Federal District Court Vacates FEC Independent Expenditure Donor Disclosure Rule; Appeal Likely

Published 10 August 2018 by Caplin & Drysdale, Chartered

Last week, a federal district court issued a ruling vacating a key Federal Election Commission donor disclosure regulation as inconsistent with the Federal Election Campaign Act of 1971, as Amended (“FECA”).  Although the court’s ruling has not yet taken effect and is likely to be appealed, it is a notable development in the long-standing fight over the donor disclosure requirements that apply to groups, such as 501(c)(4) organizations, that spend funds to sponsor “independent expenditures”—i.e., communications that expressly advocate the election or defeat of a clearly identified federal candidate—but are not registered as political committees.  Nonprofits and other organizations may be required to disclose all contributors who donate at least $200 toward influencing federal elections if the decision goes into effect.

Judge Beryl Howell of the U.S. District Court for the District of Columbia ruled that FEC regulation 11 C.F.R. § 109.10(e)(1)(vi), which requires the disclosure of persons making donations specifically “for the purpose of “furthering the reported independent expenditure,” is overly narrow and thus inconsistent with the underlying statute, codified at 52 U.S.C. § 30104(c).  The court concluded that the challenged regulation “has permitted reporting non-political committees to evade the statutory disclosure requirements” by allowing donors to avoid identification on FEC reports provided that they not earmark their donations to be used on an independent expenditure.  The regulation has resulted in many organizations engaging in independent expenditures reporting few (if any) donors on FEC reports. 

The case was brought by Citizens for Responsibility and Ethics in Washington (CREW), who sued after the FEC dismissed an administrative complaint against Crossroads GPS, a 501(c)(4) organization, alleging that the group did not disclose the names of contributors to a 2012 effort to unseat Ohio Senator Sherrod Brown.  If the decision stands, nonprofits and other organizations may be required to disclose all contributors who give at least $200 toward influencing federal elections, not just those who earmark their donation for a specific independent expenditure.

The decision has not yet gone into effect, as the court has given the FEC 45 days to issue interim regulations before the rule is invalidated.  It is almost certain that the court’s decision will be appealed, most likely by defendant-intervenor Crossroads GPS.  While the FEC could appeal the ruling as well, an appeal would require a unanimous decision by the four commissioners. 

Caplin & Drysdale's Political Law and Exempt Organizations Groups will be monitoring the case, and will send updates regarding any further important developments.  If you have questions concerning this alert or for more information, please contact:

 

Trevor Potter tpotter@capdale.com

202.862.5092

Matthew T. Sanderson msanderson@capdale.com

202.862.5046

Douglas N. Varley dvarley@capdale.com

202.862.7818

Sharon P. Want

swant@capdale.com
202.862.7849

 

 

Bryson B. Morgan bmorgan@capdale.com

202.862.7836

 

Emma K. Lewis

elewis@capdale.com
202.862.7844

 

 

 

About Caplin & Drysdale

Having celebrated our 50th Anniversary in 2014, Caplin & Drysdale continues to be a leading provider of tax, tax controversy, and litigation legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

 

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills - combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment - make us one the nation's most distinctive law firms.

 

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:

 

-Bankruptcy
-Business, Investment & Transactional Tax
-Complex Litigation
-Corporate Law
-Employee Benefits
-Exempt Organizations

-International Tax
-Political Law
-Private Client
-Tax Controversies
-Tax Litigation
-White Collar Defense

 

For more information, please visit us at www.caplindrysdale.com.


Washington, DC Office: 
One Thomas Circle, NW
Suite 1100
Washington, DC 20005
202.862.5000

Disclaimer

This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.

© 2018 Caplin & Drysdale, Chartered

All Rights Reserved.