Thanks in no small part to the efforts of comedian Stephen Colbert, the issues around Super PACs and the campaign finance regime in this country have been elevated in the national consciousness. People following campaign finance are aware of the now famous 2010 Supreme Court decision in Citizens United v. Federal Election Commission (FEC), which held that corporate and union political speech, in the form of spending on independent and electioneering communications, is protected by the First Amendment. However, there is still considerable misunderstanding about how the system works and why corporate and union donations remain largely undisclosed. This post will attempt to briefly explain the main forces at work in keeping these donations in the shadows and the current most viable legislative fix, the Disclosure of Information on Spending on Campaigns Leads to Open and Secure Elections (DISCLOSE) Act of 2012 recently reintroduced in the House. Super PACs are among the hottest discussion topics this campaign season and are used as shorthand for the problem that ail our campaign finance system, but, in fact, the issues around Super PACs are not quite so simple. Super PACs emerged not directly from the Citizens United decision but from a subsequent DC Circuit court case called SpeechNow v. FEC. In that case, the court held that corporations and unions were permitted to make unlimited donations to support political committees making so-called independent expenditures – political spending not coordinated with a campaign. After that decision the FEC began permitting independent expenditure political action committees (IE-PACs) which were soon dubbed Super PACs.
In terms of disclosure, super PACs are not much different from the PACs that existed prior to Citizens United. As discussed last year on this blog and other places, the Justices in Citizens United actually found that the disclosure requirements in the Bipartisan Campaign Finance Reform Act to be crucial. The Court went so far as to say, “[the] prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are “ ‘in the pocket’ of so-called moneyed interests.” Citizens United v. FEC, 130 S. Ct. 876, 916 (2010). With that in mind, super PACs were required to file either monthly or quarterly (PAC’s choice) reports with the FEC detailing information about any contributor of more than $200 and itemized disbursements of over $200.
With the ban on corporate giving lifted by Citizens United and the vehicle to make those contributions created by SpeechNow (and subsequent FEC Advisory Opinions) one might have thought that the corporate money would have begun to pour directly into these new super PACs. However, that has not been the case. Many corporations are quite averse to having their brand tied to strong political positions for fear of alienating potential customers. Fortunately for them, the Internal Revenue Service (IRS) code had a ready-made loophole to hide those donations, just waiting to be exploited.