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This topic is monitored by Moritz Law Professor Edward B. Foley

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Opinion & Analysis: Sound Advice of Counsel - Addendum

Since posting this piece, we have learned that three Commissioners have submitted an alternative proposal for Thursday's meeting. Their alternative would adopt only a small portion of what the GC has recommended, essentially the GC's changes to the allocation rules and one useful (but modest) change in the definition of "contribution" under federal campaign finance law. This alternative is okay as far as it goes; the problem, however, is that it does not go nearly far enough. If it is intended as a substitute for what the GC has recommended, then it should be rejected in favor of the GC's package. Wishful thinking, perhaps, since approval of the GC's submission requires an affirmative vote from four of the six Commissioners. But we are hopeful that the three who presented this alternative have done so for procedural reasons (so that a vote may be taken on the smaller set of reforms, should the larger package fail) and that they remain open to persuasion on why the Commission should adopt the full set of GC recommendations.

The main reason why reforming the allocation rules is not enough is that they are applicable only to groups that already are classified as PACs. They do not apply to any group that is not so classified. The main bulk of the GC's proposal is a set of rules for determining when a group should be classified as a PAC – a crucially important matter since many groups very active in election campaigns resist this classification. It is clear under longstanding Supreme Court precedents, including the bedrock Buckley v. Valeo case, that groups whose "major purpose" is to influence federal elections should be so classified. But there has been uncertainty on how to tell whether a group has this "major purpose," and the GC's proposal is such a beneficial step forward because it answers this question. If the Commission does not adopt the GC's recommendations on how to implement the "major purpose" test, then the currently regulatory gap will persist in which groups that clearly should be classified as PACs escape the finance rules that should apply to them, including the limits on the contributions they receive.

Right now, the regulatory environment essentially is one in which groups can decide for themselves whether they wish to register as PACs. To be sure, a group must refrain from making contributions directly to candidates, or coordinating directly with candidates, or engaging in "express advocacy." But if a group avoids these activities, it still can devote itself full-time to influencing a federal election, and even tell the IRS that its primary purpose is to do so (thereby getting the extra tax advantages of being a 527), and still refuse to register as a PAC with the FEC. There are numerous examples of both Democratic and Republican groups that have taken advantage of this loophole, the most recent well-publicized example being Swift Boat Veterans for Truth. In the absence of rules implementing the "major purpose" test, there seems relatively little risk that this or any other group will suffer a penalty for failing to register as PAC. (Although the two of us have argued previously that the FEC could develop a "major purpose" test through the adjudication of complaints filed against particular groups like this one, without the benefit of implementing regulations like the ones the GC proposes, there seems little regulatory stomach for enforcing the law in particular cases if the Commission cannot agree on a set of rules to apply in general, and the courts might look skeptically on case-by-case enforcement without general guidelines because of the regulatory uncertainty that has existed on the "major purpose" test.) And as long as the status of being a PAC is essentially one of self-policing for such groups, they can continue to receive six or seven figure contributions from donors seeking to achieve an election victory.

Furthermore, even the new allocation rules will have little effect if unaccompanied by measures that implement the "major purpose" test. Since the allocation rules apply only to PACs, and being a PAC is essentially voluntary now, any set of allocation rules will be unenforceable against any group that would like to escape them. For this reason, it is imperative that the Commission do more than just amend the allocation rules.