The Supreme Court Overturns Federal Prohibition Against Corporate Political Expenditures
On January 21, 2010, the Supreme Court issued its much-anticipated decision in Citizens United v. Federal Election Commission (No. 08-205), in which the court overturned precedent and ruled that the First Amendment’s protection for free speech protects corporations and unions to the same extent that it protects individuals, at least with respect to the right to sponsor independent advertisements supporting or criticizing political candidates. Specifically, the court declared unconstitutional a portion of the Bipartisan Campaign Reform Act of 2002 (also known as the McCain-Feingold Act of 2002) that prohibited corporations and unions from using their general treasury funds to make independent expenditures on advertisements supporting or criticizing candidates for federal office within a prescribed period of time prior to a primary or general election. The court’s decision frees corporations to directly fund such “electioneering communications,” but the court did not displace other provisions of the legislation regarding disclosure of corporate donors or the identity of the sponsors of an advertisement. A copy of the Citizens United opinion is available here.
The case arose from Citizens United’s release of a documentary critical of then-presidential candidate Hillary Clinton. Citizens United, a nonprofit corporation, intended to broadcast the program on television within 30 days of presidential primary elections. Because airing the movie within 30 days of a federal primary election would have run afoul of the federal prohibition against “electioneering communications” paid for by corporate or union general treasury funds, Citizens United filed suit to secure a judicial order that the prohibition was unconstitutional. The Supreme Court ruled in favor of Citizens United on that point, holding the prohibition to be an unconstitutional infringement of the free speech rights of corporations and unions.
The court’s decision in Citizens United is a significant victory for unions, businesses and trade associations as it allows such entities to make “independent expenditures” supporting or criticizing candidates for federal office. And while Citizens United spoke only to the unconstitutionality of federal prohibitions on independent expenditures, the decision casts severe doubts upon the constitutionality of similar state-law prohibitions (even while state officials already have issued statements declaring their intent to enforce state regulations until ordered otherwise).
That said, Citizens United does not eliminate all restrictions on a corporation’s or union’s political expenditures:
- Corporations and unions still may not make direct contributions to candidates or political parties, including in-kind contributions. Thus, corporate and union PACs will continue to have a role in the federal political process.
- Corporations and unions may not coordinate their spending with candidates or political parties. Corporations and unions wishing to place political advertisements should be careful to ensure that there is no “coordination” (a term that the Federal Election Commission has defined broadly) with candidates or political parties.
- Citizens United expressly preserved federal laws requiring corporations spending more than $10,000 per year on independent advertisements to disclose the names of donors, and laws requiring each advertisement to clearly identify its sponsor.
- Citizens United does not affect I.R.S. regulations limiting political activities by tax-favored charitable organizations. Thus, 501(c)(3) organizations will not be significantly affected by Citizens United.
- Citizens United does not affect the ban on state and federal contributions and expenditures by foreign nationals.
Because of Citizens United’s substantial modification of federal election law, the Federal Election Commission may promulgate new rules regulating corporate or union political activities. Mere hours after the Supreme Court issued Citizens United, the Commission issued a statement declaring that it “is considering the impact of the opinion on its existing regulations, as well as its ongoing enforcement processes, and will be providing guidance to the public as soon as possible regarding what steps will be taken to comply fully with the opinion.” There are a number of unresolved issues and questions raised by the opinion; corporations wishing to make independent expenditures allowed by Citizens United should consult with counsel before doing so.
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