Comment to FEC: In the Wake of Supreme Court Decisions, Fix Disclosure and Coordination Rules, and Enforce the Law

On January 15, 2015, the Brennan Center submitted a comment to the Federal Election Commission urging the Commission to fix disclosure and coordination rules, and to enforce the law.

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January 15, 2015

Chair Ann M. Ravel
Vice Chairman Matthew S. Petersen
Federal Election Commission
999 E St. NW
Washington, DC 20463

Re:       FEC REG 2014–01, Aggregate Biennial Contribution Limits

Dear Chair Ravel and Vice Chairman Petersen:

The Brennan Center for Justice at NYU School of Law[1] respectfully submits this Comment in response to the Advance Notice of Proposed Rulemaking (the “ANPRM”) issued by the Federal Election Commission on October 17, 2014.[2] In addition to submitting this Comment, we respectfully request the opportunity to testify in person at the Commission’s February 11, 2015 public hearing.

We applaud the FEC for taking action in response to McCutcheon v. FEC.[3] It is important for the Commission to respond in a thoughtful, comprehensive manner to changes in campaign finance law, and the ANPRM is a step in the right direction. Giving the public the opportunity to speak fully and frankly with administrative decision makers, particularly in the electoral realm, is imperative to a healthy democracy.

In McCutcheon, the Supreme Court struck down the aggregate contribution limits in the Federal Election Campaign Act (“FECA”), which limited the total amount individual contributors could give to candidate and political party committees.[4] The Court found that such limits were not sufficiently tailored to preventing the reality or appearance of quid pro quo corruption.[5]

McCutcheon’s controlling plurality made clear, however, that it was not calling into question the validity of base limits on contributions to particular candidate or party committees, or the government’s legitimate interest in preventing circumvention of those limits. Rather, the plurality reasoned that other, less burdensome means exist by which the government can guard against circumvention, including restrictions on joint fundraising and earmarking of contributions, and the Commission’s anti-proliferation rules (through which it determines when certain committees are affiliated with one another).[6] The Court also strongly reaffirmed the importance of robust disclosure requirements, which help to inform voters and guard against “abuse of the campaign finance system.”[7]

On December 24, 2014, the Commission issued a final rule deleting the regulation that had implemented the aggregate limits and making certain other technical and conforming changes.[8] The ANPRM seeks comment on whether the Commission “should further modify its regulations or practices” in response to McCutcheon.[9]

While it would be premature at this stage to propose detailed regulatory changes, we do believe that there are a number of additional actions the Commission should take in the wake of McCutcheon and other Supreme Court cases over the last five years. We urge the Commission to:

• Take concrete steps to improve disclosure, including through long-delayed rulemakings and the full enforcement of federal political committee registration and reporting requirements;

• Update rules regulating coordinated communications and other in-kind contributions to take into account current campaign practices;

• Take other measures to prevent circumvention of the federal base contribution limits; and

• Consider additional ways to boost political participation through technological innovation.

 This does not represent an exhaustive list of recommended priorities, but a subset of what, in our view, are the most pressing concerns.

1. The Commission Should Take Concrete Steps to Improve Disclosure.

Disclosure requirements, as the Supreme Court has long recognized, help to protect the integrity of the democratic process. In Citizens United v. FEC, Justice Kennedy, writing for eight members of the Court, explained that disclosure “provid[es] the electorate with information about the sources of election-related spending,”[10] thereby “enabl[ing] the electorate to make informed decisions and give proper weight to different speakers and messages.”[11] Furthermore, while “disclosure requirements may burden the ability to speak. . . they impose no ceiling on campaign-related activities and do not prevent anyone from speaking.”[12] Accordingly, the Citizens United Court upheld the constitutionality of the disclosure and disclaimer requirements of the Bipartisan Campaign Reform Act of 2002 (“BCRA”).[13]

In McCutcheon, the Court reaffirmed the constitutionality of disclosure requirements, explaining that “disclosure of contributions minimizes the potential for abuse of the campaign finance system.”[14] Disclosure requirements “deter actual corruption and avoid the appearance of corruption by exposing large contributions and expenditures to the light of publicity.”[15]

Congress intended federal disclosure requirements to reach broadly, but they are increasingly ineffective. Since Citizens United, “dark money” from groups who do not disclose their donors has increased dramatically in federal elections. According to the Center for Responsive Politics, of the almost $2 billion in outside spending since 2010, at least $617 million—almost one third—has been dark.[16]

Critically, the vast majority of this spending is concentrated in the closest races. For example, the Brennan Center calculated that roughly 91% of the money spent in the 2014 senate races by groups that hid some or all of their donors went to the eleven most competitive contests.[17] And in those eleven contests, 59% of non-party outside spending came from groups that hid some or all of their donors.[18]

This cannot be what Congress intended, nor does it accord with the Court’s jurisprudence. We urge the Commission to take three key steps to fix the dark money problem.

1. The Commission Should Enforce Political Committee Registration and Reporting Requirements.

The Commission could go a long way toward solving the problem of dark money if it would simply adhere to its own longstanding approach to determining whether particular groups are required to comply with political committee registration and reporting obligations.

Originally, political committee status entailed being automatically subject to contribution limits, but after Citizens United and the decision of the Court of Appeals for the District of Columbia Circuit in SpeechNow.org v. FEC,[19] it carries only disclosure-related obligations. The D.C. Circuit described these obligations as “minimal,” and not “much of an additional burden.”[20] Nevertheless, they form the core of the entire federal disclosure regime.

FECA defines a political committee as an organization that receives contributions or makes expenditures over $1,000 during a calendar year.[21] In Buckley v. Valeo, the Court added the so-called “major purpose test,” which requires that an organization have the major purpose of supporting or opposing candidates for office.[22] While this determination is fairly straightforward for candidate and party committees, it can be more difficult for other types of election spenders.

In 2007, the Commission issued a detailed Supplemental Explanation and Justification (“the Supplemental E&J”) explaining how it would apply Buckley’s major purpose test to outside groups.[23]Among other things, the Supplemental E&J provided a non-exhaustive list of “campaign activities” that the Commission would consider in determining whether a group is a political committee—including “direct mail attacking or expressly advocating” a candidate’s defeat, “television advertising opposing” a candidate, “candidate research,” “polling” and “other spending . . . for public communications mentioning Federal candidates.”[24] Federal courts across the country have affirmed the constitutionality of the approach taken in the Supplemental E&J.[25]

Nevertheless, in recent years, the Commission itself has failed to enforce the letter and spirit of the Supplemental E&J’s guidance. Instead, contrary to the advice of the Commission’s own General Counsel,[26] it has been suggested by some Commissioners that the sole type of campaign activity relevant to whether an organization is a political committee consists of the organization’s “express advocacy” communications explicitly or unmistakably calling for the election or defeat of a candidate.[27] These communications must constitute at least 50% of a group’s spending total over an unspecified period of time; the Commission’s General Counsel suggested standardizing the relevant time period under consideration to the calendar year (consistent with the relevant provisions of FECA), but that proposal was rejected.[28]

Suffice it to say, we disagree with this new, curtailed application of the major purpose test. No aspect of this approach is constitutionally required. In fact, Citizens United itself expressly rejected the “contention that . . . disclosure requirements must be” limited to communications containing express advocacy or its functional equivalent.[29] For this and the many other reasons ably (and repeatedly) set forth by the Commission’s Office of General Counsel,[30] we urge the Commission to return to its previous longstanding approach to major purpose determinations.

2. The Commission Should Fix Its Rule Governing Disclosure of Independent Expenditures.

A second step the Commission can take to counter dark money is to finally fix its regulation governing disclosure by non-political committees who make “independent expenditures” (“IEs”), which by definition contain express advocacy or its functional equivalent.[31] Under the FECA, persons other than political committees who make at least $250 worth of IEs in a calendar year must file periodic reports disclosing, inter alia, the names of each contributor who “made a contribution in excess of $200 . . . for the purpose of furthering an independent expenditure.”[32] The plain text of the statute thus mandates disclosure of all contributors who fund IEs.

The Commission’s regulation, however, significantly narrows this requirement. It calls for disclosure only of donors who contributed more than $200 “for the purpose of furthering the reported independent expenditure.” [33] As others have argued, this regulation is “manifestly inconsistent with the statute.”[34] Since contributors almost never specify that they contributed to fund particular communications, the regulation has allowed non-political committees who make IEs to easily circumvent this key disclosure provision. As a result, hundreds of millions of dollars in IEs, constituting the vast majority of dark money expenditures in both the 2012 and 2014 election cycles, have been shrouded in secrecy.[35]

Not only has this problem gone uncorrected, the Commission has repeatedly declined even to approve an NPRM that would allow the public to weigh in on the issue.[36] We urge the Commission to commence a new rulemaking to address this problem.

3. The Commission Should Fix Its Rule Governing Disclosure of Electioneering Communications.

Finally, the Commission should also fix its rule governing disclosure of “electioneering communications” (“ECs”). ECs are broadcast, cable, or satellite communications referring to a candidate within thirty days of a primary election or sixty days of a general election and (except at the presidential level) targeting the candidate’s electorate.[37] BCRA requires disclosure of “all contributors who contributed an aggregate amount of $1,000 or more to the person making” the electioneering communication.[38] On its face, the provision is in no way limited to contributors who donated solely to fund particular communications or ECs generally—although organizations can avoid disclosing all of their non-political contributions by funding ECs through a segregated bank account.[39]

Once again, however, the Commission has greatly narrowed the statutory rule. Under its current rule, organizations that make electioneering communications, including dark money groups, must only disclose their underlying donors who gave their donations “for the purpose of furthering electioneering communications.”[40] A controlling bloc of Commissioners has interpreted this language to again require, as with IEs, only disclosure of donors who specifically earmarked their contributions to pay for particular ECs.[41] Once again, such a purpose requirement allows the vast majority of non-political committees who make ECs to evade meaningful disclosure.[42]

The Commission has repeatedly been asked to address this problem, but has declined even to allow public discussion.[43] We urge the Commission to address this issue as well through a new rulemaking.

2. The FEC Should Revamp Its Rules Governing Coordinated Communications and Other Types of In-Kind Contributions to Candidates.

Strong regulation of coordinated activity between candidates and outside spenders is essential to any effective campaign finance system.[44] In Buckley v. Valeo, the Supreme Court drew a clear line between limits on independent expenditures and limits on contributions to candidates. The Court reasoned that while limits on independent expenditures warrant strict constitutional scrutiny, contribution limits “entail[] only a marginal restriction” on First Amendment rights, and therefore merit less onerous judicial review.[45] Citizens United left this distinction undisturbed.[46] While McCutcheon invalidated aggregate contribution limits, the plurality too specifically disclaimed any need to “revisit Buckley’s distinction between contributions and independent expenditures and the corollary distinction in the applicable standards of review.”[47]

As the Buckley Court explained, third-party expenditures “coordinated” with a candidate can be “treated as contributions,” because “[t]he ultimate effect is the same as if the [spender] had contributed the dollar amount [of the expenditure] to the candidate.”[48] The Supreme Court has long made clear, moreover, that the legal definition of coordination need not entail actual “agreement or formal collaboration” between a candidate and an outside group.[49] “[E]xpenditures made after a ‘wink or nod,’” the Court has repeatedly observed, “will be ‘as useful to the candidate as cash.’”[50]

Nothing in the Court’s more recent jurisprudence disturbs this line of reasoning. If anything, in fact, the flood of outside spending that has taken place in the last five years necessitates a more robust regulatory approach to coordination than the Commission might previously have adopted.

Since Citizens United, super PACs and other outside groups have spent almost $2 billion on federal elections.[51] That is about two-and-a-half times the total spent from 1990 to 2008.[52] Outside spending almost tripled between the 2008 and 2012 presidential elections, more than quadrupled between the 2006 and 2010 midterm elections, and then almost doubled again between the 2010 and 2014 midterm elections.[53] Most of this spending has been concentrated in the most hotly contested races, in which outside groups now routinely outspend both candidates and parties.[54]

Moreover, such spending increasingly comes from groups devoted to electing a single candidate (sometimes called “buddy groups”)—often staffed by the candidate’s family, friends, or former staffers.[55] Buddy groups offer a convenient mechanism for maxed-out contributors to target particular races in exactly the same way as they can with direct contributions, resulting in exponentially greater corruption concerns.[56]

Too often, the FEC’s rules for coordinated communications do not adequately address this new political landscape. The Brennan Center recently made a number of recommendations for how policymakers can revamp their rules to take into account the reality of how campaigns are conducted today.[57] Implementation of these recommendations would, in our view, significantly improve the Commission’s approach to coordination.

Our specific suggestions for the FEC are the following:

1. The Commission Should Provide for Sensible “Cooling Off” Periods For Former Staff and Campaign Consultants.

Mandatory “cooling off” periods before which candidates’ staff and consultants can go to work for an outside group are a staple of coordination laws. Former staff and strategic consultants are often the best placed to know a candidate’s confidential plans and strategies.[58] Without periods of reasonable length or other alternative safeguards,[59] there is a high risk that outside spending will be tailored in ways that closely match the candidate’s needs, creating a heightened corruption risk.

The Commission’s current rules provide for a cooling off period for both former staff and consultants of only 120 days.[60] This brief period allows staffers to shift from a candidate’s campaign to an outside group during the same election cycle, enabling parallel campaigns that can work in tandem for maximum effect.[61] Other jurisdictions have adopted longer windows more likely to prevent this problem.[62] We recommend the Commission follow a similar approach.

2. The Commission Should Consider Candidate Fundraising for Outside Groups in Its Coordination Analysis.

In the wake of Citizens United, one of the most troubling new trends has been the explosion of candidate fundraising for outside groups that can raise unlimited funds, numerous instances of which have been documented at both the state and federal levels.[63] As the Minnesota Campaign Finance Board has explained, “fundraising for, or promotion of, an [outside group] constitutes cooperation that destroys the independence of any subsequent expenditures made . . . to affect the candidate’s election.”[64] According to one scholar, “a candidate who raises funds for a group by definition is coordinating fundraising strategy with that group.”[65] Especially where the group’s stated objective is to work for the candidate’s election (as is increasingly the case), candidate fundraising essentially “lets would-be donors and the world know that a donation to the [group] is just as good (or better, given the lack of contribution limits) as a donation to the candidate’s campaign.”[66]

Under the Commission’s current rules, candidate fundraising for super PACs and other outside groups is expressly permitted. According to Advisory Opinion 2011–12 (Majority PAC and House Majority PAC), “[f]ederal officeholders and candidates . . . may attend, speak at, or be featured guests at fundraisers for [political committees] at which unlimited individual, corporate, and labor organization contributions will be solicited . . . .”[67] The only restriction—that the candidate not violate the solicitation limit by personally asking for more than $5,000—is easily circumvented.

 To address the inherent quid pro quo corruption concerns that arise in connection with such spending, a growing number of jurisdictions treat candidate fundraising for an outside group as a presumptive indication, or at least evidence, that the group’s expenditures in support of the candidate are coordinated with him or her.[68] In our view, this is a sensible approach that the Commission too should follow.

3. The Commission Should Treat All Reproduction of Materials Made Available by the Candidate’s Campaign as a Type of In-Kind Contribution.

Reproduction of campaign materials is another common method that outside groups use to circumvent contribution limits, which is why it has long been treated as a type of contribution under federal law and the laws of many states.[69] Recently, however, many campaigns have sought to exploit a loophole in such laws by producing professional video footage and other images of candidates and putting these materials online for use by outside groups in their own advertisements (a tactic the press has dubbed “McConnelling,” because it was pioneered by the campaign of Senate Majority Leader Mitch McConnell).[70] Many candidates have provided raw material for ads to outside groups by simply posting them online in this manner.[71]

Republication of this sort provides a direct benefit to a candidate, no different than any other type of in-kind contribution. By making stock footage and other images available online for use by outside groups, campaigns are engaging in exactly the sort of “wink or nod” that is the essence of most coordination.

In our view, FECA’s existing republication provisions and Commission regulations already cover such conduct.[72] To the extent there is any confusion about the reach of the Commission’s regulations, however, we urge the Commission to clarify its rules accordingly.

4. The Commission Should Commit to Robust Enforcement.

Lastly, beyond any specific rule changes, the Commission must commit to robust enforcement of the rules already in place. To date, the Commission’s track record in this regard has not been encouraging.[73] We are, in fact, unaware of any significant penalties levied in recent years for coordination violations, which is remarkable given the amount of collaboration actually happening. We urge the Commission to adopt a new approach.

3. The Commission Should Take Other Steps to Prevent Circumvention of the Base Contribution Limits.

Apart from the matters described above, we urge the Commission to take other steps to prevent circumvention of the base contribution limits.

1. The Commission Should Continue to Enforce Reasonable Solicitation Restrictions.

Most importantly, we urge the Commission to continue imposing limits on solicitation of contributions above both FECA’s base and aggregate limits. We agree with the Commissioners who have argued that while McCutcheon struck down the aggregate limits themselves, the decision left FECA’s solicitation limits in place.[74] Consequently, candidates should not be allowed to solicit contributions for a joint fundraising committee in excess of the aggregate contribution limits, even if that joint fundraising committee can now accept contributions in excess of the aggregate contribution limits.[75]

Though the McCutcheon Court did not specifically reach the question,[76] the plurality approvingly cited Justice Kennedy’s McConnell concurrence which rejected a ban on soft money contributions to national parties while also approving a ban on candidate solicitations of such contributions.[77] As Justice Kennedy explained in McConnell, “The making of a solicited gift is a quid both to the recipient of the money and to the one who solicits the payment (by granting his request).”[78] Hence, FECA’s solicitation limits further the anticorruption interest and pass constitutional muster.[79]

To be sure, as discussed in Section 2(B) herein, solicitation limits of this sort are relatively easy to evade. The Commission may therefore wish to consider strong rules implementing these limits—including, for example, additional restrictions on joint fundraising activities. In the wake of McCutcheon, such activities have taken on a greater role in our elections.[80] The McCutcheon plurality suggested limiting the number of committees who can participate in a joint fundraising effort as a course of action available to Congress, [81] but we also believe the FECA does not prohibit the Commission from taking such action on its own. Doing so would further prevent the use of fundraising as a circumvention mechanism.

2. The Commission Should Robustly Enforce Its Earmarking and Affiliation Rules.

 Finally, while we recommend no changes to the Commission’s earmarking and affiliation rules at this time, we do urge the Commission to robustly enforce those rules.

We note in particular that while the Commission’s rules appear to define earmarking “broadly,” as the McCutcheon plurality observed,[82] the Commission has used a narrower definition of earmarking in enforcement actions. There, the Commission has considered funds to be earmarked “only when there is clear documented evidence of acts by donors that resulted in their funds being used as contributions.”[83] This interpretation of the rule encompasses only the most conspicuous of earmarks and creates an easily exploitable loophole. Indeed, this interpretation fails to reach the “implicit agreements” that the Supreme Court believes are “already prohibited by the earmarking rules.”[84] We question whether this approach is consistent with Congress’s broad directive that “all contributions made by a person, either directly or indirectly, on behalf of a particular candidate, including contributions which are in any way earmarked or otherwise directed through an intermediary or conduit to such candidate” are contributions from that person to the candidate.[85]

4. The Commission Should Take Other Steps to Enhance Political Participation Through Technology.

Finally, we encourage the Commission to consider additional measures to enhance political participation, particularly by small donors. For example, the Commission’s approval of text message contributions in 2012 was an important step in encouraging broader participation in our democracy.[86] As a result of the advisory opinion, donors collectively contributed about $1.2 million via text message in 2012.[87] Because contributions are capped at $50,[88] this means at least 24,000 people gave via text. In fact, Pew Research estimated that 10% of donors to presidential campaigns in 2012 did so via either text message or cell phone app.[89] Additionally, at least three states have approved of the use of text message contributions since the issuance of the Commission’s advisory opinion.[90] We urge the Commission to continue looking for additional means to foster technological innovation to boost participation without undermining existing rules.

* * * * * * *

A full and fair public debate is essential to a democratic society. Indeed, the First Amendment’s free speech guarantee is one of the most sacred rights enshrined in our constitution. But with federal election spending continuing to reach unprecedented levels, it is crucial that we have effective campaign finance regulation. Voters are entitled to know who is trying to influence their votes and, correspondingly, who is most likely to try to influence the votes of their representatives after the election. Contribution limits and other campaign finance laws must be scrupulously enforced to safeguard our government from corruption. We must ensure that our government works for all citizens rather than a select few.

The Supreme Court premised McCutcheon on vigorous rulemaking and enforcement by the FEC. We strongly urge the Federal Election Commission to honor the Court’s promise.

Respectfully submitted,

/s/

_______________

Daniel I. Weiner

David W. Earley

Democracy Program,

Brennan Center for Justice