Comment to FEC on Van Hollen Independent Expenditure Petition

August 22, 2011

The Brennan Center for Justice submitted a comment to the Federal Election Commission urging it to revise its independent expenditure reporting requirements in line with Rep. Chris Van Hollen's petition.

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Robert M. Knop
Assistant General Counsel
Federal Election Commission
999 E Street, N.W.
Washington D.C. 20463

Re: Petition for Rulemaking on Independent Expenditure Reporting filed by Representative Chris Van Hollen

Dear Mr. Knop:

We write on behalf of the Brennan Center for Justice at NYU School of Law (“Brennan Center”) to comment on the Petition for Rulemaking filed by Representative Chris Van Hollen on April 21, 2011 (the “Petition”), which urges the Commission to revise its regulations on the reporting of independent expenditures. See 11 C.F.R. § 109.10(e)(1)(vi).

Because the Petition meets the requirements of 11 C.F.R. § 200.2(b), and because 11 C.F.R. § 109.10 conflicts with federal law, we urge the Commission to initiate a rulemaking and amend the regulation to ensure consistency with the underlying statute.

The current FEC regulation frustrates the purpose and the intent of federal law governing disclosure of money spent on independent expenditures.  The Federal Election Campaign Act (“FECA”), as amended by the Bipartisan Campaign Reform Act (“BCRA”), requires disclosure of independent expenditures made by any person, as well as the underlying source of those funds.  Two provisions in particular mandate greater disclosure than is called for by the current FEC regulations.

First, 2 U.S.C. § 434(c)(1) requires every person (other than a political committee) who makes independent expenditures over $250 in a calendar year to “file a statement containing the information required under subsection (b)(3)(A) of this section for all contributions received by such person.”  Subsection (b)(3)(A) requires:

the identification of each person (other than a political committee) who makes a contribution to the reporting committee during the reporting period, whose contribution or contributions have an aggregate amount or value in excess of $200 within the calendar year (or election cycle, in the case of an authorized committee of a candidate for Federal office), or in any lesser amount if the reporting committee should so elect, together with the date and amount of any such contribution.

2 U.S.C. § 434(b)(3)(A) (emphasis added).

Second, 2 U.S.C. § 434 (c)(2)(C) requires every person who makes independent expenditures over $250 in a calendar year to disclose:

the identification of each person who made a contribution in excess of $200 to the person filing such a statement which was made for the purpose of furthering an independent expenditure.

2 U.S.C. § 434(c)(2)(C) (emphasis added).

Simply put, 2 U.S.C. §§ 434(c)(1) and (c)(2)(C) require any person—which includes any corporation, union, social welfare organization or trade association—that spends more than $250 on independent expenditures during a calendar year to disclose the identity of all donors of more than $200—as well as the identity of all persons who contributed more than $200 for the purpose of furthering any independent expenditure. By contrast, the FEC regulation implementing these statutory requirements, 11 C.F.R. § 109.10, requires disclosure by any person that makes independent expenditures in excess of $250, but only requires the identification of underlying donors who contribute more than $200 for the purpose of furthering the reported expenditure itself:

“[t]he identification of each person who made a contribution in excess of $200 to the person filing such report, which contribution was made for the purpose of furthering the reported independent expenditure.”

11 C.F.R. § 109.10(e)(1)(vi) (emphasis added).

The current regulation unduly narrows which, if any, underlying contributors a person filing a report has to identify, in contravention of the clear language and purpose of the law. 

Federal law requires that entities making independent expenditures disclose “each person  . . . who makes a contribution” of over $200 to the entity, 2 U.S.C. § 434(b)(3)(A); see id. § 434(c)(1), and “each person who makes a contribution in excess of $200 . . . for the purpose of furthering an independent expenditure.” 2 U.S.C. § 434(c)(2)(C).  These provisions mandate the identification of all contributors of more than $200 to the entity making independent expenditures, whether or not those contributions are specifically earmarked for a particular independent expenditure.

These statutory provisions, and other disclosure laws which ensure transparency from other persons who spend money in politics such as candidates and political committees, serve a critical purpose.  Campaign finance disclosure laws inform the public about the true source of the financial support for political speech so that a voter can take that information into account when assessing the persuasiveness of the speech.  As the Supreme Court wrote in Citizens United, “transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Citizens United v. FEC, 130 S. Ct. 876, 916 (2010). Campaign finance disclosure laws “help citizens make informed choices in the political marketplace.” Id. at 914.  Importantly, revealing the true source of the money used to fund political speech allows the citizenry to see whether elected officials are “‘in the pocket’ of so-called moneyed interests.” Id. at 916.

In adopting 2 U.S.C. §§ 434(c)(1) and (b)(3)(A), Congress chose to require that the true source of the funds spent to influence the outcome of elections through independent expenditures be revealed to the public.  It mandated disclosure not only of the name of the entity engaged in independent expenditures, but also the identification of the entity’s underlying donors who contribute over $200.  These provisions aim to, inter alia, protect against scenarios in which a group using an anodyne name can serve as a front for the interests of its contributors, whose identities remain veiled. 

Even the more limited statutory language in 2 U.S.C. § 434(c)(2)(C) calls for more disclosure than is required by the regulation.  Section 434(c)(2)(C) contains language similar to that found in the FEC regulation, but with a small yet substantively important difference.  The federal law requires the identification of those contributing for the purpose of furthering “an” independent expenditure, while the FEC regulation requires only the identification of those contributing for the purpose of furthering “the reported” independent expenditure.

The substitution of the definite article “the” for the indefinite article “an” means that the filer only has to reveal the identities of its underlying donors who have earmarked their contributions for one specific independent expenditure.  The indefinite article in the law captures any donations made to support the organization’s independent expenditures; it does not require that the donor intend to support a particular independent expenditure.  In contrast, the language of the regulation only requires the identification of any donor who contributes specifically to support “the reported” independent expenditure. 

In its current form, therefore, the regulation fails to require disclosure of donors that the statute plainly reaches: even if a donor contributed to an entity making independent expenditures with the intent or knowledge that the contribution would be used to support independent expenditures, the regulation would not require disclosure unless the donor earmarked her donation to support one specific independent expenditure.  Unsurprisingly, few donors earmark their contributions in this way, and many entities making independent expenditures refrain from reporting these donors.  This allows donors to contribute while concealing their identities, despite the statutory provision requiring the disclosure of “each person …who makes a contribution” of over $200 to the entity, 2 U.S.C. § 434(b)(3)(A); see id. § 434(c)(1). 

In the absence of a regulation that adequately implements unambiguous provisions of federal law, secret unreported spending in our elections is proliferating.  This defeats the purpose of Congress’s carefully crafted policy on disclosure of campaign spending, which—as the Supreme Court recognized in Citizens United—aims to provide “transparency [to] enable[] the electorate to make informed decisions and give proper weight to different speakers and messages.”  130 S. Ct. at 916. 

The Commission should initiate a rulemaking, and should adopt regulations that implement the law as it is written. Entities and persons that have the right to engage in independent expenditures to influence elections also have the legal obligation to disclose the source of their funding.  The public has a First Amendment interest in receiving that information.  The Commission’s existing regulation obstructs that constitutionally vital goal, and defeats the Congressional mandate. 

We urge the Commission to initiate a rulemaking and adopt the proposed regulation set forth in the Petition.

Respectfully submitted,

J. Adam Skaggs
Senior Counsel
Democracy Program

Elizabeth Kennedy
Counsel
Democracy Program