Campaign regulation foes targeting state-level restrictions

Introduction

Federal courts — not the White House, not Congress — have triggered the most earthshaking changes in how recent U.S. elections are funded.

Think Citizens United v. Federal Election Commission, where the Supreme Court allowed corporate spending in elections.

Or SpeechNow.org v. Federal Election Commission, which created super PACs.

Or McCutcheon v. Federal Election Commission, which let donors give money to as many federal political candidates as they pleased.

But the latest Supreme Court decision on campaign finance, in May, maintained the status quo.

In Republican Party of Louisiana v. Federal Election Commission, the justices affirmed a lower court decision and upheld restrictions on “soft money,” or unlimited funding streams to parties banned in 2002 by the Bipartisan Campaign Reform Act, otherwise known as “McCain-Feingold” for the two senators who sponsored it.

These limits are one of the few pillars left standing from that legislation — although a new kind of “soft money” has nevertheless found its way into party politics thanks in part to the McCutcheon decision.

Having won significant battles at the federal level, political groups and libertarian nonprofits are now targeting state-level rules in district and appellate courts across the country.

The effects could be wide-ranging. The most notable battles deal with when groups need to disclose their donors, and whether contribution limits trample on donors’ freedoms of speech and expression.

“It’s a strategy we’re seeing across the country,” said Megan McAllen, senior legal counsel at the Campaign Legal Center. “There’s not much left of campaign finance law to target.”

Related article: “Democrats say Citizens United should die. Here’s why that won’t happen.”

Political organizations with significant cash reserves are fighting to keep the identities of their major backers private.

The Koch brothers-backed Americans for Prosperity Foundation, for example, is challenging a California law requiring 501(c)(3) nonprofits to identify their large donors to the state attorney general.

The attorney general’s office threatened to revoke the foundation’s tax exemption if it did not turn over a list of donors who gave more than $5,000 during a year. (Nonprofits are already required to provide the Internal Revenue Service such a list.)

Americans for Prosperity sued the state and argued the rule violated its donors’ rights to privacy. If the group turned over its supporters’ names, Americans for Prosperity argued, the supporters would face retribution from people — such as California officials — who oppose the Koch brothers.

“Donors whose associations with the Foundation are known to the public have received threats of physical harm, have had their businesses boycotted, and have been subjected to character assassination in their hometown newspapers,” the group’s complaint said.

A U.S. District Court temporarily blocked the law, but the 9th Circuit reversed the ruling, saying the donor reports are kept confidential and stay in the attorney general’s office. In a later proceeding, the district court again sided with Americans for Prosperity. The case is now back in the 9th Circuit.

“It’s free speech for me and not for thee,” McAllen at the Campaign Legal Center said. “It’s an attempt to, under the guise of free speech, to be able to say and spend without limit, while at the same time seeking protection” from the consequences.

A similar case in New York features Citizens United, the 501(c)(4) “social welfare” nonprofit behind the eponymous 2010 campaign finance case. Citizens United is asking for the same thing as Americans for Prosperity: Grant the nonprofit an exemption from reporting its donors or hold the requirement unconstitutional.

The case is now in the U.S. Court of Appeals for the 2nd Circuit after a Southern District of New York judge ruled in favor of the state in August 2016, saying that the rule is necessary to prevent tax fraud.

Few states have managed to change their contribution limits in the legislature. So, many groups are turning to the courts to erode the restrictions.

Related article: “Statehouses, not Congress, hosting biggest political money fights“

Don Zimmerman, an Austin, Texas, city council member running for reelection, argued his city’s campaign-finance limits violated contributors’ freedom of speech.

Voters passed a campaign finance law in 1997 that capped city council donations at $100. It also carved out a “blackout” period when candidates could not receive donations and required unused funds to be spent or donated to charity. The district court upheld what is now a $350 limit, but struck down the blackout period and charity requirement.

Both Zimmerman and the city appealed; Zimmerman wanted the limits struck down, and the city of Austin aimed to reinstate the two invalidated measures. The case is now in the 5th Circuit.

An Illinois case has taken a similar back-and-forth route since 2012.

Illinois Liberty PAC challenged Illinois’ $50,000 donation limit from political action committees to state candidates. It also challenged the state’s $5,000 limit from individuals to candidates.

The case meandered from federal district court to the 7th Circuit Court of Appeals then back to district court, which upheld the limits after the trial. The case is now back before the 7th Circuit.

The Illinois Liberty PAC, which supports conservatives, has received donations over the years from Republican megadonor Richard Uihlein ($62,000), developer Michael Keiser ($61,500) and former retail CEO Ed Bachrach ($30,500), according to Illinois Campaign for Political Reform data.