Legal challenge seeks to bring down new campaign finance law

Introduction

A conservative group in Alabama has filed the first court challenge to recently passed campaign finance legislation that aims to force certain tax-exempt political groups to disclose their donors and expenditures.

The National Federation of Republican Assemblies is a “527” group, so named after a section of the IRS code. Before the law went into effect, these groups could run issue-oriented campaigns without disclosing their identities, the contributions they received or the expenditures they have made.

Congress targeted these groups in the July legislation because special interests used the 527 groups to run attack ads with complete anonymity.

The Republican federation is subject to the new law, but didn’t file with the IRS before the Aug. 1 deadline. The group did not file because it considers the law unconstitutional and believes it will have a “chilling effect” on free speech, according to Paul Haughton, a Republican activist in Alabama and executive vice president of the federation.

The complaint, filed in federal court in Mobile, Ala., claims that the legislation, passed hurriedly with a surprising 92-6 Senate vote and signed by President Clinton on July 1, infringes on First and Tenth amendment rights.

The complaint claims that the law “violates the First Amendment rights of the Plaintiffs by heavily burdening core First Amendment expression, limiting the speech of the Plaintiffs, and abridging their free expression . . .” It states that the Tenth Amendment, which reserves to the states or to the people the powers the Constitution did not delegate to the federal government, is infringed because regulatory requirements at the national level duplicate and possibly exceed what is required at the state level.

In addition, the group bases its complaint on a 1958 Supreme Court case, National Association for the Advancement of Colored People v. Alabama, which found that the names of members of the NAACP did not have to be publicly disclosed if there was a threat of retribution. Haughton argues that the new law seeks to overturn this.

Broad net catching only minnows

Haughton is one of four plaintiffs. The others include the Mobile Republican Assembly and the Alabama Republican Assembly. The complaint lists U.S. Attorney General Janet Reno, IRS Commissioner Charles O. Rossetti and Alabama U.S. Attorney Dan Foster as defendants.

The court action was filed Aug. 21 on behalf of NFRA’s 25,000 members and, Haughton said, a growing coalition of conservative and liberal grassroots groups that believe the law doesn’t fulfill the intended goals.

“There are big dollar groups, like Tom DeLay’s and Dick Gephardt’s PAC, pumping tons of money into races,” Haughton said, referring to House Majority Leader DeLay, R-Texas, and House Minority Leader Gephardt, D-Mo.

“Those are the groups that should be regulated,” he told the Center for Public Integrity. “Our group has $5,000 in the treasury and we already report on a state level. We are small fries. This law has a chilling effect on those who would donate to us but don’t want to, now that their names could be attached to our group — a pro-life, conservative branch of the Republican Party.”

Will the law survive?

This law will survive this “opening salvo” and other likely court challenges, according to Glenn Moramarco, a senior attorney with the Brennan Center for Justice in New York.

Moramarco said the alleged First Amendment violations “would be convincing if the case and the law weren’t based on a tax issue.” The government should be able to request more paperwork from groups who claim the privileged status of tax-exempt, according to Moramarco. He and other campaign finance lawyers dismissed the argument that the new law violates the Tenth Amendment, based on the history of Tenth Amendment challenges.

As for the 1958 NAACP decision, “It is based on individual exemptions if it can be proven that personal danger would be a direct result of disclosure,” Moramarco said. He and his colleagues at the Brennan Center participated in the hearings and conversations leading up to the drafting of the law.

The Republican federation faces IRS sanctions that include losing tax-exempt status and a $20 fine for every day the group fails to disclose its financial and organizational information. The federation might be required to pay taxes on donations it received during the period it does not disclose. The group is seeking an injunction against the new law until its case can be heard.

The IRS said it does not comment on lawsuits.