable interpretation." Concerned organizations would do well to follow that rulemaking process and consider filing comments expressing their concerns and desired outcome.
Reporting Requirements - Trap for the Unwary
The Court's decision did not strike down all regulation of electioneering communications. The Court said that the government must allow corporations (including nonprofits) to pay for communications if they fall on the issue advocacy side of the "no other reasonable interpretation" test. But it did not explicitly address the separate issue of reporting requirements that are triggered by running these 30/60 days broadcast ads. Left intact are the BCRA requirements that a person paying for an EC report to the FEC the disbursement of funds, and, significantly, that they report the name and address of donors who have given the organization an aggregate of $1000 or more since the beginning of the preceding calendar year.
There are legal provisions that allow ECs to be made from a segregated fund established for the purpose, and disclosure is then limited to the donors to that fund. However, the law and regulations did not envision most corporations being allowed to make any payments for an EC, so it is not clear how they could establish these accounts. It is likely that the FEC will address in its rulemaking the application of the disclosure rules to corporate and union ECs allowed under the WRTL case. This is another point that nonprofits will want to monitor, and should consider commenting on when the FEC releases its proposed rulemaking.
By Elizabeth Kingsley
Initial Ethics Reform in the 110th Congress
New Ethics Rules in the House
Early in 2007, the newly elected US House of Representatives voted to amend its rules. A number of the amendments entailed minor adjustments to procedural rules, but other amendments were more substantive, including two sets of changes that influence the manner in which some nonprofit organizations may interact with House members and House employees. Because the House implemented its ethics reform as a resolution altering the chamber's internal rules instead of ethics legislation, House rules changed immediately upon approval. The US Senate, on the other hand, passed amendments to the Lobbying Disclosure Act (LDA) and other ethics reforms as legislation in January, which then had to be approved by the House and still must be signed into law by the President before the provisions become enforceable. The House approved the bill at the end of July. Consequently, the Senate bill, known as S. 1, is now awaiting President Bush's signature.
The amended House Rules continue certain provisions of the House Rules of the 109th Congress, including the prohibition against Representatives and their staff accepting gifts valued in excess of $50 per item or an aggregate $100 in a calendar year. Under the new rules, Representatives and their staff are also prohibited from accepting gifts from a registered lobbyist or any private entity that retains or employs a registered lobbyist. The Lobbying Disclosure Act of 1995 requires organizations whose employees engage in a set amount of lobbying activity to register those employees as lobbyists with each chamber of Congress. Any reference to a lobbyist in this article refers to an individual who is registered as a lobbyist under the LDA.
There are a number of exceptions that soften the restrictions on gifts from lobbyists or organizations employing or retaining lobbyists. A non-exhaustive list of some of the exceptions follows:
- Food and refreshments of nominal value, if offered as something other than a complete meal;
- Other types of gifts (coffee mugs, key chains, etc.) of nominal value ($10 or less). Gifts worth less than $10 do not count toward the $100 total for the calendar year. Greeting cards, baseball caps, and t-shirts are explicitly considered to be items of nominal value, whether or not their monetary value exceeds $10;
- Free attendance, food, and refreshment at any event that qualifies as a widely attended event.
Restrictions on Privately Sponsored Travel
Prohibitions have also been put in place that limit who may sponsor official travel for Representatives and their staff. Registered lobbyists and the entities that employ or retain them are prohibited from sponsoring travel for Members and employees of the House, except when the sponsored travel in question falls into one of two categories: (1) travel to a one day event or (2) travel sponsored by private colleges and universities. Private entities that do not employ registered lobbyists may continue to sponsor official travel to events that exceed one day, but Representatives may only accept sponsorship if the cost for transportation does not exceed the cost of business-class travel. Examples of barred classes of sponsored travel include first-class accommodations, travel on any form of charter vehicle, and travel on private aircraft.
Under no circumstances may Representatives or their staff be accompanied by a lobbyist for any portion of a trip during which they are in transit. House members and staff can meet with a lobbyist at their final destination, but they may not meet with them while traveling. Representatives and their staff are also prohibited from accepting reimbursement for a trip that a lobbyist requests, organizes or arranges unless the lobbyist's involvement in these matters is negligible.
Impact of Ethics Rules on Nonprofit Organizations
The rules instituted by the House of Representatives are not statutory guidelines to which nonprofit organizations must adhere. Rather, they are internal rules meant to govern lawmaker behavior; the ultimate responsibility for adherence to these rules lies with Representatives and their staff. Even though it is up to the lawmaker to decline an invitation or a gift that is prohibited, nonprofit organizations that employ lobbyists need to be aware of the new regulations to ensure that they do not waste time or energy planning fact-finding trips, fundraisers, or advocacy efforts to which a Representative would be disqualified from attending or participating. To further complicate matters, all privately sponsored travel must be approved by the House Committee on Standards of Official Conduct, so nonprofits must be sure to plan trips far enough in advance to leave a sufficient amount of time for all House procedures to run their course.
In light of the new rules, groups that regularly sponsor Congressional travel or frequently invite members and employees of Congress to charitable events should carefully consider any decision to hire or retain a lobbyist. While it may have once been a relatively benign decision to employ or retain a lobbyist (or to register a current employee as a lobbyist under the LDA if they are nearing the threshold for registration) such a decision may now have a clear and substantive impact on certain activities of the organization.
For a complete list of exceptions to the gift and travel bans, and for a more detailed definition of what qualifies as a widely attended event, please see the full text of the House Rules for the 110th Congress, available on the House website. Additional guidance on the rule changes can be found on the website of the House Committee on Standards of Official Conduct.
Ethics Reform in the Senate
The Senate passed its own ethics reform legislation in January, which was recently approved by the House on July 31, 2007. S. 1 addresses a number of ethics issues and is regarded by some as the most significant ethics reform in decades. Among many other items, the legislation would prohibit lobbyists from providing gifts or travel to all Members of Congress, lower the lobbyist registration threshold, and require bundlers of more than $15,000 in a six month period to report to the Federal Election Commission. The legislation, which affects both the Lobbying Disclosure Act and Congressional rules, would also require candidates for federal office to pay fair market value for chartered flights. At the time of this publication, the Senate bill remains with the President, unsigned. Nonprofit Navigator will keep you apprised of new developments.
By Robert Johnson
This publication is designed to provide accurate and authoritative information about the subject matter covered. It is not distributed with the intent to render legal, accounting, or other professional advice. The services of a competent professional should be sought if legal advice or other expert assistance is required.
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