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U.S. Supreme Court Strikes Down Bans on Corporate Political Spending

Government Affairs Compliance Law Update Michael M. Grebe, Jeff Peelen

The Supreme Court, in its much publicized and anticipated decision of the Citizens United v. Federal Election Commission case, ruled that the government may not ban independent political spending by corporations. The ruling struck down key provisions of the McCain-Feingold campaign finance law, including provisions that had, until now, prevented independent political groups from running advertisements within 30 days of a primary election or 60 days of a general election. Despite calls in Congress for an immediate counter response, an effective legislative move seems unlikely, given that the Court based its holding on First Amendment Free Speech grounds. In fact, given the basis for the decision, Citizens United calls into question the constitutionality of a number of state "no-corporate-spending" statutes as well.

What Does Citizens United Allow Corporations To Do That They Could Not Do Before?

Prior to Citizens United, corporations had only a limited ability to participate in the political arena. They were not allowed to contribute directly to candidates or their campaigns, nor were they allowed to run advertisements supporting one candidate or another. Even contributing to "issue" campaigns, though allowed, raised a plethora of issues many considered worth avoiding. Most corporations' political involvement was limited to indirectly administering and promoting Political Action Committees ("PACs"), and they were prohibited from contributing to such PACs directly.

Citizens United removed many of these previously existing limitations and simplified the rules governing corporate political spending. To be clear, corporations are still not allowed to contribute directly to candidates' campaigns, nor are they allowed to contribute or spend in a way that is coordinated with a candidate or his party. However, as long as their political spending is not in coordination with a candidate or party, corporations may now spend what they wish in support of whatever cause they like.

The key limiter to future corporate political spending will be the "coordination" inquiry. For instance, ABC Corp. may choose to spend $1 million, or even $10 million, in support of congressional candidate John Smith. It may run advertisements directly for Mr. Smith, or, because the Court upheld disclaimer and disclosure laws, it may choose to contribute freely to trade associations and outside interest groups, therefore enabling advertisement on behalf of Mr. Smith while avoiding unnecessary disclosure. However, if ABC Corp. contacts (or is contacted by) John Smith's campaign, and discusses best methods for advertising, it may find itself facing serious consequences. Thus, all corporate political spending should still be measured to determine whether it could be viewed as being "in coordination" with a political candidate or party.

What Citizens United Really Changes For Corporations

In some respects, the Court's decision opens the floodgates; corporations will see an increasing flow of solicitations for donations from independent political groups. Also, some believe Citizens United will result in a massive increase in corporate (and likely union) political spending. But a deeper look reveals such radical changes in corporate spending unlikely. Few corporations are looking for ways to spend more money right now, and the Court's decision does nothing to remove the risk of offending the public if a corporation is perceived as "too political."

Ultimately, the Citizens United decision most favors those corporations with a concrete political goal in mind, especially in those industries which have historically been targeted by specific and unfriendly legislative restrictions. For such corporations, long hamstrung from participating in the political arena by the unconstitutional campaign finance reform laws, the choice whether to spend on politics is squarely back on the shoulders of the corporations themselves.

If you would like additional information on how the Citizens United decision will affect you or your business, please contact a member of the Quarles & Brady Government Affairs Compliance group.