Is it campaign finance reform, or yet another threat of harm to First Amendment rights affecting donors and tax-exempt organizations? This spring, the U.S. House of Representatives passed an “omnibus” campaign finance bill called “For the People Act,” (H.R. 1) which addresses a wide range of election and related matters. Not a fan, Senate Majority Leader McConnell dubbed the bill, “The Democrat Politician Protection Act”, and vowed it will never pass the Senate. The Act expressly excludes Section 501(c)(3) public charities from its donor disclosure and reporting requirements, but not Section 501(c)(4) social welfare or other tax-exempt organizations. While the proposed legislation likely will go nowhere in the Senate, it warrants notable mention in the following ways.
New Requirements Under H.R. 1
Of key importance, H.R. 1 would create a new category of regulated speech focusing on speech that “promotes,” “attacks,” “supports,” or “opposes” (“PASO”) candidates or elected officials. Generally, campaign finance laws affect only people running for office. Why include elected officials too? Are all elected officials now presumed to be running for reelection, at all times? This proposed expansion could have significant ramifications for nonprofit organizations that criticize or approve of elected officials’ stances and activities, in connection with nonprofits’ advocacy to promote their mission.
In addition, H.R. 1 would require financial reports and public donor disclosures for covered organizations’ expenditures and advertisements involving PASO language. This requirement builds on PASO’s expanded speech definition. In particular, Section 4111’s “Reporting of Campaign-Related Disbursements” requirement calls for any “covered organization” making “campaign-related disbursements” aggregating more than $10,000 in a 2-year election reporting cycle to file FEC statements containing a list of persons in control of the organization, the amounts of disbursements over $1000 and their recipients, candidates’ name, the organization’s position for or against such candidate, and identification of donors giving more than $10,000 during an election cycle. H.R. 1 also would require groups making PASO ads (and other campaign-related disbursements) to disclose their donors of $10,000 or more in the ad itself, with differing disclosure standards for video and audio formats.
Notably, H.R. 1 contains an exception to the requirements for disclosing donors’ names and addresses “if the inclusion of the information would subject the person to serious threats, harassment, or reprisals.” However, H.R. 1 contains no guidance or other language to determine how this exception should be interpreted or applied. For that reason, such exception may be defined based on experience of actual threats and reprisals. In other words . . . too late.
H.R. 1 would also expand the ban on foreign nationals contributing to or spending on elections, which is a subject of endless media scrutiny these days. Other notable provisions include making Election Day a federal holiday, substantial requirements for state regulation of elections, felons’ right to vote upon release from prison, and the requirement for Presidential and Vice Presidential candidates to submit 10 years of tax returns.
Questions for H.R. 1 and Beyond
To the extent that H.R. 1 may portend a sign of things to come (especially if political winds were to shift in the Senate), its definitions and requirements create numerous problems and leave many questions unanswered. Among them are the following:
1) How would this proposed “PASO” category of communications (those that promote, attack, support, or oppose) candidates and officials be applied - for “political campaign activity,” “lobbying,” or ‘issue advocacy” too? Just for Section 501(c)(4) organizations only, or for Section 501(c)(3) public charities too?
2) How would the FEC’s interpretation affect the IRS and its own regulation of politically tinged speech? And how do such government interpretations square with state Attorney Generals’ increasing interest in donor disclosures (e.g., in California, New York, and as now proposed in New Jersey)?
3) Who is a “clearly identified candidate”? Are all elected officials presumed to be running for re-election and therefore “candidates”? If so, most any advertisement or statement expressing opposition or support for elected officials or their positions could be considered a “campaign-related disbursement” subject to regulation and disclosure.
4) How would the exception for disclosures that subject donors to “serious threats, harassment, or reprisals” be applied? Such matters of serious concern were most recently rejected by the federal Court of Appeals for the Ninth Circuit.
5) How will our courts react to resulting free speech, donor privacy, and freedom of association challenges, if H.R. 1 or other similar legislation is passed, and particularly within our increasingly polarized political climate? As with past campaign finance laws, constitutional challenges most certainly will arise arguing against overbroad regulation of speech and forced disclosure of donor information.
6) Aside from First Amendment concerns, H.R. 1’s proposed election reforms at face value violate numerous principles of federalism and will likely be challenged by state governments as infringements on their rights to govern and conduct elections. How might courts rule on those issues?
Given H.R. 1’s lack of clarity, the extent to which PASO-type communications may fall within regulated parameters – or not – seems inscrutable. Such uncertainty, along with the proposed mandatory donor disclosures and government reporting, would likely inhibit (or “chill”) advocacy efforts of 501(c)(4) and other affected organizations. As a result, they could well face reduced contributions from concerned donors and pressure to decrease such efforts, along with increased costs for legal counsel and compliance efforts.
H.R. 1 thus could result in a dramatic shift in how affected organizations conduct their affairs. On the practical side, it has virtually no chance of being enacted into law during the 116th Congress, which lasts through December 2020. If the Democrats were to control both Houses of Congress and the Presidency starting in 2021 or sometime after that, H.R. 1 or similar legislation may have a chance. But until those stars align, a Republican Majority Leader in the Senate will prevent it from passing, and a Republican President will almost certainly veto it.
Nevertheless, such proposed legislation bears close watching as a harbinger of further governmental efforts regarding election laws, donor disclosure requirements, and resulting implications for tax-exempt organizations.