Political Law Notes

DC Federal District Court Voids FEC Independent Expenditure Reporting Rule - Expands Donor Disclosure

Date: August 21, 2018

In an opinion released on August 3rd, US District Court Judge Beryl Howell greatly expanded the FEC donor disclosure reporting requirements for independent groups – like Section 501(4) and 501(c)(6) organizations – that sponsor independent expenditures and other candidate advocacy communications.  The court delayed the implementation of its ruling for 45 days to give the FEC time to draft interim rules.

The case, Citizens for Responsibility and Ethics in Washington v. FEC and Crossroad Grassroots Policy Strategies, concerns a 38 year-old FEC rule requiring an organization not registered with the FEC to include in its independent expenditure reports only the names of donors who contribute more than $200 for the specific purpose of furthering the communication that is the subject of report.  The court found this rule to be impermissibly narrow and contrary to the clear wording of the statute.  The statute, by contrast, mandates the disclosure of donors who give for the purpose of furthering “an independent expenditure” – which the court interpreted as meaning any independent expenditure and not just the specific communication covered by the report. 

For years, many independent groups, such as 501(c)(4) and 501(c)(6) organizations, have not asked donors to finance specific candidate advocacy communications or shared the contents of proposed communications to avoid having to disclose the identity of their donors under the existing rule.  Under the court ruling, however, donors whose funds are used to support any candidate advocacy communications sponsored by the group must be disclosed as long as the donor knows that the donation may somehow be used for independent expenditures (such as by being shown examples of express advocacy videos and ads).  The decision did not stop there, however.   

Judge Howell also ruled that the FEC regulation completely overlooked another disclosure obligation applicable to these non-FEC registered organizations.  The campaign finance law requires organizations supporting independent expenditures to disclose the identity of its contributors who give more than $250 to support its political purposes of influencing elections generally, regardless of whether they intend to help finance candidate advocacy communications.  This could cover, for example, donors whose contributions are used by the organization to support a separate Super PAC or to fund partisan voter registration or get out the vote drives.  Disclosure would be required even if funds are contributed for the general purposes of the organization.  

The current FEC rules do not require any such disclosure.  The ruling raises the possibility that virtually any contributor to an independent group that engages in political activities or supports Super PACs or other organizations that do so may have to be identified to the FEC. 

Judge Howell’s decision raises a number of near-term and long-range questions.  The immediate question is whether the FEC or Crossroads Grassroots Policy Strategies will appeal the decision – a result that seems highly likely.  In that case, will Judge Howell’s decision be stayed over the next few months, which includes the 2018 pre-election run-up?  Given the courts’ historical reticence to change campaign finance rules close to an election, it would not be unusual if the decision is stayed while the appeal is pending.  

If the decision is not stayed, will the FEC Commissioners be able to agree on new regulations?  With only four Commissioners and two vacant seats, a stalemate is a real possibility.  In that event, independent groups may be left with just the statute and the court’s ruling for guidance.  

If Judge Howell’s ruling is ultimately upheld, it is sure to affect the decisions of persons who consider supporting an independent advocacy group’s activities – whether by helping finance candidate communications or underwriting other political activities.  Still, will donors curtail their financial support of these groups or will they find other avenues for redirecting their support or just be willing to have their names disclosed?

For the time being, independent groups and their donors should be cautious and consult counsel so that they understand the impact of the decision on their political activities and their disclosure obligations.