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Final Rules on Independent Expenditures and Electioneering Communications by Corporations and Labor Organizations

On October 9, 2014, the Commission approved final rules that permit corporations and labor organizations to finance independent expenditures and electioneering communications. The rules were promulgated in response to a Petition for Rulemaking filed by the James Madison Center for Free Speech petitioning the Commission to revise its regulations in response to the Supreme Court’s decision in Citizens United v. FEC, 558 U.S. 310 (2010), which invalidated the ban on corporate independent expenditures and electioneering communications.

Background
The Federal Election Campaign Act (the Act) and Commission regulations prohibit corporations and labor organizations from using their general treasury funds to make contributions or expenditures in connection with a federal election. 52 U.S.C. § 30118 (formerly 2 U.S.C. § 441b), and 11 CFR 114.2. This ban extends to payments for independent expenditures and electioneering communications. See 52 U.S.C. §§ 30101(17), 30104(f)(3), 30118(b)(2) (formerly 2 U.S.C. §§ 431(17), 434(f)(3), 441b(b)(2)); 11 CFR 100.16(a), 100.29(a).

In January 2010, the Supreme Court held that the Act’s prohibitions against corporate spending on independent expenditures or electioneering communications were unconstitutional. However, the Supreme Court upheld statutory provisions that require these communications to contain disclaimers and be reported to the Commission.

Since that time, the Commission has not enforced any statutory or regulatory provisions prohibiting corporations and labor organizations from making independent expenditures and electioneering communications. With this rulemaking, the Commission formally implements regulatory changes in response to the Citizens United decision. In addition to technical and conforming edits, the Commission approved the following changes to the regulations:

11 CFR 114.2. The Commission revised 11 CFR 114.2 to remove paragraphs (b)(2)(i), (b)(2)(ii) and (b)(3), which had prohibited corporations and labor organizations from making expenditures, express advocacy communications and electioneering communications beyond the restricted class. In addition, the Commission added a note referring to court decisions that corporations and labor organizations may make contributions to independent expenditure-only committees (Super PACs) and independent expenditure-only accounts maintained by Hybrid PACs.

11 CFR 114.3. The Commission revised the regulations on voter registration and get-out-the-vote (GOTV) drives aimed at the restricted class. The Commission removed language in paragraph (c)(4) that prohibited corporations and labor organizations from withholding voter registration or GOTV assistance based on support for or opposition to a particular federal candidate or party. The Commission concluded that the holding in Citizens United applies to all corporate and labor organization expenditures that are not coordinated and that do not otherwise constitute in-kind contributions. Accordingly, the Commission revised paragraph (c)(4) to permit partisan voter registration and GOTV activities, but prohibited corporations from coordinating with any candidate or party committee in conducting the drives.

Although the Commission did not edit the reporting requirements under 11 CFR 114.3(b), it should be noted that, while disbursements for nonpartisan voter registration and GOTV drives are not reportable expenditures under 52 U.S.C. § 30104(c)(1) (formerly 2 U.S.C § 434(c)(1)), disbursements for partisan drives aimed at the restricted class may be reportable expenditures. These disbursements must be reported if the activity includes express advocacy and exceeds the $2,000 reporting threshold.

11 CFR 114.4. The Commission removed all prohibitions on express advocacy beyond the restricted class in the communications described in 11 CFR 114.4(c). The Commission retained paragraphs (c)(2)-(6) as a non-exhaustive list of the types of permissible communications that corporations and labor organizations might make. The Commission also reorganized paragraph (c) to include explicit permission to make independent expenditures and electioneering communications, but included a general prohibition on coordination with candidates or party committees (unless coordinating with a candidate for endorsements to the restricted class under (c)(6) or for appearances at an educational institution under paragraph (c)(7)). The Commission also removed the exception for electioneering communications made by Qualified Nonprofit Corporations (QNCs) since Citizens United permits all corporations and labor organizations to make electioneering communications.

Finally, the Commission revised 11 CFR 114.4(d), the regulation on voter registration and GOTV drives aimed at the general public. The Commission removed the prohibition against corporations and labor organizations withholding assistance based upon support for or opposition to a particular candidate or party and removed the prohibition on express advocacy as part of those drives.

11 CFR 114.10. The Commission revised part 114.10 to remove the exemption for QNCs and to cross-reference the regulations applicable to corporate and labor organization independent expenditures and electioneering communications. This provision also restates the prohibition on coordinated expenditures, coordinated communications and contributions, and appends a note referring to court decisions that corporations and labor organizations may make contributions to independent expenditure-only committees (Super PACs) and independent expenditure-only accounts maintained by Hybrid PACs.

11 CFR 114.14 and 114.15. The Commission removed parts 114.14 and 114.15 in their entirety. These provisions placed restrictions on how general treasury funds may and may not be used for electioneering communications. Since Citizens United held that corporations and labor organizations may use general treasury funds to make all electioneering communications, the Commission removed sections of the regulations that distinguished between them.

11 CFR 104.20. The Commission combined paragraphs (c)(7)(i) and (c)(7)(ii) into new paragraph (c)(7) to permit any person (including a corporation or labor organization) making electioneering communications to do so from a segregated account consisting of donations from persons who may lawfully finance electioneering communications. The Commission concluded that since an electioneering communication (regardless of whether it is functionally equivalent to express advocacy) may now be financed with individual, corporate or labor funds, there is no longer a need for the regulations to distinguish between accounts based on who contributes to them or whether the electioneering communications are functionally equivalent to express advocacy. For clarity, the Commission also expressly listed the entities that may not contribute to the segregated accounts because they are prohibited from financing electioneering communications (foreign nationals, national banks, and corporations created by a law of Congress). The Commission also revised paragraphs (c)(8) and (c)(9) to conform those paragraphs to the removal of 11 CFR 114.15. Finally, the Commission added language to paragraph (c)(9) to clarify that that paragraph applies when the reporting entity does not use the segregated account option of paragraph (c)(7).

Additional Information
The final rules and Explanation and Justification were published in the Federal Register on October 21, 2014 (79 Fed. Reg. 62797). They are available on the Commission’s website at http://sers.fec.gov/fosers/showpdf.htm?docid=305685. Before final promulgation of the rules, the Commission transmits the rules to Congress for a thirty-day review period. The final rules were transmitted to Congress on October 10, 2014.

(Posted 10/23/2014; By: Zainab Smith)

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The FEC Record is produced by the Information Division, Office of Communications. Toll free 800-424-9530; Local 202-694-1100; E-mail info@fec.gov. Greg Scott, Director; Alex Knott, Senior Writer/Editor; Dorothy Yeager, Production Manager