Super PACs and Financing the 2012 Presidential Election

Abstract

Political Action Committees Super PACs have little resemblance to conventional political action committees (PACs) that have existed since the 1940’s. Labor unions were first to establish (PACs) as “auxiliary” political organizations in response to provisions in the Smith-Connolly Act of 1943 and Taft-Hartley Act of 1947 that prohibited unions from contributing money from their own treasuries to political candidates in federal elections. Business organizations, which had been subjected to a similar prohibition since the 1907 Tillman Act and Corrupt Practices Act of 1925, formed their own PACs in the 1960s. The Federal Election Campaign Act of 1971 required all PACs to register with the newly created Federal Election Commission (FEC) and file quarterly disclosure reports on contributions and expenditures. Amendments passed in 1974 limited the maximum contribution that a PAC could make to a candidate and that an individual can make to a PAC to $5,000 per election.6 Political action committees also have been able to participate in the electoral process by spending an unlimited amount of money on activities that target specific candidates but are conducted independent of any of the candidates seeking office. Independent expenditures are defined as expenditures for television advertisements that expressly advocate the election or defeat of any candidate and are not produced “in cooperation, consultation, or concert with, or at the request or suggestion of, a candidate, a candidate's authorized committee, or their agents, or a political party committee or its agents.” Committees making independent expenditures must disclose all contributions that are in excess of $200 and file itemized reports of all disbursements.7 Independent Expenditures-Only Committees What are regularly referred to by today’s election professionals and analysts as super PACs are actually a set of political organizations designated by federal election law as independent expenditure-only committees. Unlike the traditional PAC, these committees do not contribute money to political candidates, political parties, or other political committees. Super PACs may raise unlimited sums of money from corporations, unions, associations and individuals and then spend unlimited sums of money on television advertisements and other electioneering communications to expressly advocate for or against a political candidate. Super PACs must report the sources and dollar amounts of all contributions and an itemized list of expenditures to the FEC on either a monthly or quarterly basis. Whereas political action committees are legislative creations, super PACs owe their existence to rulings from two recent federal court decisions. The process began with the Supreme Court’s 5-4 decision in Citizens United v. Federal Election Commission on January 21, 2010. The Court’s ruling invalidated prohibitions on corporate and union treasury funding of independent expenditures (i.e., advertisements that expressly advocate election or defeat of a candidate) and electioneering communications (i.e., advertisements that refer to candidates) that had been in place since the 1974 Federal Election Campaign Act.8 Although the ban on direct contributions to candidates remained in place, unions and corporations seemed to be given more freedom to support and oppose candidates for office. More important than the Supreme Court’s ruling in Citizens United, however, was its rationale. The Court already had established in Buckley v. Valeo (1976) that communications for political was protected political speech, but that preventing corruption or the appearance of corruption was a sufficiently important governmental interest that would outweigh an individual’s First Amendment interests. In the case of restrictions on independent expenditures, the Court ruled that the government has no anti-corruption interest in express political when expenditures are independent from candidates and uncoordinated with their campaigns. The absence of coordination makes it unlikely that candidates have promised favorable treatment or other improper commitments as a quid pro quo to individuals or associations making the expenditures.9 In Citizens United, the Court simply extended this reasoning to unions and corporations. In neither the Buckley or Citizens United decisions did the Supreme Court strike down contribution limits to candidates or political action committees. The Court reasoned that there was a sufficient governmental interest in imposing contribution limits because there at least would be an appearance of corruption resulting from large individual financial contributions and that limits only marginally restrict the contributor's ability to engage in political expression. The U.S. Court of Appeals for the District of Columbia was faced with a case in which a political committee believed that contributions limits did not apply in their situation since they did not make any direct contributions to candidates. The Appellate Court agreed and in SpeechNow.org v. FEC reasoned that if the Supreme Court had ruled that there was no appearance of corruption in the case of independent expenditures, then the practice of contributions to committees that only spend on independent expenditures and make no direct contributions to candidates or PACs also cannot be considered corrupt. The Appellate Court determined, however, that there was a sufficient important governmental interest to require SpeechNow.org to organize and report to the FEC as a political committee and to adhere to the same disclosure requirements as PACs that make contributions to candidates.10 Tax-Exempt Super PACs Non-profit, tax-exempt “social welfare organization” committees also are permitted to raise unlimited sums of money from donors with no contribution limits and cannot be limited in how much money they spend on electioneering communications. While also referred to as super PACs in the news media because there are virtually no limits on contributions and expenditures, these committees are different in that they are authorized by Section 501(c)(4) of the U.S. Tax Code to promote the social welfare of the public. Industry associations are authorized to form similar organizations to promote their members’ interests by Section 501(c)(6). Labor unions are authorized under Section 501(c)(5). All three types of 501(c)s are permitted to engage in political activities, but these activities cannot be their primary purpose. Section 501(c) organizations are prohibited by federal law, moreover, from making contributions to presidential and congressional candidates. But unlike super PACs, the majority of electioneering communications of 501(c)s cannot explicitly advocate for or against a candidate. In addition, 501(c)s are not required to disclose the source of their contributions and their expenditures.11 Another way for interest groups to finance substantial amounts of electioneering communications is to organize a committee under Section 527 of the Tax Code. Similar to 501(c)s, Section 527 organizations also are tax-exempt, but their primary mission is to influence elections. Section 527 organizations can receive unlimited amounts of “soft money” to fund voter mobilization efforts, issue advocacy, and other activities that do not constitute express advocacy. Unlike 501(c)s, 527s must disclose all contributions and expenditures to the Internal Revenue Service and thus do not provide the anonymity that contributing to a 501(c) provides.12 But the advantage is that their money can be used solely for partisan purposes as long as it does not cross the line into express advocacy. The Bipartisan Campaign Reform Act of 2002 (BCRA) prohibited PACs and non-profits organizations from airing political advertisements in the 60-day period prior to an election. This prohibition was not only for “express advocacy ads but also for “issue ads,” which BCRA’s authors characterized as “sham issue ads” since their clear purpose is to affect an election even though they refrain from explicitly endorsing or opposing a candidate. Wisconsin Right to Life (WRTL), a nonprofit political corporation, challenged this provision of BCRA by intending to run advertisements during the 2004 election encouraging viewers to contact the state’s two U.S. Senators and tell them to oppose filibusters of judicial nominees. In FEC v. Wisconsin Right to Life, the Supreme Court sided with WRTL, finding that their ads were genuine issue ads and gave the FEC a very narrow standard for designating an ad as the equivalent to express advocacy: “only if the ad is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”13 The implication of WTRL in combination with Citizens United and FreeSpeechNow.org was that non-profit organizations and political committees that did not make contributions to political candidates could not be limited by how much money they spent to influence an election. Moreover, there were no restrictions on where they could receive contributions and how large those contributions could be. It was just a matter of time before candidates and political activists would realize that the unlimited potential of super PACs for financing campaign communication and mobilization.