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US Supreme Court Lifts Restrictions on Corporate Campaign Spending
The US Supreme Court lifted restrictions on corporate campaign spending in its decision in Citizens United v. Federal Election Commission. The ruling, which overturns previous decisions, will allow corporations and unions to run their own campaign ads, but will still prohibit them from making direct contributions to campaigns.
The Court rejected arguments Independent Sector made in an amicus brief this summer asking that current restrictions on corporate campaign spending be upheld. IS expressed concern about the influence of money in politics which jeopardizes the integrity of the electoral process, impairs the ability of citizens and charitable organizations to exercise their advocacy rights, and discourages participation by individuals and charities.
Impact on Nonprofits
It is important to note that nonprofits are still subject to federal tax law which limits their political activity.
- The decision will not change the rules for 501(c)(3) organizations since it did not change the tax law ban on partisan activity by such organizations.
- 501(c)(4)s will have more flexibility to engage in campaign activity, but this still may not be their primary activity.
- Alliance for Justice has posted materials on its website outlining the ruling's impact on different categories of nonprofits. See AFJ's fact sheet and comparison chart.
Responses and Changes Ahead
Nonprofits should expect changes in state laws and federal regulations in the months ahead. The Federal Election Commission has issued preliminary guidance on how to comply with the decision until new regulations can be issued.
Congress, with the backing of the White House, and state legislatures are considering legislative responses to the Supreme Court's ruling. Some of these proposals include: optional public financing of campaigns; requiring shareholder approval of corporate campaign spending; enhanced disclosure and disclaimer requirements; and restricting election activity of corporations with foreign boards or subsidiaries. There may also be additional legal challenges to areas of campaign finance law as a result of the Court's ruling.
Background
The underlying case involved election activity of a 501(c)(4) organization , but the Supreme Court decided to re-open the case to decide lift restrictions on corporate and union campaign spending. IS urged the Court to decide the case on narrow grounds without overturning the prior decisions. The amicus brief also suggests that the Court should expressly adopt an exception developed in the lower courts that allows certain 501(c)(4) organizations to accept de minimis amounts of corporate funding without jeopardizing their election activity.
Last Updated: February 5, 2010
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