Corporate Money in State Races Likely After Supreme Court Decision

The Supreme Court's decision upholding Citizens United in Montana today proved one thing: that corporate money is here to stay.

In a short, anonymous ( per curiam) decision, the court effectively ruled 5-4 to invalidate a Montana state law that prohibits corporate spending in connection with candidates and elections, contradicting the Montana Supreme Court's rejection of a challenge to it.

In doing so, the court upheld its own landmark campaign-finance decision in all 50 states.

"The question presented in this case is whether the holding of Citizens United applies to the Montana state law. There can be no serious doubt that it does," the majority justices wrote.

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In setting that standard, the Supreme Court paved the way for corporations to spend money on elections in other states where, despite the Citizens United ruling, laws still ban the practice. In 2010, 24 states banned election spending by corporations and/or unions, the National Conference of State Legislatures noted.

"Today's immigration ruling will have a significant impact on our country, but a case can be made that this Montana ruling will have every bit as much of an impact on a larger population, on a larger host of issues, because it now opens up free speech to groups who have in the past been prohibited from being involved in elections," said GOPAC President David Avella, whose political training group supports Republicans in state and local races.

In states that still ban corporate spending, Avella said super PACs have yet to form, and that independent groups have hesitated to begin using corporate money to support or oppose candidates. Because laws remain on the books, and because it might take a while for state legislatures to remove them following the Supreme Court's Montana ruling, Avella said corporate money might not flood into state races this year.

"That will be interesting to see, whether it happens in this cycle, whether it happens in the 2012 cycle," Avella said. "It may take us until the 2014 cycle to start seeing more of a movement that way. Certainly, this ruling has to encourage advocates of free speech to start standing up for their rights at the state level."

With corporate money cemented into place at the federal and state levels, campaign-finance reformers are left to pursue another issue entirely: disclosure.

With the Montana matter closed, the vanguard of campaign-finance haggling is now being undertaken by the Obama campaign, which is pressing for a disclosure of donors by Crossroads GPS, a prominent, Karl Rove-co-founded 501(c)4 nonprofit group affiliated with but technically separate from the American Crossroads super PAC.

Obama for America and Democratic National Committee General Counsel Robert F. Bauer submitted a complaint to the Federal Election Commission (FEC) earlier this month arguing that Crossroads GPS meets certain standards that should require it to begin disclosing the names of its donors to the FEC.

For years, 501(c)4 groups have angered campaign-finance reformers. They are the least transparent form of political group, able to take money from virtually any source (corporate, union, or individual), only disclosing the dollar amounts of donations (not the donors' identities) once a year to the IRS. Campaigns and super PACs, meanwhile, regularly disclose donors' identities to the FEC. A 501(c)4 group like Crossroads GPS must disclose its election spending as it happens, but the public generally doesn't know how much money such a group has, or anything about where that money comes from.

Pursuant to federal law and Supreme Court decisions, a group must disclose its donors' identities if the group's "majority purpose" is to influence elections. To avoid crossing that threshold, 501(c)4 groups engage in "issue advocacy" that sometimes involves mentioning candidates, and can look and sound like election activity. Groups claiming 501(c)4 status implicitly maintain that a "majority" of their activity is geared toward "issue advocacy" or some other non-electoral aim.

The Obama campaign contends that Crossroads GPS has crossed that threshold.

"There has never been any doubt about [Crossroads GPS's] true purpose: to elect candidates of its choice to the presidency and the Congress," Bauer wrote in a letter to the FEC. The complaint cited TV ads, aired in battleground states, in which Crossroads GPS disparaged Democratic candidates, including President Obama, but did not exhort listeners to vote against them.

The future of this challenge is uncertain. The FEC uses a broad array of factors to determine whether a group like Crossroads GPS must disclose. In its evaluation of the Swiftboat Veterans and POWs for Truth's 2004 activity, for instance, the FEC announced in 2007 that it had examined statements made to donors, public statements on the group's website, statements by a member of the group's steering committee on a news program, and statements in fundraising solicitations. Internal documents are also fair game.

The FEC does not announce its investigations publicly, so it's unclear whether the commission is looking into the Obama campaign's complaint. A six-member panel of three Republicans and three Democrats, the FEC has a reputation both for reluctance to police campaign-finance violations and for deadlocking on decisions with partisan implications.

But if it does pursue the matter of disclosure - with Crossroads GPS, or with other groups of the same ilk - there's no guarantee that the FEC will do anything before the November election.

'To the extent that lawbreakers are held accountable, it will likely come long after the fact," said Paul Ryan, senior counsel for the Campaign Legal Center.

After FEC complaints were lodged against Swiftboat Veterans by four separate entities, including the Campaign Legal Center and John Kerry's presidential campaign, the FEC announced a settlement with the group in December 2006.

"More than two years after the 2004 election, the FEC says, in a nutshell, 'Yeah, Campaign Legal Center was right,'" Ryan said.

More likely, Democrats will continue to denounce such groups and their role in the 2012 elections, while a 501(c4) of their own - Priorities USA - supports Obama by raising and spending money under the same rules.

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