The Citizens United Ruling

By Jeremy P. Jacobs

We all now know the broad strokes of what the Supreme Court did in its Citizens United v. Federal Election Commission decision in late January. We have heard plenty of speculation—some factual, some not so much—about what the decision will mean for the upcoming elections.

What is important to keep in mind, however, is what—specifically—the Court ruled. Many accounts, including President Obama’s in his State of the Union address, are meant to score political points, not to prove legal ones. That isn’t to say that there isn’t room for political interpretation—there clearly is—but let’s focus first on precisely what the court held.

The Supreme Court ruled in a 5-to-4 decision that corporations have a free speech right to use their general treasury funds to pay for ads that expressly advocate for the election or defeat of a political candidate in a federal election. These ads cannot be coordinated with a candidate’s campaign or party, but they may be run at any time, including on the days leading up to an election. While it did not mention them in the opinion, legal experts agree that the ruling also applies to labor unions.

Says Bob Lenhard, a Democratic campaign finance lawyer and former chairman of the FEC: “Most concretely, the Court said that the First Amendment bars the government from restricting corporations from spending their treasury money to produce ads that call for the election or defeat of a particular candidate.”

Specifically, the Court struck down a ban on corporate and union expenditures in the Federal Election Campaign Act of 1971, and a similar prohibition on “electioneering communications”—read: ads—in the Bipartisan Campaign Reform Act of 2002, better known as McCain-Feingold. It also overruled precedent first set in Austin v. Michigan Chamber of Commerce in 1990 and upheld in McConnell v. FEC in 2003.

The Court did not overrule contribution limits for corporations or unions—so political action committees will remain. Nor did it undo a ban on foreign corporations making direct or indirect contributions or expenditures in U.S. politics. U.S. subsidiaries of foreign corporations would only be able to make independent expenditures if no foreign national is involved in the decision making process and the foreign parent company does not pay for the expenditure, according to Chris DeLacy, a campaign finance lawyer. “Foreign corporations also can’t push a check through a U.S. subsidiary,” DeLacy adds. “As a legal issue, the U.S. subsidiary has to use money made in the U.S.”

(This contradicts part of what Obama said in his State of the Union: “Last week the Supreme Court reversed a century of law that I believe will open the floodgates for special interests—including foreign corporations—to spend without limit in our elections. I don’t think American elections should be bankrolled by America’s most powerful interests, or worse, by foreign entities.”)

Campaign finance reformers, who in general harshly criticized the ruling, did take solace in two other aspects of the Court’s holding. First, the Court ruled against Citizen United’s challenge to the requirement that ads include disclaimers—the “this ad was paid for by” line. Second, and more importantly, the Court upheld laws requiring the disclosure of where a group gets and spends its money. Here’s Lenhard again: “They said that the rules that require disclosure of that spending and that require the inclusion of a disclaimer identify who did the ads, are constitutional.”

Looking ahead, it is important to note that the Court ruled in favor of Citizens United on constitutional grounds. That means a few things. First, the ruling automatically supersedes all state and local campaign finance laws. Oklahoma, for example, has already said its state law in this area is no longer applicable, and others are following suit. Second, beyond a constitutional amendment—which is practically and politically a non-starter—it severely limits what Congress can do to put the previous restrictions back on the books. Says Bill McGinley, a Republican campaign finance lawyer: “The ruling closes the door on some of the potential legislative fixes that the Democrats are currently kicking around.”

Jeremy P. Jacobs is the staff writer Politics magazine.