January 22, 2010Client Alert

Citizens United v. Federal Elections Commission, U.S. Supreme Court No. 08-205

On Wednesday, the U.S. Supreme Court announced a sweeping change to America’s campaign finance laws – corporations, unions and associations will now be able to spend money directly from their general funds on broadcast, cable and satellite ads that advocate for, or against candidates. Relying on the First Amendment and a long history of free speech protections, the Court held that the First Amendment bars any restriction on the amount a corporation may spend on a political race. The Court held provisions of the McCain-Feingold campaign finance law invalid.

The Citizens United case arose during the 2008 presidential campaign when a non-profit corporation (funded by for-profit companies) sought to distribute a film attacking Hillary Clinton. Believing they might run afoul of civil and criminal federal campaign law restrictions, Citizens United sought a ruling that their activities were not covered by the law. The District Court and Court of Appeals both held that the activities were covered by the restrictions and held that those restrictions were valid. The Supreme Court reversed those rulings.

It is often said a case is strictly limited to its facts. While that is generally correct, in First Amendment matters, a Supreme Court decision is meant to have broad application. Free speech decisions, like Citizens United, are issued to avoid chilling future speech. The Supreme Court was well aware of the impact of this lengthy decision – more than 180 pages.

Citizens United’s precise holding, that the federal restrictions on corporate funding of express advocacy are barred by the First Amendment, means that a corporation, or union, or groups of corporations and unions, may use their funds to “expressly advocate” for a candidate’s election of defeat. Importantly, however, there are clear limitations to this ruling. For example, the Court appeared to approve existing restrictions on corporate donations directly to candidates, and it explicitly approved requirements that the source of funds be disclosed and that expenditures be reported. Moreover, while a corporation or union may seek to publish its views as aggressively as it may choose for or against a particular candidate, that activity must not be “coordinated” with the candidate in any way. Laws expressly prohibit such coordinated expenditures, and the Supreme Court acknowledged that the government may restrict both direct donations by corporations to candidates and may bar coordinated expenses with the candidate.

The Citizens United case can potentially have a dramatic impact on future elections. Corporate owners of every type may now utilize those corporate resources to advocate directly for the election or defeat of candidates. While a corporation may fully participate in the electoral process, if a corporation chooses to expressly advocate for or against a candidate, that corporation may be required to file reports with the state or federal government acknowledging that participation and listing expenditures. It is important to understand those State and Federal requirements, in advance. A corporation should consult with appropriate counsel to determine the reporting requirements and may want to consider using that counsel in filing required reports. Michael Best has a well-known practice that addresses tax issues, campaign finance law, free speech, Constitutional Law and regulatory matters. We regularly assists clients throughout the nation on those matters.

If you have any questions, you may contact one of the authors directly, and we look forward to working with our clients to assure their effective participation in future elections.

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