The Political Law Blog covers political organization structuring, campaign finance, lobbying, government rules and ethics, and employment issues associated with staff and volunteers.
The Office of Campaign and Political Finance will hold a public hearing regarding implementation of regulations on Monday, September 22, 2014 at 10:00 a.m. at One Ashburton Place, Room 411, in Boston.
The office intends to issue revised regulations at 970 CMR 1.00-2.00. The regulations will implement those portions of Chapter 210 of the Acts of 2014 ("An Act relative to campaign finance disclosure and transparency") that went into effect when the Act was signed on August 1, and will be issued pursuant to G.L. c. 30A, § 2 and G.L. c.55, § 3.
Interested persons may either appear in person at the hearing or submit comments in writing at any time prior to the hearing. Any comments or questions, and all requests for copies of the proposed regulations, should be directed to Michael J. Sullivan, Director, Office of Campaign and Political Finance, Room 411, One Asburton Place, Boston, Massachusetts 02108, telephone 800-462-6273 or 617-979-8300, or may be submitted by email (email@example.com).
Massachusetts legislators are considering new legislation in response to McCutcheon v. FEC, a Supreme Court decision which struck down aggregate campaign finance limits for individual donors. The new legislation eliminates the aggregate contribution limit prohibited by the Supreme Court.
The current bill also amends G.L. c. 55 (Disclosure and Regulations of Campaign Expenditures and Contributions) by:
The Federal Election Commission voted May 8th to allow a political action committee to accept contributions in the digital currency Bitcoin.
The unanimous vote by the six FEC commissioners glossed over lingering disputes in a long-running debate over how to treat Bitcoin transactions under federal campaign finance law. These included divisions between Republican and Democratic commissioners over whether Bitcoin contributions should be subject to the $100 limit in place for cash campaign contributions.
Democratic FEC commissioners have expressed concerns about the anonymous nature of bitcoins, suggesting they could be used to avoid disclosure requirements. Republican commissioners have said bitcoins should be treated no differently from other "in-kind" contributions, such as stocks and bonds, noting that the requirements for receipts of all campaign contributions to identify their contributors remain in place for bitcoins.
In a brief discussion before the May 8th vote, FEC Vice Chair Ann Ravel, a Democrat, said she could support granting an advisory opinion allowing Bitcoin contributions because the requester asked only to be allowed to accept bitcoins worth $100 or less.
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In an unusually frank opinion, a federal judge in New York has struck down the state's contribution limits for a super PAC while noting that he disagrees strongly with the Supreme Court rulings requiring him to do so (New York Progress and Protection PAC v. Walsh, S.D.N.Y., No. 13-6769, 4/24/2014).
The case was the latest in which federal and state limits on campaign money have fallen due to recent Supreme Court precedents. Several federal courts have held unconstitutional any limits on super PACs. These PACs make independent campaign expenditures--as opposed to direct contributions to candidates.
"The Court has noted its concern; and many others have expressed similar concerns about the impact of the [Supreme Court] rulings in Citizens United and McCutcheon," said the five-page opinion filed April 24 by Judge Paul Crotty of the U.S. District Court for the Southern District of New York. "The Court is bound, however, to follow the Supreme Court and the Second Circuit's clear guidance."
Crotty referred to the high court's 2010 ruling in Citizens United v. Federal Election Commission, which struck down federal limits on campaign spending, as well as this month's ruling in McCutcheon v. FEC, striking down a federal limit on Aggregate campaign contributions made by a donor during a two-year election cycle.
In both cases, a 5-4 majority of the court held that limits on campaign money can only be justified under the First Amendment if they prevent "quid pro quo corruption" of candidates.
"In effect, it is only direct bribery--not influence--that the [Supreme] Court views as crossing the line into quid pro quo corruption," Crotty wrote.
He noted that he agrees with a dissent in the McCutcheon case, filed by Justice Stephen Breyer, which took a broader view of the threat of corruption. The district judge said, however, that he was bound to apply the views of the Supreme Court majority "no matter how misguided."
In addition, Crotty noted that the U.S. Court of Appeals for the Second Circuit had reversed his earlier decision denying a preliminary injunction to the plaintiff in the New York case, a super PAC called the New York Progress and Protection PAC. Under the appeals court ruling last November, the super PAC was allowed to take unlimited contributions to advocate the election of Republican mayoral candidate Joe Lhota in New York.
Lhota lost the mayor's race last year to Democrat Bill de Blasio.
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The first step in forming a corporate political action committee (PAC) is to determine who within the corporation may authorize the establishment of the PAC. Often this will be the corporate board of directors, but in some cases the authorization may come from one of several board officers. The legal form of the PAC also may vary. Although the PAC or a corporation is permitted to incorporate for liability purposes, it is not required. It is recommended, though again not required under federal election law, that the PAC adopt articles of organization (setting forth the powers and limitations of the PAC) and bylaws (setting forth the governance of the PAC).
The next step is for the PAC to file a Statement of Organization (FEC Form 1) with the Federal Election Commission (FEC) within 10 days after its establishment. The Form 1 serves to identify the PAC's treasurer, its connected organization (i.e., the corporation), and the PAC's depository. Upon receipt of the Form 1, the FEC will provide the PAC with an identification number. The PAC will use this identification number on all subsequent reports or statements filed with the Commission.
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Corporations that make illegal campaign contributions often find themselves the highly publicized targets of public and private sanctions. Federal election law provides for criminal as well as civil enforcement where there are knowing and willful violations. In many cases, however, whether a violation is enforced civilly or criminally turns on seemingly arbitrary factors, such as whether the Department of Justice or the Federal Election Commission first became aware of the violation.
Civil penalties generally may not exceed the greater of $7,500 or the amount of the contribution or expenditure involved in the violation. If, however, the FEC or the court determines that there is clear and convincing proof that a knowing and willful violation has been committed, the civil penalty may be significantly higher--limited by regulation to the greater of $16,000 or an amount equal to 200 percent of the amount of the contribution or expenditure involved in the violation (or even higher in the case of a knowing and willful violation of the prohibition on contributions in the name of another).
Democratic and Republican commissioners on the Federal Election Commission deadlocked 3-3 in a Feb. 27 vote on whether to waive full disclaimer requirements for some mobile phone ads.
Republican FEC commissioners argued that requirements for a small mobile ad to provide information about who funded the message would burden political speech. They said the ads should be eligible for an exemption to disclaimer requirements that applies to "small items," like campaign buttons and bumper stickers.
The commissioners holding Democratic seats on the FEC said disclaimers providing the public with information about who is paying for an ad serve an important purpose. They said disclosure rules should not be waived for new advertising technologies that are increasing important in political races.
Debate on the issue at an open commission meeting echoed the themes of earlier commission discussions about online advertising, prompted by FEC advisory opinions regarding campaign ads sold by high-tech companies, such as Google and Facebook. The FEC faced deadlocks on rulings regarding disclaimers in Facebook ads in 2011 and Google ads in 2010, though a pared-down advisory opinion for Google--approving ads with a link to disclaimer information--was approved by a 4-2 vote.
The latest discussion focused on a new advisory opinion requested by a smaller firm, Revolution Message (2013-18). The media consulting company asked the FEC is a regulatory exception to disclaimer requirements for small items would apply to banner ads containing political advertising transmitted on mobile phones.
The commissioners' deadlocked 3-3 vote means the company has no definitive answer to the question. Revolution Messaging and others may face a more limited risk of enforcement action if they go ahead with plans for mobile ads, however, because it takes the votes of at least four commissioners to pursue any FEC enforcement case.
The super PAC supporting presidential candidate and former House Speaker Newt Gingrich (R-GA) failed to file required reports on over $1.6 million in political ad spending in 2012, but will not have to pay a fine due to a deadlock at the Federal Election Commission over the proper penalty amount.
Two Democratic FEC commissioners, Ann Ravel and Ellen Wintraub, said they refused to approve a penalty proposed by the FEC general counsel's office because it would have been "merely a slap on the writs," compared to the reporting violation.
Winning Our Future raised over $24 million in 2012, mostly from Gingrich supporter Sheldon Adelson, chief executive of the Los Vegas Sands Corp., and his wife, Miriam Adelson.
Ravel and Weintraub noted that the super PAC actually refunded $5 million to Miriam Adelson and spent over $500,000 on operating expenses after Gingrich dropped out of the race for the Republican presidential nomination in 2012, and the PAC knew it faced possible FEC enforcement action.
Ravel and Weintraub said they were legally prohibited from revealing the amount of a proposed penalty not approved by the commission but suggested it was a small fraction of the amount not reported. The commissioners said an example of a fine that "better corresponded to the severity of the violation" was an $82,000 penalty for a $1.2 million reporting violation by the Democratic National Committee in 2007.
The votes of Ravel and Weintraub, along with the abstention of Steven Walther, who holds a Democratic FEC seat, blocked the proposed fine. The three Republican FEC commissioners voted for the recommended fine, but it takes at least four votes on the six-member FEC to aprove any enforcement action.
The treatment of virtual currencies in business and politics is an evolving and important area of the law.
Bitcoin, a form of virtual currency, has a total market capitalization that exceeds USD $10 billion, and it is rapidly growing. Some retailers, like Overstock.com, already accept bitcoins as a form of payment. However, the Internal Revenue Service stubbornly refuses to issue a letter on whether Bitcoin should be treated as an investment or currency. Similarly, the Federal Election Commission remains deadlocked on whether to allow federal campaigns to accept contributions in virtual currencies.
But change is on the horizon. Businesses and political campaigns should prepare to accept bitcoins or risk falling behind their competitors.
Chief Justice John Roberts questioned the need for the aggregate limit on campaign contributions to federal candidates during oral arguments of a key campaign finance case (McCutcheon v. FEC, U.S., No. 12-536).
The argument came in a case in which Alabama Shaun McCutcheon and the Republican National Committee say the aggregate limit on contributions to federal candidates, political parties, and traditional political action committees (PACs) violate the First Amendment to the U.S. Constitution. The aggregate limit, set at $123,000 for the two-year election cycle of 2013 and 2014, is enforced by the Federal Election Commission. Within that limit, a contributor may give $48,600 to candidates and $74,600 to party committees and PACs.
Roberts, who is considered a swing vote in the case, questioned several times a cap that allows a contributor to give a maximum individual contribution of $5,200 to nine candidates but says he cannot give the maximum to a "tenth candidate."
The chief justice suggested that rules restricting transfers of campaign money could deal with concerns about circumventing the limits on money going to each candidate, while the aggregate limit may be unnecessary to prevent circumvention.
Roberts offered no hint, however, that he might go beyond a narrow ruling to strike the aggregate limit for contributions to candidates and support striking down all campaign contribution limits.
Sen. Mitch McConnell (R-KY) has argued for changing the legal standard to justify contribution limits to "strict scrutiny," a move that would virtually guarantee elimination of all limits.
Roberts and the other four members of the court's conservative wing--Justices Samuel Alito, Anthony Kennedy, Antonin Scalia, and Clarence Thomas--have indicated varying degrees of skepticism about whether contribution limits are constitutional under the First Amendment to the U.S. Constitution.
Scalia appeared to support eliminating most, if not all limits, during the McCutcheon argument. He said that limits on the amounts given to parties and candidates may put them at a disadvantage next to Super PACs, which can collect unlimited sums for independent expenditures to influence elections.
Responding to concerns that eliminating the aggregate limit could allow a single contributor to give as much as $3.5 million or more to candidates and others, Scalia said the total amount spend on "political speech" is far larger.
"When you add all that up, I don't think $3.5 million is a heck of a lot of money," he said.
Arguing on behalf of the FEC, U.S. Solicitor General Donald Verrilli said past Suprreme Court decisions have created a line between independent expenditures, which are considered free of any risk of corruption, and campaign contributions, which carry a threat of corruption or the appearance of corruption.
I'm not here to debate the question of whether the Court's jurisprudence is correct with respect to the risks of corruption from independent expenditures," Verrilli said in response to Scalia.
He added that, if independent expenditures from outside groups are diminishing the voices of political parties and candidates, then Congress could examine changes in the law to deal with that issue, without the Supreme Court.
The solicitor general said repeatedly that eliminating the aggregate contribution limit would allow joint fundraising committees headed by leading candidates or party leaders to solicit multi-million-dollar contribution checks, with the money to be distributed among various candidates and committees. Soliciting such large contributions passes a threat of corruption recognized by past court precedents since the landmark 1976 ruling in Buckley v. Valeo, he said.
Also responding to Scalia's questions, Justice Elena Kagan suggested that the court is having "second thoughts" about past decisions on independent expenditures, "we could change that part of the law."
Kagan is a member of the court's liberal wing--also including Justices Stephen Breyer, Ruth Bader Ginsburg, and Sonia Sotomayor--which has opposed recent rulings rolling back restrictions on independent campaign spending, including the 2010 decision in Citizens United v. FEC. During the McCutcheon argument, these justices voiced varying degrees of support for maintaining current contribution restrictions.
The strongest defense of limits came from Ginsburg, who said only the "super-affluent" could afford to give more money than allowed by the aggregate limit. She said maintaining the limit was needed to preserve the voices of ordinary people who could not give so much and who believe the political process is dominated by the wealth few.
"By having these limits you are promoting democratic participation," Ginsburg said, "then the little people will count some."
Sotomayor, meanwhile, suggested there was not enough in the factual record of the Mutcheon case to make a determination about the need for aggregate limits to deal with the threat of corruption.
"I'm confused because we're talking in the abstract," she said. "We don't have a record below."
That concern was echoed by Breyer, who said an extensive factual record developed for the 2003 campaign finance case, McConnell v. FEC showed a major corruption threat posed by large contributions to political parties.
"How can I decide this on the basis of theory when the record previously showed the contrary of what's been argued?" he asked.
The challenges in the McCutcheon case were seen as seeking to persuade Roberts that he could support their cause without explicitly overturning the landmark campaign finance ruling in Buckley, which upheld contribution limits, according to legal experts on both sides.
The brief filed by Verrilli in the McCutcheon case was emphasized repeatedly that the Buckley ruling upheld limits on individual campaign contributions to each candidate and political committee, as well as an aggregate limit on all contributions by a single contributor in a specific period.
A brief filed in McCutcheon emphasized how the current aggregate contribution limits could be invalidated without directly overturning Buckley because that ruling "upheld a specific aggregate contribution ceiling in a very different campaign finance scheme at a very different moment in the court's jurisprudence."
It remains to be seen when they rule on the case if the justices will focus on differences between the current aggregate contribution limit, established by the 2002 Bipartisan Campaign Reform Act (BCRA), and the limit at issue in the Buckley case, which was established under an earlier campaign finance law, the Federal Election campaign Act. The limit approved in Buckley set a $25,000 annual cap on each contributor's total contributions to federal candidates, party committees and PACs.
BCRA amended the aggregate limit provision to set a higher cap on all contributions during a two-year election cycle and adjust it for inflation. The BCRA provision also set sub-limits for contributions to candidates, political parties, and PACs.
Supports of maintaining the current aggregate limit argued the differences between BCRA and FECA provisions were peripheral and that the court could not strike down the current limit without effectively overturning Buckley. That move would potentially open up a broad new path to invalidate all remaining controls on campaign contributions, regulation supporters said.
The transcript of the Supreme Court argument is available here.
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