What It Means

Speculation about the impact of the Citizens United decision has run the gamut from mass hysteria to communal ecstasy. Most campaign finance experts, however, agree that little is known about exactly how this will affect our election system.

“Citizens United elicits very strong feelings but to a certain extent, what it means lies in the eye of the beholder,” says Chris DeLacy, a campaign finance lawyer. “A lot of this is going to play out over time.”

Some things, however, are more likely to happen than others. Most campaign finance experts agree, for example, that there will be a rise in third party group expenditures in future elections. How large this influx will be remains unclear. “I tell people to look at what happened before,” says Brad Smith, a campaign finance lawyer and former chairman of the FEC. In 2007, the Court ruled in FEC v. Wisconsin Right to Life that corporations had a right to air issue advocacy ads, ones that did not expressly advocate for the election or defeat of a candidate.

“What we saw then,” Smith says, “was a bit more spending of that type. So there will probably be more spending, but the idea that there is going to be this torrent is not true.”

The increase in spending will like come from 501(c) groups, particularly: 501(c)4s—typically social welfare groups, 501(c)5s—labor unions and 501(c)6s—trade associations like the Chamber of Commerce. All of these groups may engage in political activity, but they must disclose that activity to the IRS as well as contributors who give more than $5,000.

Groups are already forming that seek to take advantage of the ruling. In early February, a group of Republicans, including former Minnesota Sen. Norm Coleman, announced the creation of the American Action Network. The group will have a 501(c)4 arm that will engage in political activity and it has already said the Citizens United ruling will significantly help its fundraising efforts.

The impact of the Wisconsin Right to Life case may be instructive on other levels as well. Following that ruling, the FEC required corporations airing issue ads to disclose where their funding came from if—and only if—the funds were given with the express purpose of airing political ads. If the FEC adopts the same rules post-Citizens United, it would be easy for third party groups to shroud their donors, says Paul Ryan, a campaign finance reform advocate at the Campaign Legal Center.

“That would be a huge loophole,” he says. “It would be child’s play for an organization to characterize the influx of funds it can now receive from corporations after this decision as an increase in dues. [They could] then turn and use that money for political expenditures and the public wouldn’t know where the money is coming from.”

Ryan recommends that Congress focus on beefing up these disclosure laws in the wake of Citizens United. That is one of the few areas where Congress can legislate.

As noted previously, because the Court ruled on constitutional grounds, what Congress can do—or, more specifically, what Democrats may want to do—to rein in the ruling is severely limited. One aspect of the bill Sen. Charles Schumer (D-N.Y.) and Rep. Chris Van Hollen (D-Md.) introduced in February does tackle disclosure. It would require 501(c)s to disclose all their donors and create “political broadcast spending” accounts with the FEC.

The Schumer-Van Hollen bill would also require CEOs to appear on camera and say they “approve this message” for any ad their corporation airs. It would ban a corporation with 20 percent or more foreign ownership, or that has a board with a majority of foreign principals from making expenditures. Companies that received bailout funds or government contracts would also be prohibited from airing ads.

Even if the Schumer-Van Hollen bill passed—it’s chances are uncertain—it is also unclear which parts would hold up in court. That may not stop Congress from passing some part of it. A law that would likely limit the effects of the Court’s ruling on the 2010 elections could prove effective in the short term. Someone would have to challenge it, and it would have to go through the judicial process—buying Democrats some time to make it through the cycle.

It is also likely that we’ll see the FEC redraft the definition of a “political committee,” particularly in the realm of independent expenditure groups. In addition to Citizens United, the D.C. Circuit Court of Appeals ruled last September in Emily’s List v. FEC that independent expenditure committees may both take in unlimited contributions and spend unlimited amounts. The same court heard Speech-Now v. FEC in January, which questioned whether a group must register as a political committee—and thus be subject to $5,000 contribution limits—if it only plans to engage in independent expenditures.

What you won’t see, though, is mysterious 501(c) groups forming quickly in the run up to the election, like the fl y-by-night 527 groups we’ve seen in previous elections. That’s because these groups are more difficult to form under IRS rules and, even though the IRS has never formally said so, it is generally accepted that these groups cannot spend more than 50 percent of their money on political activity and continue to claim their tax exemption.

Another important consequence of Citizens United is that it opens the door to other challenges—specifically challenges to corporate contribution limits.

Even though the opinion only discussed expenditures, by justifying the right to spend on constitutional grounds the Court created the question of why corporations don’t also enjoy the same right to contribute. “The argument that Justice Kennedy used in the majority opinion—that the First Amendment doesn’t permit discrimination based up on who the speaker is,” says Bob Lenhard, the Democratic former chairman of the FEC’s Board of Commissioners, “makes it much harder to understand why the contribution limits continue to be constitutional.”

While there has been plenty of bluster surrounding the decision, the full force of Citizens United still lies down the road. Until then, several campaign finance experts share the same recommendation: Calm down.

“The reform side as every incentive to be alarmist and the deregulationists have ever incentive pooh-pooh this,” says Rick Hasen, a law professor at Loyola Law School and author of the Election Law Blog. “I think this is a very big deal, but it’s going to take a few more steps before the sky is actually falling.”

Jeremy P. Jacobs is the staff writer Politics magazine.