H.R. 5175 was introduced by Rep. Van Hollen (D-MD) in conjunction with Sen. Chuck Schumer (D-NY) in late April. The Committee on House Administration marked up the bill on May 20, 2010, on a party-line five to three vote. After weeks of being unable to reach agreements on H.R. 5175, Democrats have accepted language that may help them get the necessary votes for passage.
The proposed legislation is a punitive measure for associations of persons who choose to exercise their right to free political speech as guaranteed by the Constitution, and affirmed in the Citizens United v. FEC case. The bill’s disclosure requirements and limits on foreign corporations and government contractors target only the political speech of corporations, with no effect on unions, including foreign-influenced labor unions, public-employee unions, or government grant recipients.
Government Contractors: The bill prohibits independent expenditures and electioneering communications by anyone with a government contract over $10 million (this was increased from $50,000 to $10 million by the rule). This prohibition is not applied to unions in collective bargaining agreements with the government, unions who receive dues from government payroll deduction, or grant recipients.
TARP Recipients: The bill prohibits independent expenditures and electioneering communications by TARP recipients who have not fully repaid their federal funds, but does not prohibit unions of TARP companies from such communications.
Foreign Nationals: The bill bans independent expenditures or electioneering communications by corporations where: 20 percent or more of the company is owned by foreign nationals; the majority of the board are foreign nationals; foreign national(s) have the power to control the decision-making process of the corporation with respect to its interests in the U.S.; foreign national(s) have the power to control the decision-making process of the corporation with respect to political activities.
The bill would also require that CEOs (or the other highest ranking official of the corporation) certify, under the penalty of perjury, the company’s eligibility for political spending to the Federal Elections Commission. The bill excludes U.S. based corporations with U.S. employees and revenue from political participation, and prohibits those corporations from forming PACs or making PAC contributions.
The bill does not apply the same prohibitions to unions with foreign members, non-citizen members, foreign board representation or other foreign agreements/affiliations.
Coordinated Communication: The bill defines “coordinated communication” as a covered communication which is “made in cooperation, consultation, or concert with, or at the request or suggestion of, a candidate, and authorized committee of a candidate, or a political committee of a political party; or any communication that republishes, disseminates, or distributes, in whole or in part, any broadcast or any written, graphic, or other form of campaign material prepared by a candidate, an authorized committee of a candidate, or their agents.”
The bill defines “covered communication” as a public communication that refers to a clearly identified candidate for Federal office and is publicly distributed or publicly disseminated.
The bill sets 120 days prior to the first primary for the office of the President as the applicable election period. The bill expands the period in which coordinated communication is treated as a contribution to start 90 days before all other Federal election primaries and end at general election.
The bill excludes the political party committees from the contribution rule for coordinated spending on public communications unless the communication is “controlled by or under the direction of” the candidate.
As noted by the Committee on House Administration Republican Staff, the new definition of coordination based solely on conduct may conflict with court holdings, or lead to a finding of coordination where a candidate had no control or knowledge of the communication. The expansion of the covered period may also mean issue ads would be subject to coordination limits for an extremely long period (up to a year in some states).
Internet Communications: An amendment authored and accepted by Rep. McCarthy (R-CA) would provide that communications disseminated over the internet would not be treated as a form of general public political advertising subject to the Federal Election Campaign Act, provided that the communication was not laced for a few on another person’s Web site.
Express Advocacy: The bill expands the definition of independent expenditure to include express advocacy or its functional equivalent, and would require the filing of independent expenditure reports within 24 hours regardless of when the expenditure is made. The bill sets the threshold amount at $10,000 during the period up to the 20th day before an election, and $1,000 during the period after the 20th day before the date of an election.
Electioneering Communications: The bill expands the definition of electioneering communication from 60 days to 120 days before the general election and would require a report on any and all electioneering communications. The bill also requires that any person who is required to file a statement in electronic form do so in a form accessible by computers, and in a manner that makes it searchable, sortable, and downloadable.
Additional Reporting: The bill would require that an organization report all campaign-related donations over $600 for independent expenditure reports, and $1,000 for electioneering communication reports. The bill requires that all independent expenditures not made from the Campaign Related Activity Account over $600 be reported, and if from the Campaign Related Activity Account, report all donations over $6,000. Similarly, if electioneering communications are not made from the Campaign Related Activity Account, they must report all donations over $1,000; and if made from the Campaign Related Activity Account, they must report all donations over $10,000.
The bill would allow transfers to other entities be deemed for independent expenditure/electioneering communication and reported as such. The bill applies this to corporations, unions, 501(c)(4)s, 501(c)(5)s, 501(c)(6)s & 527s. However, as modified, the bill includes a provision that would allow 501(c)(4)s an exemption if they meet these criteria:
- They are exempt from tax under section 501(c)(4) for each of the last ten years
- They have at least 500,000 individuals who have paid membership dues
- They have at least one dues paying member from every state (including D.C. and Puerto Rico)
- They receive no more than 15 percent of their funding from corporations or unions
- None of the funds from corporations or labor unions received are used for campaign-related activity
**This provision was originally crafted to exempt specific organizations and has since been manipulated to now exempt even more organizations.
The bill treats amounts transferred between affiliates as attributable to regular dues or assessments from individuals, and requires no reporting on such a transfer.
Donor Intent: The bill would allow donors to avoid reporting donations to the FEC so long as there is a mutual agreement that donations will not be used for campaign related activity. Donors making this agreement must receive a certification from the CFO that their donation will not be used for campaign activity.
The bill would require that the donor and the recipient entity agree at the time a donation or payment is made that it would not be used for campaign activity. However, the bill would not require union members to reach any agreement when dues are deducted from their paychecks. Members may be concerned that these requirements turn the presumption of voluntary compliance on its head and that these provisions would deter speech because of the unnecessary burden.
Campaign Related Activity Accounts: The bill defines a new category of accounts called “Campaign Related Activity Accounts” and circumvents holdings in the Citizens United vs. FEC case that allow general treasury funds to be used for political speech.
Stand by your Ad Requirements: The bill greatly expands current “stand by your ad” requirements by requiring the head of the organization and the organization’s largest donor to be named and provide approval statements during the communication; the organization to be named up to three times in each disclaimer; and the five largest donors to be listed on screen (with the two largest stated in radio ads).
While the bill includes language that would seem to require regulations be promulgated to allow for exceptions to be made if the bill’s new requirements create a “hardship” by “requiring a disproportional amount of the communication’s content to consist” of these requirements, it is unlikely that any regulations would actually invalidate the concerns of many small organizations with even smaller budgets. Additionally, the “hardship” exception is effectively meaningless for 2010 because it does not go into effect until the FEC issues rules. While the bill’s requirements take effect immediately, the exception is delayed and would not be made available until much after November of 2010.
Members may be concerned that the disclaimers required by the bill could take an estimated 14 seconds to cite, and when combined, can use up much of the time of a 30 second advertisement. Members may feel that the disclaimer is designed to deter speech rather than provide useful information. Furthermore, the bill does not address how an organization would comply with these onerous regulations if many donors gave the same amount.
Political Robocalls: The bill would require a disclaimer at the beginning of political robocalls identifying who is funding the call.
Lobbyists: The bill would require registered lobbyists and organizations to report spending on independent expenditures and electioneering communications.
Web site Reporting: The bill would require annual reports that list each disbursement for campaign related spending be made available on the company’s web site, in machine-readable format, linked directly from the organization’s home page.
Judicial Review: The bill would provide for judicial review through the D.C. District Court, D.C. Court of Appeals, and then the Supreme Court. The bill also provides for actions and challenges brought by Members of Congress.
According to the House Committee on Administration Republican staff, this new process for judicial review is in conflict with the review provisions in both Federal Elections Campaign Act and the Bipartisan Campaign Reform Act, and will likely lead to delays for litigation to determine the correct review procedure. Members may be concerned that this section is intended to make a quick resolution of constitutional challenges impossibly before the 2010 election.
The bill would take effect 30 days after enactment, regardless of FEC rules.