Reed Smith

FEC Starts to Make Citizens United a Reality

As we previously noted, the Supreme Court has ushered in a new dawn on corporate political spending in its recent decision in Citizens United v. Federal Election Commission, 558 U.S. ____ 2010. This decision reverses decades of statutory and case law that prohibits corporations from using their general treasuries to fund direct political advertising against candidates for local, state or federal office, or what it is termed "express advocacy." It also removes restrictions on electioneering advertising done within close proximity to either a primary or general election, and that also refers to a clearly identified candidate for federal office. The ramification of this decision will likely be felt for some time to come, and the Reed Smith Public Policy & Infrastructure Practice would like to note the latest development, a series of immediate steps that the Federal Election Commission ("FEC") announced in a February 5, 2010 press release, posted on its website www.fec.gov. The FEC will also undertake a longer-term course of action to "fully implement" the Court's decision, and provides some basic guidelines to corporations and labor organizations intending to finance independent expenditures or electioneering communications. We offer this analysis of what has happened and what to expect.

Interim Steps: Enforcement and Rulemaking and Disclosure

One of the first things the FEC announced in its press release, not surprisingly, is that it will stop enforcing the statutes and regulations in place that ban either express advocacy or electioneering advertising. Thus, the FEC will no longer pursue claims, information requests, or audit actions related to those restrictions. Also, the FEC is reviewing all pending enforcement matters to determine which are affected by the Citizens United decision. Finally, the FEC "will no longer pursue information requests or audit issues" related to either express advocacy or electioneering claims.

This change in approach was anticipated in the aftermath of the Citizens United decision. In our January 25 teleseminar on the decision, we also predicted that the FEC would go beyond the Court's mandated disclosure for issue ads, and require organizations also to disclose their involvement in express advocacy. This is precisely the approach the Commission announced last week. Specifically, corporations and labor unions intending to undertake independent expenditures or fund electioneering communications must include the appropriate disclaimers on those communications, and must disclose independent expenditures on FEC Form 5, and electioneering communications on FEC Form 9.

Longer-Term Impacts: Formal Rulemaking Expected and Review as to What Constitutes a "Coordinated Communication"

The FEC will also conduct a formal rulemaking to revise the regulations directly affected by Citizens United, though it has not announced when that rulemaking will occur. In the meantime, the Commission is accepting comments about how Citizens United affects its ongoing rulemaking with regard to the "coordinated communication" test that governs when a corporate political expenditure is considered an in-kind contribution, subject to campaign finance limits and disclosure requirements. The FEC will hold a public hearing on the matter March 2 and 3, 2010; anyone seeking to testify must include such a request with their comments, which are due on or before February 24.

It is clear that we are only beginning to see the impact that Citizens United will have on corporate, union, and most likely trade association political activity. As we noted during our January 25 teleseminar on the decision, and as is visible in the specific questions posed by the FEC in its supplemental "coordinated communication" rulemaking, the Court's invocation of First Amendment rights has forced great scrutiny of both the basic outlines and the minute details of current regulations on organizational election expenditures. Until the dust settles, corporations and unions intending to finance independent expenditures or electioneering communications should continue to observe the disclaimer and disclosure requirements left unharmed by the Court's decision.

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Reed Smith attorneys will continue to monitor developments in this area. They are available to assist with the preparation of comments to the current rulemaking, and any such procedure to come, as well as the evaluation of current political contribution practices, to ensure they are in line with the remaining regulations on notice and disclosure.

	Christopher L. Rissetto Partner Washington, D.C. +1 202 414 9206		Lorraine Mullings Campos Partner Washington, D.C. +1 202 414 9386		Joelle E.K. Laszlo Associate Washington, D.C. +1 202 414 9212		Robert Helland Advisor Washington, D.C. +1 202 414 9334