SENATE DEMOCRATS UNVEIL LEGISLATION TO LIMIT FALLOUT FROM SUPREME COURT RULING THAT ALLOWS UNLIMITED SPECIAL-INTEREST SPENDING ON ELECTIONS—ANNOUNCE PLAN FOR SENATE PASSAGE BY JULY 4
DISCLOSE Act Will Require All Organizations Making Political Expenditures To Make Public Their Donors And Appear On Camera To Stand By Their Ads
Legislation Also Bans Foreign-Controlled Corporations, Government Contractors from Making Political Expenditures
Bill Was Developed Together With Obama Administration; Van Hollen, Castle To Introduce House Version Later Today
WASHINGTON, DC—U.S. Senators Charles E. Schumer (D-NY), Russ Feingold (D-WI), Ron Wyden (D-OR), Evan Bayh (D-IN) and Al Franken (D-MN) announced new legislation Thursday to blunt the harmful impacts from the Supreme Court’s decision allowing corporations and other special interests to spend unlimited sums to influence elections. The lawmakers said their goal is for the Senate to pass the new measure by July 4 so the law can take effect in time for the 2010 midterm elections.
The legislation is a response to the Court’s ruling in the Citizens United case last January. That decision overturned a decades-old law banning political expenditures by corporate interests. The new Senate legislation would partly restore those limits – by barring foreign-controlled corporations, government contractors and companies that have received government assistance from making political expenditures – and also require corporations, unions, and other organizations that make political expenditures to disclose their donors and stand by their ads.
The legislation is dubbed the “Democracy Is Strengthened by Casting Light On Spending in Elections” Act, or The DISCLOSE Act.
Senator Schumer said: “At a time when the public's fears about the influence of special interests were already high, the Court’s decision stacks the deck against the average American even more. Our bill will follow the money. In cases where corporations try to mask their activities through shadow groups, we drill down so that ultimate funder of the expenditure is disclosed. If we don’t act quickly to confront this ruling, we will have let the Supreme Court predetermine the outcome of next November’s elections. It won’t be Republicans or Democrats; it will be Corporate America and other special interests.”
Senator Feingold said: “The Supreme Court’s decision in Citizens United was a tragic error. While the core of the McCain-Feingold law was left intact, the results of the decision are far reaching, giving big corporations greater power to sway elections and drown out the voices of average Americans. While no bill can reverse the Court’s mistake, we need to make sure that the public can follow the money and see exactly who is behind the onslaught of political advertising that the decision has unleashed. That is why this bill is so important.”
Senator Wyden said: "I wish Congress didn't have to take action to ensure that a citizen's voice doesn't get buried by new and larger mountains of corporate cash; but that is what our legislation will do. If the Supreme Court wants to treat corporations as individuals then we will hold those entities to the same standards of accountability that we do individuals, which means requiring that CEO's, labor leaders and even political consultants stand by their ads."
Senator Bayh said: "By opening the floodgates to unlimited spending by special interests, this Supreme Court decision has made it even more difficult to achieve the principled compromise that our country so desperately needs at this moment in time. The threat of unlimited amounts of negative advertising from special interest groups will only make lawmakers more beholden to the most ideological and partisan members of their party and more afraid of violating party orthodoxies. If fundraising is constantly on members’ minds, it’s difficult for policy compromise to trump political calculation. This legislation is needed to prevent an already bad campaign finance system from getting even worse."
Senator Franken said: “Citizens United was an incredible act of judicial activism. It turned back a century of federal law, and it nullified Minnesota’s twenty-year-old ban on corporate spending in elections. The DISCLOSE Act will make sure that voters and shareholders know who is funding election advertising. My provisions make sure that American-based subsidiaries controlled by foreign companies or governments won’t ever spend money on Minnesota or federal elections. Minnesota’s elections should be controlled by Minnesotans.”
Under the senators’ proposal, the heads of any organization sponsoring an ad—including corporate CEOs—would be required to appear during the ad, as is currently required of candidates for federal office. In cases where special interests funnel their money into shell groups, the top five organizations that have donated to the group would have to be identified on screen during any ad sponsored by that group. The CEO of the group’s top funder for that particular advertisement would also be required to appear on screen to deliver a “stand by your ad” disclaimer.
Also, the bill would effectively require, for the first time, all corporations and advocacy groups that make political expenditures to establish easy-to-track campaign accounts. All donations to these accounts that exceed $1,000—as well as all expenditures funded through these accounts—would be reported within 24 hours to the Federal Election Commission once the money is spent, as well as to the public on the organization’s website, and to company shareholders in their corporate filing statements. If a company or organization did not wish to establish these transparent accounts, it would be required to disclose all its donors, not just those whose contributions are earmarked for political activities.
The legislation will also strengthen a candidate’s ability to respond to corporate attack ads by ensuring they can purchase air time at the lowest possible rate in the same media markets where these attacks ads are airing. The bill would also make sure that private corporations don’t coordinate their political activities with candidates.
The legislation was developed together with the Obama administration and House leaders like U.S. Rep. Chris Van Hollen (D-MD). Van Hollen was expected to introduce the House version of the DISCLOSE Act later today with Republican cosponsors.
A section-by-section summary of the legislation appears below.
SUMMARY OF CITIZENS UNITED LEGISLATION
TITLE I – REGULATION OF CERTAIN POLITICAL SPENDING
Sec. 101. BAN PAY-TO-PLAY
· Prevent Government Contractors from Spending Money on Elections. Government contractors would be barred from making campaign-related expenditures, defined to include independent expenditures and electioneering communications. This is an extension of an existing ban on contributions made by government contractors. Before Citizens United, corporations could not make such campaign-related expenditures. A $50,000 contract threshold will be included to exempt small government contractors.
· Prevent Corporate Beneficiaries of TARP from Spending Money on Elections.Corporations that received bailout funding from the federal government should not be permitted to use taxpayer money to influence elections. This section would prohibit bailout beneficiaries from making campaign-related expenditures. Once that money is repaid, however, the restrictions would be lifted.
Sec. 102. PREVENT FOREIGN INFLUENCE IN U.S. ELECTIONS
· While foreign nationals, including foreign corporations (those incorporated overseas), are banned from making contributions or expenditures to influence U.S. elections, the opinion in Citizens United created a loophole for spending by domestic corporations controlled by foreign nationals. To close the loophole, the legislation extends the existing prohibition on contributions and expenditures by foreign nationals to include domestic corporations under the following circumstances:
1. If a foreign national owns 20% or more of voting shares in the corporation, which is modeled after the control test in many states, including Delaware;
2. If a majority of the board of directors are foreign nationals;
3. If one or more foreign nationals have the power to direct, dictate, or control the decision-making of the U.S. subsidiary; or
4. If one or more foreign nationals have the power to direct, dictate, or control the activities with respect to federal, state or local elections.
Sec. 103. PREVENT ORGANIZATIONS FROM COORDINATING THEIR ACTIVITIES WITH CANDIDATES AND PARTIES
· The legislation ensures that corporations and unions are not allowed to coordinate campaign-related expenditures with candidates and parties in violation of rules that require these expenditures to be independent.
· Current FEC rules bar corporations and unions from coordinating with congressional candidates and parties about ads that refer to the candidate and are distributed within 90 days of a primary election or within 90 days of the general election. For Presidential contests, current FEC rules prohibit coordination on ads that reference a presidential candidate in the period beginning 120 days before a state's Presidential primary election and continuing in that state through the general election. Outside these time frames, current law prohibits coordination only on ads that expressly advocate the election or defeat of a candidate.
· This legislation would do the following:
· For House and Senate races, the legislation would ban coordination between a corporation or union and the candidate on ads referencing a Congressional candidate in the time period starting 90 days before the primaryand continuing through the generalelection. For presidential campaigns, the legislation would ban coordination between a corporation or union and the candidate on ads referencing a Presidential or Vice Presidential candidate in the time period starting 120 days before the first presidential primary and continuing through the general election.
Sec. 104. POLITICAL PARTY COMMUNICATIONS
· The legislation provides that any payment by a political party committee for the direct costs of an ad or other communication made on behalf of a candidate affiliated with the party is treated as a contribution to the candidate only if the communication is directed or controlled by the candidate.
· Party-paid communications that are not directed or controlled by the candidate are not subject to limits on the party’s contributions or expenditures.
TITLE II – PROMOTING EFFECTIVE DISCLOSURE OF CAMPAIGN-RELATED ACTIVITY
The legislation ensures that the public will have full and timely disclosure of campaign-related expenditures (both electioneering communications and public independent expenditures) made by covered organizations (corporations, unions, section 501(c)(4), (5), and (6) organizations and section 527 organizations).
The legislation imposes disclosure requirements that will mitigate the ability of spenders to mask their campaign-related activities through the use of intermediaries.
It also requires disclosure of both disbursements made by the covered organization and also the source of funds used for those disbursements.SUBTITLE A – REPORTING IMPROVEMENTS TO THE FEC
Sec. 201. INDEPENDENT EXPENDITURES
The definition of an “independent expenditure” is expanded to include both express advocacy and the functional equivalent of express advocacy, consistent with Supreme Court precedent. Additionally, the section imposes a 24-hour reporting requirement for expenditures of $10,000 or more made more than 20 days before an election, and expenditures of $1,000 or more made within 20 days before an election.
Sec. 202. ELECTIONEERING COMMUNICATIONS
This section expands the definition of “electioneering communications” to include all broadcast ads that refer to a candidate within the period beginning 90 days before a primary election, until the date of the general election. Any such “electioneering communication” is subject to the disclosure requirements in the bill. The section also expands the reporting requirements for electioneering communications to include a statement as to whether the communication is intended to support or oppose a candidate, and if so, which candidate.
SUBTITLE B – EXPANDED REQUIREMENTS FOR DISCLOSURE
Sec. 211. IMPROVED DISBURSEMENT REPORTING REQUIREMENTS
The legislation would require corporations, labor unions, and section 501(c)(4), (5), or (6) organizations—as well as section 527 organizations—to report all donors who have given $1,000 or more to the organization during a 12-month period if the organization makes independent expenditures or electioneering communications in excess of $10,000.
If an organization makes a transfer of funds to another person for the purpose of making an independent expenditure or electioneering communication, the organization shall be treated as making an independent expenditure or electioneering communication. A person shall be deemed to have transferred funds for the purpose of making campaign-related expenditures if there have been substantial discussions about such expenditures between the person making the transfer and the person receiving the funds, if the person making the transfer or the person receiving the transfer knows (or should have known) of the intent to make campaign-related expenditures by the person making the transfer or if the making the transfer or the person receiving the funds made a campaign-related expenditure in the last election cycle or the current cycle.
Sec. 212. DISCLOSURE OF GENERAL TREASURY FUNDS
If a donor to a covered organization specifies that his donation may not be used for campaign-related activity, the organization is restricted from using the donation for that purpose, and may not then disclose the identity of the donor. The organization’s CEO must certify to the donor within 7 days that such funds will not be used for campaign-related activity.
If a covered organization makes a disbursement for campaign-related activity, the CEO must file a statement with the FEC certifying that the expenditure was not made in coordination with a candidate, that funds designated by the donor not to be used for campaign-related activity have not been used for any campaign-related activity, and that the spending has been fully disclosed and made in compliance with law.
Sec. 213. CREATION OF SEPARATE CAMPAIGN-RELATED ACTIVITY ACCOUNT
An organization can establish a separate “Campaign-Related Activity” account to receive and disburse political expenditures. If an organization makes campaign-related expenditures exclusively from its separate account, then it is only required to disclose only donors who have contributed $10,000 or more for unrestricted use or donors who have contributed $1,000 or more specifically for campaign-related activity.
Sec. 214. ENHANCE DISCLAIMERS TO IDENTIFY SPONSORS OF ADS
· Require Leaders of Corporations, Unions, and Organizations to Identify that they are Behind Political Ads. If any covered organization (corporation, union, section 501(c)(4),(5), or (6) organization, or section 527 organization) spends on a political ad, the CEO or highest ranking official of that organization will be required to appear on camera to say that he or she “approves this message,” just like candidates have to do now.
· In order to prevent “Shadow Groups”, Require Top Donors To Appear in Political Ads They Funded. In order to prevent individuals and entities from funneling money through shell groups in order to mask their activities, the legislation will include the following requirements:
· The top funder of the advertisement must also record a stand-by-your-ad disclaimer.
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