Bob intended to send this to the list, and asked that I forward it. I have
some responses, which I'll send shortly.
----- Original Message -----
From: "Bauer, Bob-WDC" <RBauer@perkinscoie.com>
To: "'Marty Lederman '" <marty.lederman@comcast.net>
Sent: Saturday, January 31, 2004 10:50 AM
Subject: RE: Some thoughts on the GC's Draft Opinion in the ABC 527
Proceeding
Marty is frustrated with the lack of focus on stated or apparent
election-influencing "purpose" in the General Counsel's draft on the ABC
request. But the problem on this point does not follow from the Counsel's
analysis, so much as it does from the impossibility of achieving
satisfactory, not to mention constitutional, results with words like
"purpose". I fear in fact that "purpose" presents some of the same
diffficulties we see in the application of terms like "circumvention".
Consider a donor who provides a huge some of money to a 501(c)(3)
organization that is dedicated to public education in the area of
reproductive rights. As the donor writes out the check for $4 million, he
states: "I am doing this, because if we raise public awareness of the
threat
to reproductive rights presented by this Administration and its policies,
we
can beat Bush in November." And the CEO of the happy charity replies: "I
am
with you: Bush is the biggest threat we have ever faced to the rights of
women, and we have to get rid of him." The law of course does not take
account of purpose or motive: it focuses on how the monies are spent.
One answer would be: but the committee before the Commission in ABC is, so
it claims, a political committee, and so the effect of the application of
the test is not whether a 501(c) would somehow wander into FECA territory,
but simply whether we accept a purpose other than a federal election
related
purpose in determining the use of monies other than hard money. This,
however, is a dodge. For purpose is regulable in the latter case, there
is
no reason why it would not be just as regulable in the former. In fact,
from a statutory perspective, we could imagine that if an officeholder had
solicited the $4 million for the reproductive rights program, believing it
to have the same effects as imagined by the donor, the fears of
"corruption"
would be more acute than in the case presented by ABC, where the draft
assumes that the activities in question were not coordinated with
officeholders.
The "objective" test that the Commission has followed for the most part,
respects the difficulties of sorting out how to evaluate and weight
"purpose". it limits the Commission's chase after the unknowable--what
did
the donor really intend with the donation?--and it avoids oversimplifying
politics. A donor might well have principally, even exclusively, the
purpose of supporting a federal reeelection, but the committee receiving
the
monies might find the nonfederal element of its program important: it may
well believe that ticketwide activities, entailing coattail effects, will
enhance the possibility of an election producing legislative majorities
for
the President's congressional supporters, In l980, Bill Brock was
lionized
for a vigorous hard and soft money program that sought to integrate
federal
and state efforts to generate a Republican victory in elections
across-the-board. And he was successful (though the R's did not succeed
in
winning the House, only the Senate.) In this day and age, any pronounced
interest in a political nonfederal program, as part of an integrated
effort,
is viewed as disingenuous, and worse.
Moreover, by focusing on who accepts the money and how it is spent, the
law
stays closer to its constitutionally approved knitting. The object of
this
exercise is not to regulate the activities of all those who may wish to
influence elections with the use of monies, but to do so with focus on
those
activities presenting the most serious danger of corruption of federal
elected officials. The "purpose" test in the application discussed by
Marty
pulls the analysis away from this direction. In fact, the purpose test as
Marty discusses it would be far better justified if the campaign laws were
sustained as an effort to secure political equality, by equalizing
influence
without regard to resources.
-----Original Message-----
From: Marty Lederman
To: Rick Hasen; election-law
Sent: 1/30/2004 11:17 AM
Subject: Some thoughts on the GC's Draft Opinion in the ABC 527 Proceeding
The draft opinion does not attempt to answer two of the three most
important questions in the current 527 debate:
(i) what makes an organization a "political committee"
(ABC implicitly conceded that it is such a committee, by noting that it
has federal and nonfederal "accounts" pursuant to 11 CF.R. 106.6 --
which I think makes sense only if it is a "political committee"); and
(ii) whether FECA's $5000 limit on contributions to
political committees is constitutional as applied to a nonparty
committee that does not make contributions to, or coordinated
expenditures with, federal candidates or parties.
The opinion is, instead, concerned almost exclusively with the legality
of political committees' own conduct - in particular, with how a
committee may use so-called "non-Federal funds." With respect to that
question, the draft opinion will, I predict, be deemed inadequate or
unsatisfying by many observers on all sides of this debate. As I
understand it based on a very quick read, the draft's analysis proceeds
in the following steps:
1. The draft presumes the validity of 11 C.F.R. 102.5(a)(1)(i),
which provides that all "expenditures" by a political committee "in
connection with any Federal election" must be "Federally funded," i.e.,
not paid for by union and corporate treasury funds, or by individual
contributions over $5000. (See page 5.)
2. In determining whether a particular committee activity is an
"expenditure," the draft assumes that, in accord with 2 U.S.C.
431(9)(A)(i), any "purchase, payment, distribution, loan, advance,
deposit, or gift of money or anything of value, made . . . for the
purpose of influencing any election for Federal office" constitutes an
"expenditure."
3. The draft then takes a page out of BCRA in crafting a new
bright-line rule for committees' communications that mention federal
candidates. The draft assumes that communications "promoting,
supporting, attacking or opposing" federal candidates -- communications
that are, for entirely separate purposes, deemed "federal election
activity" pursuant to title I of BCRA, see 2 U.S.C. 431(20)(A)(iii) --
are necessarily "for the purpose of influencing a federal election," and
therefore constitute "expenditures" by the committee (page 12). The
"promote, support, attack or oppose" standard, the draft reasons, is
"appropriate as the benchmark for determining whether communications
made by political committees must be paid for with Federal funds" (page
3).
4. With respect to voter registration and GOTV activities that do not
expressly promote, attack, support or oppose federal candidates, the
draft opinion simply assumes the continued application of the allocation
rules specified in 11 C.F.R. 106.6.
There are at least a couple of major problems with this analysis.
A. Most fundamntally, the draft opinion makes virtually no attempt to
tie any of its analysis to the language of FECA itself. A person
unschooled in the lacunae of the past quarter-century of FEC regulation
would, upon reading this, assume that FECA imposes specific restrictions
on political committees' "expenditures," as such. But FECA does not
impose any such expenditure limitations. Instead, it prohibits two
sorts of contributions to political committees (and, in one case, the
receipt by such committees of the prohibited contributions).
First, corporations and unions may not use their treasury funds to give
any payment, or anything of value, to a political committee "in
connection with" any federal election, convention or caucus (and
political committees may not receive such payments). 2 U.S.C. 441b(a).
Second, no person may make contributions to nonparty political
committees "in any calendar year which, in the aggregate, exceed
$5,000." 2 U.S.C. 441a(a)(1)(C). For purposes of this restriction,
"contribution" is defined as "any gift, subscription, loan, advance, or
deposit of money or anything of value made by any person for the purpose
of influencing any election for Federal office; or the payment by any
person of compensation for the personal services of another person which
are rendered to a political committee without charge for any purpose."
2 U.S.C. 431(8)(A).
The FEC has, over the years, declined to apply these two restriction
limitations with regard to a contributor's actual intent or purpose in
making the donation. Instead, it has simply presumed that funds
contributed in excess of these two statutory limitations are not, in
fact, "in connection with" federal elections (in the case of corporate
and union treasury funds) or "for the purpose of influencing" federal
elections (in the case of individual donations above $5000) -- a
presumption that apparently is based on the fiction that such so-called
"non-Federal" funds are contributed to political committees only in
order to influence, and only "in connection with," state and local
elections. Thus, according to the FEC, if the recipient of such an
contribution spends it in a way that is intended to influence both state
and federal elections, the portion of the expenditure that was paid by
"non-Federal" funds is presumed to have been applied "only" to influence
(and in connection with) the state-election "portion" of the
expenditure. For example, a GOTV campaign that does not mention federal
candidates can be paid for in part using corporate and union treasury
funds, on the assumption that those funds are being used - and were
intended by the contributor to be used - only to influence state and
local, but not federal, elections.
The draft opinion continues in this vein. Indeed, the draft even opines
that a committee's expenditure is in part "non-Federal," and may be paid
for with "non-Federal" funds, where the Committee itself has the express
purpose of electing or defeating particular federal candidates (page 7).
Perhaps, however, the FEC might want to reconsider whether it should
abide by the allocation scheme and by its
"objective"-use/recipient-expenditure-based test for determining whether
FECA contribution limits are exceeded, in light of the Supreme Court's
rebuke of such practices in McConnell. The McConnell majority noted (in
the context of expenditures by party committees) that a "literal
reading" of the FECA would have required activities intended to
influence both federal and state elections to be paid for entirely with
funds subject to FECA restrictions. 124 S.Ct. at 648-49 ; see also id.
at 660 n.44 ("the FEC regulations permitted more than Congress, in
enacting FECA, had ever intended"); id. at 660 FEC's allocation regime
"subverted" the FECA scheme that was approved in Buckley). Justice
Thomas, dissenting, similarly reasoned that if donations are in fact
made for the purpose of influencing federal elections, then the "alleged
soft-money donation is in actuality a regular 'contribution' as already
defined and regulated by FECA." Id. at 732. I think it is fair to say
that virtually no one believes that corporations and unions give
treasury funds to political committees solely "in connection with"
nonfederal elections, or that individuals give more than $5000 to such
committees solely for the purpose of influencing nonfederal elections.
And, if that is correct, then it should mean that all such donations are
"Federal," and FECA-restricted.
On the other hand, perhaps it could be argued that, even if the FEC
should never have embraced such a "nonfederal purpose" fiction back in
the 1970s, by overturning the FEC's allocation scheme in certain
respects, but by leaving it untouched in other respects - including with
regard to contributions to nonparty committees - the Congress in
enacting BCRA in effect ratified the FEC's longstanding construction of
FECA, and approved the permissibility of the FEC's basic
allocation/recipient-use-test scheme. (On the other, other hand, that
FEC scheme was, as applied to nonparty committees, anything but clear
under FEC law even before BCRA - see, e.g., the SG's brief for the FEC
in Akins and the FEC's proposed regulatory amendments in March 2001, 66
Fed. Reg. 13681; therefore, it would be difficult to identify precisely
what BCRA could be said to have ratified.)
In any event, the draft opinion does not join this debate; instead, it
is predicated on the FEC's longstanding fiction about contributors'
"nonfederal" intent, on the existing allocation scheme, and on the
assumption that the FEC should look to the manner in which the funds are
spent, rather than at the objective for which they were contributed.
Indeed, the draft goes so far as to refuse to answer questions
concerning whether certain donations to political committees are lawful
when the donator's stated purpose is to influence federal elections (see
pages 22, 7 n.6.) - even though it is precisely such donations, and not
committees' expenditures, that FECA directly regulates! The draft
defends this refusal on the ground that requests pertaining to the
activities of "third parties" do not qualify as advisory opinion
requests. This is, I think, a cheat. The entire statutory basis of the
draft opinion is FECA's restrictions on contributions to political
committees. To be sure, the FEC regulations address the committees'
expenditures, but only as an administratively manageable way of
enforcing the statutory restrictions on contributions by corporations,
unions, and individuals. Moreover, at least as to corporate and union
donations, the draft could easily have opined as to whether the
committees' receipt of such donations is unlawful. See 2 U.S.C. 441b(a)
(separately prohibiting committees' receipt of corporate and union
treasury funds donated "in connection with" federal elections).
B. Even assuming that the FEC should continue to regulate FECA's
contribution limitations based upon the purposes of the subsequent
expenditures by the recipient political committees, the draft provides
very little explanation for its new bright-line rule that a
communication promoting, attacking, supporting or opposing a federal
candidate can be financed entirely with "Federal funds." The draft
simply reasons that such communications are "for the purpose of
influencing a federal election," and thus are "expenditures" within the
meaning of 2 U.S.C. 431(9). (See page 12.) But there are at least a
couple of problems with this theory.
First, for better or worse, rightly or wrongly, "expenditure" under
431(9) and similar FECA provisions has been construed to include only
"magic words" express advocacy, a narrower category than BCRA's "federal
election activity' definition. BCRA did not amend the definition of
"expenditure." To the contrary - that more recent statute established
new categories of communications, including "electioneering
communications" and "federal election activity," precisely because it
wanted to reach communications that were not regulated as "expenditures"
under FECA. Thus, insofar as committees' use of "non-Federal" funds is
(or should be) governed by what constitutes an "expenditure" under FECA,
the draft opinion appears to construe that statutory term more broadly
than might be warranted.
On the other hand, why should the permissibility of a committee's use of
"non-Federal" funds be governed by whether the committee's activity is
an "expenditure" under FECA? The statutory tests are whether the funds
were donated to the committee "in connection with" a federal election
(for union and corporate treasury funds), and whether the funds were
given to the committee "for the purpose of influencing any election for
Federal office" (for individual donations above the $5000 cap). In
light of those statutory criteria, perhaps it does make sense to presume
that funds contributed for communications that attack, support, oppose
or promote a federal candidate are subject to FECA limits -- not because
such communications are necessarily "expenditures," and not because of
BCRA, but instead simply because such communications presumptively are,
at least in part, "in connection with," and "for the purpose of
influencing," federal elections. If so, then perhaps the draft opinion
has reached the right result, but for the wrong reasons. (This
conclusion would not, of course, resolve how such funds should be
treated where the communication in question is intended to affect both
state and local elections, or are, e.g., "in connection with" both
federal elections and federal legislative debates.)
C. Finally, the draft does not question or reexamine the adequacy of
the existing FEC regulation (11 C.F.R. 106.6) concerning political
committees' expenditures for GOTV and voter registration. Nor, more
broadly, does the draft address the broader questions of regulatory
amendment that the FEC raised in March 2001, see 66 Fed. Reg. 13681, but
that the Commission has yet to answer. (In fairness to the GC, this is
probably not the proper procedural context for such reevaluation of the
existing regulatory structure - although the GC does use the draft
opinion to adopt a brand-new bright-line rule regarding communications
that attack, support, oppose or promote a federal candidate.)