Order Code IB98025
CRS Issue Brief for Congress
Received through the CRS Web
Campaign Finance:
Constitutional and Legal
Issues of Soft Money
Updated August 29, 2003
L. Paige Whitaker
American Law Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Definitions of Hard and Soft Money in Federal Elections
Political Party Soft Money
Overview
Selected Case Law
Pending Lawsuit: McConnell v. FEC
Soft Money Spent On Issue Advocacy
Overview
Selected Case Law
Pending Lawsuit: McConnell v. FEC
Issue Advocacy Distinguished from Independent Expenditures
Corporate and Labor Union Soft Money
Bipartisan Campaign Reform Act of 2002 (BCRA) (P.L. 107-155) (enacted March 27, 2002;
effective Nov. 6, 2002)
Political Party Soft Money
Issue Advocacy
FOR ADDITIONAL READING
CRS Issue Briefs
CRS Reports
Selected World Wide Web Sites


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Campaign Finance: Constitutional
and Legal Issues of Soft Money
SUMMARY
Prior to enactment of the Bipartisan
while also serving to inform the public about
Campaign Reform Act of 2002 (BCRA), P.L.
a policy issue. BCRA prohibits corporations
107-155, the term “soft money” generally
and unions from using treasury funds to fund
referred to unregulated funds, perceived as
“electioneering communications,” defined as
resulting from loopholes in the Federal Elec-
broadcast advertisements that “refer to” a
tion Campaign Act (FECA), 2 U.S.C. §§ 431
federal candidate, 60 days before a general
et seq. Generally, the intent of BCRA,
election and 30 days before a primary, and
(effective Nov. 6, 2002), which amends
regardless of the source of funding, requires
FECA, is to restrict the raising and spending
disclosure of an ad’s cost, sponsor, and
of soft money. This Issue Brief discusses
contributors. The prevailing view in the lower
constitutional and legal issues surrounding
courts is that Supreme Court precedent gener-
two major types of soft money that BCRA
ally holds that regulation of such communica-
regulates: political party soft money and soft
tions, which do not contain express words of
money used for issue advocacy communica-
advocacy, is unconstitutional. Likewise,
tions. Corporate and labor union soft money,
plaintiffs in the pending lawsuit, McConnell v.
which FECA exempts from regulation and is
FEC, argue that issue ads are constitutionally
not addressed by BCRA, is also discussed.
protected speech and may not be regulated.

Defendants, however, maintain that BCRA
Prior to BCRA, political party soft
provides a constitutional regulation of “sham
money was funds raised by the national parties
issue ads,” which are designed to promote the
from sources and in amounts that FECA
election or defeat of a federal candidate, and
otherwise prohibited. Such funds were used
should therefore be subject to regulation. The
in part for overhead expenses and issue ads,
Supreme Court will hear oral argument in this
and then largely transferred to state and local
case on September 8, 2003.
parties, in accordance with the applicable state
law, for grassroots and party building activity.
Finally, soft money can be used to pay
As a result of BCRA, FECA now generally
for certain corporate and labor union activities
prohibits national parties from raising or
that are expressly exempt from FECA regula-
spending soft money, i.e. funds raised outside
tion: (1) communications by a corporation di-
the restrictions of FECA. In McConnell v.
rected at stockholders, executive or adminis-
FEC, (No. 02-1672), the U.S. Supreme Court
trative personnel and their families or by a
will be considering the constitutionality of the
labor organization directed at its members and
BCRA restrictions on party soft money.
families, on any subject; (2) voter registration
and get-out-the-vote activities by a corpora-
Over the last several election cycles, soft
tion, directed to its stockholders, executive or
money spent for issue advocacy communica-
administrative personnel and their families, or
tions gained great popularity. Issue advocacy
by a labor organization to its members and
typically occurs when a group, such as a for-
their families; and (3) the establishment and
profit or non-profit corporation or labor union,
administration of a political action committee
pays for an advertisement that could be inter-
(PAC). The recently enacted BCRA does not
preted to favor or disfavor certain candidates,
address this type of soft money.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
Shortly after enactment of the Bipartisan Campaign Reform Act of 2002 (BCRA), P.L. 107-
155, (effective Nov. 6, 2002), Senator Mitch McConnell and others filed suit in U.S. District
Court for the District of Columbia arguing that portions of the new law are unconstitutional.
Primary features of the law include restrictions on party soft money and issue advocacy. On
May 2, 2003, a three-judge panel of the U.S. District Court for the District of Columbia
struck down BCRA’s blanket prohibition on the raising of soft money by national parties and
the use of soft money by state and local parties, but retained the ban only for public
communications that “refer” to clearly identified federal candidates. The panel also retained
the prohibition on the raising of soft money by federal candidates and officials. Regarding
"electioneering communications," which BCRA prohibits from being funded by corporations
and labor unions, the three-judge panel struck down the regulation of all broadcast ads that
refer to a clearly identified federal candidates in the last 30 days of a primary or 60 days of
a general election, but upheld a portion of the secondary definition of electioneering
communication, thus allowing regulation of advertisements that supported or opposed federal
candidates, regardless of when they were disseminated. McConnell v. FEC, No. 02-CV-0582
(D.D.C. May 2, 2003). On May 19, the district court issued a stay to its ruling, which leaves
BCRA, as enacted, in effect until the Supreme Court issues a decision.
On June 5, 2003, the U.S. Supreme Court agreed to expedite its review of BCRA and
scheduled four hours of oral argument on September 8. (McConnell v. FEC, No. 02-1672).
BACKGROUND AND ANALYSIS
Definitions of Hard and Soft Money in Federal Elections
Prior to enactment of the Bipartisan Campaign Reform Act of 2002 (BCRA), P.L. 107-
155, money for election related activities that was generally raised and spent outside of
federal regulation was known as “soft money” or non-federal funds. Soft money was raised
and spent in a manner that could affect federal elections, but was unregulated – and legal –
since it was not spent directly for or against specific federal candidates. Generally, the intent
of BCRA, which amends the Federal Election Campaign Act (FECA), 2 U.S.C. §§ 431 et
seq.
, and became effective on November 6, 2002, is to restrict the raising and spending of
soft money.
The term “hard money,” has typically been used to refer to funds raised and spent in
accordance with the limitations, prohibitions, and reporting requirements of the FECA. See
2 U.S.C. §§ 441a, 441b(a). Unlike soft money, hard money may be used in connection with
a federal election. Under the FECA, hard money restrictions apply to contributions and
expenditures from any “person,” as defined to include, “an individual, partnership,
committee, association, corporation, labor organization, or any other organization or group
of persons, but does not include the Federal Government or any authority of the Federal
Government.” 2 U.S.C. § 431(11).
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This Issue Brief discusses constitutional and legal issues surrounding two major types
of soft money that BCRA regulates: political party soft money and soft money used for issue
advocacy. Corporate and labor union soft money, which FECA expressly exempts from
regulation and BCRA does not address, is also discussed.
Political Party Soft Money
Overview
Before the enactment of BCRA, political party soft money funds were raised by the
national parties from sources and in amounts that FECA otherwise prohibited. Such funds
were used in part for party overhead expenses and issue ads, and then largely transferred to
state and local parties, in accordance with the applicable state law, for grassroots and party
building activity. Since the 1979 FECA Amendments, certain grassroots, voter-registration,
get-out-the-vote, and generic party-building activities were exempt from FECA coverage.
2 U.S.C. § 431(9)(B)(viii),(ix). In addition, certain Federal Election Commission (FEC)
advisory opinions permitted soft money to be used for a portion of activities that promoted
both federal and state candidates. (See, e.g., AO 1978-10). Money raised and spent for these
activities was in large part unregulated and hence, was considered political party soft money.
As a result of the BCRA amendments, the FECA now generally prohibits national party
committees from raising or spending soft money by subjecting such funds to the limitations,
prohibitions, and reporting requirements of FECA.
Selected Case Law
The constitutionality of such restrictions on party soft money is a major issue in the
currently pending Supreme Court case, McConnell v. FEC, (No. 02-1672). In its landmark
decision in this, Buckley v. Valeo, the Supreme Court made it clear that the right to associate
is a “basic constitutional freedom,” and that any action that may have the effect of curtailing
that freedom to associate would be subject to the strictest judicial scrutiny. 424 U.S. 1, 25
(1976) (quoting Kusper v. Pontikes, 414 U.S. 51, 57 (1973)). However, the Court further
asserted that the right of political association is not absolute and can be limited by substantial
governmental interests such as the prevention of corruption or the prevention of even the
appearance of corruption. 424 U.S. at 27-28.
Employing this analysis, the Buckley Court determined that limitations on contributions
can pass constitutional muster if they are reasonable and only marginally infringe on First
Amendment rights in order to stem actual or apparent corruption resulting from quid pro quo
relationships between contributors and candidates. The Court noted that, unlike an
expenditure limitation, a reasonable contribution limitation does “not undermine to any
material degree the potential for robust and effective discussion of candidates and campaign
issues by individual citizens, associations, the institutional press, candidates, and political
parties.” 424 U.S. at 20-38. Furthermore, the Buckley Court found that preventing
corruption or the appearance thereof, which can be presented by such quid pro quo
relationships, would constitute a substantial governmental interest warranting reasonable
infringement on First Amendment rights. 424 U.S. 26-27.
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In a more recent Supreme Court decision, Nixon v. Shrink Missouri Government PAC,
528 U.S. 377 (2000), the Supreme Court upheld a Missouri state campaign contribution
limits and reaffirmed its landmark 1976 precedent in Buckley v. Valeo that the government
can regulate campaign contributions. The Court noted that it has consistently found that less
justification is required in order to uphold limits on campaign contributions than is required
to uphold limits on campaign expenditures. In his dissent, however, Justice Kennedy warned
that the Court’s decision undermines free speech protections and will add to the proliferation
of “covert speech” in the form of soft money.
Pending Lawsuit: McConnell v. FEC
In McConnell v. FEC, plaintiffs argued in the district court that the BCRA restrictions
on political party soft money are unconstitutional because they significantly burden free
speech and association rights under the First Amendment, but are not sufficiently tailored to
prevent actual corruption or the appearance thereof. Consolidated Opposition Brief for
Plaintiffs at 14-29, McConnell v. FEC, No. 02-CV-0582 (D.D.C. 2002). Plaintiffs further
maintained that BCRA regulation of the role of national party committees in state and local
elections usurps the states’ power to regulate such elections in violation of the Tenth
Amendment to the Constitution and principles of federalism. Id. at 4-14.
Defendants, however, maintained that the prohibitions on political party soft money will
stem corruption, in actuality and appearance, that result from quid pro quo relationships
between large-dollar soft money contributors and federal office candidates who benefit from
political party soft money expenditures. Defendant-Intervenors’ Excerpts of Brief of
Defendants at 19-44, McConnell v. FEC, No. 02-CV-0582 (D.D.C, 2002). With regard to
BCRA’s impact on state and local parties, defendants argued that the restrictions were
enacted to serve the same anti-corruption and anti-circumvention purposes that informed the
FECA’s restrictions on the national parties and only limit the source and amount of money
state parties can use to pay for federal election activity. Id. at 51-60.
Section 101 of BCRA, which creates a new section in the Federal Election Campaign
Act (FECA), Section 323(a), codified at 2 U.S.C. § 441i(a), prohibits national parties from
soliciting, receiving, directing, transferring, and spending nonfederal funds, i.e., soft money.
On May 2, 2003, in a 2 to 1 split, the McConnell v. FEC court upheld the BCRA ban on
national parties using nonfederal funds for public communications that “refer” to a clearly
identified federal candidate — “regardless of whether a candidate for State or local office is
also mentioned or identified” — and that “promotes or supports” or “attacks or opposes” a
candidate for that office, “regardless of whether the communication expressly advocates a
vote for or against a candidate.” No. 02-CV-0582 slip op. at 5-6 (D.D.C., May 2, 2003).
However, the court found that the prohibition on national parties soliciting, receiving,
directing, transferring, and spending soft money otherwise was unconstitutional. On May
19, 2003, the district court issued a stay to its ruling, which leaves BCRA, as enacted, in
effect until the Supreme Court issues a decision.
Section 101 of BCRA creates another new FECA provision, Section 323(b), which
prohibits state and local parties from using nonfederal funds (or soft money) for “federal
election activities.” Section 301(20)(A) of FECA, as amended by BCRA, defines “federal
election activities” to include: (i) voter registration drives in the last 120 days of a federal
election; (ii) voter identification, Get-Out-The-Vote (GOTV) drives, and generic activity in
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connection with an election in which a federal candidate is on the ballot; (iii) public
communications that “refer” to a clearly identified federal candidate — “regardless of
whether a candidate for State or local office is also mentioned or identified” — and that
“promotes or supports” or “attacks or opposes” a candidate for that office, “regardless of
whether the communication expressly advocates a vote for or against a candidate”; or (iv)
services by a state or local party employee who spends at least 25% of paid time in a month
on activities in connection with a federal election. Codified at 2 U.S.C. § 431(20). The
McConnell v. FEC three-judge court ruled that Section 323(b) of FECA, as amended by
BCRA, is constitutional only as applied to Section 301(20)(A)(iii) activities. According to
this court ruling, state and local parties would be prohibited from spending nonfederal or soft
money on public communications that “refer” to a clearly identified federal candidate —
“regardless of whether a candidate for State or local office is also mentioned or identified”
— and that “promotes or supports” or “attacks or opposes” a candidate for that office,
“regardless of whether the communication expressly advocates a vote for or against a
candidate.” However, state and local parties would still be permitted to use soft money for
other “federal election activities” including, voter registration, GOTV drives, generic activity
in connection with an election where a federal candidate is on the ballot, and services by state
or local party employees spending at least 25% of paid time in a month on federal election
activities. No. 02-CV-0582 slip op. at 6 (D.D.C., May 2, 2003).
Soft Money Spent On Issue Advocacy
Overview
Over the last several election cycles, soft money spent for issue advocacy
communications gained great popularity. Issue advocacy communications are paid for by a
group, such as a for-profit or non-profit corporation or labor organization, for advertisements
that could be interpreted to favor or disfavor certain candidates, while also serving to inform
the public about a policy issue. The prevailing view in the lower courts is that Supreme
Court precedent requires that only those communications that expressly advocate the election
or defeat of a clearly identified candidate can be constitutionally regulated; any such
communication that does not meet this “express advocacy” standard is constitutionally
protected First Amendment speech, which cannot be regulated. Hence, according to most
lower courts, issue ads may be paid for with unregulated soft money.
BCRA prohibits corporations and unions from using treasury funds to fund
“electioneering communications,” defined as broadcast advertisements that “refer to” a
federal candidate, 60 days before a general election and 30 days before a primary, and
regardless of the source of funding, requires disclosure of an ad’s cost, sponsor, and
contributors. P.L. 107-155, §§ 201-204.
Selected Case Law
In Buckley v. Valeo, 424 U.S. 1 (1976), the Supreme Court generally held that campaign
finance limitations apply to “communications that in express terms advocate the election or
defeat of a clearly identified candidate for federal office.” A footnote to the opinion provides
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examples of such “express advocacy”: terms “such as ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your
ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ ‘reject.’” Id. at 44 n.52; see 11
C.F.R. 101.22(a). Communications without these ‘magic words’ are often classified as issue
advocacy, thus falling outside the scope of the FECA.
In the 1986 decision of Federal Election Commission v. Massachusetts Citizens for Life,
Inc., (MCFL), 479 U.S. 238 (1986), the Supreme Court continued to distinguish between
issue and express advocacy, holding that an expenditure must constitute express advocacy
in order to be subject to the FECA prohibition against corporate use of treasury funds to
make an expenditure “in connection with” any federal election. Id. at 249-250. In MCFL,
the Court ruled that a publication urging voters to vote for “pro-life” candidates, while also
identifying and providing photographs of certain candidates who fit that description, could
not be regarded as a “mere discussion of public issues that by their nature raise the names of
certain politicians.” Instead, the Court found, the publication “in effect” provided a directive
to the reader to vote for the identified candidates and ergo, constituted express advocacy. Id.
at 249-250.
In FEC v. Furgatch, 807 F.2d 857 (9th Cir. 1987), cert. denied, 484 U.S. 850 (1987),
the Ninth Circuit presented the following three-part test to determine whether a
communication may be considered issue advocacy:
First, even if it is not presented in the clearest, most explicit language, speech is ‘express’
for the present purposes if its message is unmistakable and unambiguous, suggestive of
only one plausible meaning. Second, speech may only be termed ‘advocacy’ if it presents
a clear plea for action, and thus speech that is merely informative is not covered by the
Act. Finally, it must be clear what action is advocated. Speech cannot be ‘express
advocacy of election or defeat of a candidate’ when reasonable minds could differ as to
whether it encourages a vote for or against a candidate or encourages the reader to take
some other kind of action. Id. at 864.
However, the trend in the circuit courts appears to be away from the Furgatch and FEC
definitions toward a more limited interpretation of what type of speech will constitute
“express advocacy.” Hence, regulation of fewer types of communications are being upheld
as constitutionally permissible and therefore, more “issue ads” are permissibly funded with
soft money.
In Maine Right to Life Committee v. FEC, 914 F.Supp. 8 (D. Maine 1996), aff’d per
curiam 98 F.3d 1 (1st. Cir. 1996), cert. denied, 522 U.S. 810 (1997), the First Circuit
affirmed the district court’s opinion that the FEC surpassed its authority when it included a
“reasonable person” standard in its definition of “express advocacy.” The court reasoned that
such a standard threatened to infringe upon issue advocacy, an area protected by the First
Amendment. Id. at 12. The Fourth Circuit reached a similar conclusion in FEC v. Christian
Action Network,
92 F.3d 1178 (4th Cir. 1997).
In Vermont Right to Life Committee v. Sorrell, 216 F.3d 264 (2d Cir. 2000), the Second
Circuit Court of Appeals found that state campaign regulations triggering disclosure and
reporting requirements of speech that “expressly or implicitly advocate[] the success or
defeat of a candidate” were facially invalid under the First Amendment because they would
result in a regulation of constitutionally protected issue advocacy, (emphasis added). In
Vermont, the court held that the Supreme Court in Buckley v. Valeo had established an
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“express advocacy standard” in order to insure that regulations were neither too vague nor
intrusive on First Amendment protected issue advocacy. Accordingly, the court determined
that by including the term “implicitly,” the regulations extend to advocacy with respect to
public issues, in violation of the rule enunciated in Buckley and its progeny.
Pending Lawsuit: McConnell v. FEC
Similar to the prevailing view in the lower courts, plaintiffs in the currently pending
lawsuit challenging the constitutionality of BCRA, McConnell v. FEC, argued in the district
court that issue ads are constitutionally protected speech that may not be regulated. Plaintiffs
maintained that Buckley and its progeny clearly enunciate the standard that the government
may not regulate political speech beyond express advocacy. Consolidated Opposition Brief
for Plaintiffs at 32-41, McConnell v. FEC, No. 02-CV-0582 (D.D.C. 2002).
Defendants, on the other hand, argued that the BCRA restrictions on “electioneering
communications” are necessary to regulate “sham issue ads,” which are intended and
designed to promote the election or defeat of a federal candidate. Defendant-Intervenors’
Excerpts of Brief of Defendants at 66-94, McConnell v. FEC, No. 02-CV-0582 (D.D.C.
2002). Often broadcast by corporations and labor unions, defendants argue that such ads
violate FECA restrictions on corporate and union spending. Id. at 94-119. Therefore,
defendants maintained that BCRA was simply an effort by Congress to repair the “gaping
holes recently opened in FECA’s coverage.” Id. at 106.
On May 2, 2003, the three-judge district court ruled 2 to 1 that the primary definition
of “electioneering communication” is unconstitutional and accordingly, ruled that the
prohibition on labor unions and corporations (and any persons using funds donated by a
corporation or labor union) using treasury funds for “electioneering communications” and
the requirement for disclosure to the FEC of spending for all “electioneering
communications” would be unconstitutional under the primary definition. The court upheld
the backup definition of “electioneering communication,” with the deletion of the last clause,
“and which also is suggestive of no plausible meaning other than an exhortation to vote for
or against a specific candidate.” Thus the court generally upheld the disclosure requirements
and the prohibition on labor unions and corporations funding “electioneering
communications” as defined by a portion of the backup definition. No. 02-CV-0582, slip op.
at 6 (D.D.C., May 2, 2003). Under this ruling, corporations and labor unions would
generally be prohibited from using treasury funds to pay for any broadcast, cable, or satellite
communication — at any time in the election cycle — which “promotes or supports” or
“attacks or opposes” a candidate for that office, “regardless of whether the communication
expressly advocates a vote for or against a candidate.” However, on May 9, 2003, the district
court issued a stay to its ruling, which leaves BCRA, as enacted, in effect until the Supreme
Court issues a decision.
Section 203 of BCRA also contains an exemption to the prohibition on corporations
directly funding “electioneering communications,” (i.e. using treasury funds instead of
funding such advertisements through a PAC) for certain non-profit organizations. Under a
portion of Section 203 known as Snowe-Jeffords, (named after its primary sponsors in the
Senate), Internal Revenue Code Section 501(c)(4) and 527(e)(1) organizations are permitted
to use their general treasury funds for “electioneering communications” so long as the
communication is paid for exclusively with funds from individuals who are U.S. citizens,
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nationals, or lawfully admitted for permanent residence. Codified at 2 U.S.C. §
441b(c)(2)(2002). The Snowe-Jeffords provision is an expansion of the law as it existed
prior to BCRA. Prior to BCRA, the 1986 Supreme Court decision, FEC v. Massachusetts
Citizens for Life (MCFL),
479 U.S. 238 (1986), had provided an as-applied exception for
non-profit corporations that satisfied certain criteria. In order to satisfy the MCFL criteria,
a corporation is required to: (1) be formed for the purpose of promoting political ideas and
cannot engage in business activities; (2) have no shareholders or other persons affiliated so
that members have no economic disincentive for disassociating with it if they disagree with
its political activity; and (3) not be established by a business corporation and cannot accept
contributions from business corporations. Id. at 264.
Section 204 of BCRA, however, (known as the Wellstone Amendment) effectively
withdraws the Snowe-Jeffords exception in Section 203, according to the district court in
McConnell v. FEC. No. 02-CV-0582, slip op. at 9 (D.D.C., May 2, 2003). As a result of the
Wellstone Amendment in Section 204, entities that are organized under Internal Revenue
Code Sections 501(c)(4) and 527(e)(1) are not permitted to use their general treasury funds
for “electioneering communications.” Codified at 2 U.S.C. § 441b(c)(6). As the McConnell
district court noted, the Wellstone Amendment was codified in a separate portion of BCRA
in order to preserve severability. In McConnell, the district court struck down the Wellstone
Amendment in Section 204 as it applies to corporations that meet the criteria set forth by the
Supreme Court in MCFL, also known as “MCFL corporations.” Hence, under the district
court ruling, the prohibition against corporations using treasury funds to pay for
“electioneering communications” would apply only to non-MCFL corporations. As noted
earlier, however, on May 9, 2003 the district court issued a stay to its ruling, which leaves
BCRA, as enacted, in effect until the Supreme Court issues a decision.
Issue Advocacy Distinguished from Independent Expenditures
Soft money spent for issue advocacy communications is sometimes confused with
independent expenditures. Although both types of expenditures are purportedly independent,
(Justice Kennedy argues that, by nature, practically all expenditures are coordinated with a
candidate and, thus, cannot be considered independent. Colorado Republican Committee v.
FEC (Colorado I), 518 U.S. 604 (1996)(Kennedy, J., concurring in the judgment, dissenting
in part), only independent expenditures are subject to the FECA. The Colorado I Court held
that the First Amendment would prohibit the application of a FECA provision, 2 U.S.C. §
441a(d)(3), limiting political party expenditures made independently and without any
coordination with a candidate or his or her campaign. The Colorado decision essentially
banned any limitations on political party expenditures when they are made independently of
a candidate’s campaign. Colorado I, 518 U.S. at 614-17. Since a political committee
making independent expenditures, however, is still subject to FECA restrictions regarding
sources and contribution amounts it may receive from a person, see, e.g., 11 C.F.R. §
110.0(d), an independent expenditure is not considered soft money.
In FEC v. Colorado Republican Federal Campaign Committee (Colorado II), 533 U.S.
431 (2001), the Supreme Court held that a political party’s coordinated expenditures, unlike
genuine independent expenditures, may be limited in order to minimize circumvention of the
Federal Election Campaign Act’s (FECA) contribution limits. While the Court’s opinion in
Colorado I was limited to the constitutionality of the application of FECA’s “Party
Expenditure Provision,” 2 U.S.C. § 441a(d)(3), to an independent expenditure by the
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Colorado Republican Party, in Colorado II the Court considered a facial challenge to the
constitutionality of the limit on coordinated party spending. Persuaded by evidence
supporting the FEC’s argument, the Court found that coordinated party expenditures are
indeed the “functional equivalent” of contributions. Id. at 447. Therefore, in its evaluation,
the Court applied the same scrutiny to the coordinated “Party Expenditure Provision” that
it has applied to other contribution limits: inquiring whether the restriction is “closely drawn”
to the “sufficiently important” governmental interest of stemming political corruption. Id.
at 456. The Court further determined that circumvention of the law through “prearranged
or coordinated expenditures amounting to disguised contributions” is a “valid theory of
corruption.” Id. In upholding the limit, the Court noted that “substantial evidence
demonstrates how candidates, donors, and parties test the limits of the current law,” which,
the Court concluded, “shows beyond serious doubt how contribution limits would be eroded
if inducement to circumvent them were enhanced by declaring parties’ coordinated spending
wide open.” Id. at 457.
Corporate and Labor Union Soft Money
Generally, contributions and expenditures by corporations, labor unions, membership
organizations, cooperatives, and corporations without capital stock have been prohibited in
federal elections. 2 U.S.C. § 441b. FECA, however, provides for three exemptions from this
broad prohibition, that is, contributions and expenditures for: (1) communications by a
corporation to its stockholders, executive or administrative personnel and their families or
by a labor organization to its members or families on any subject; (2) nonpartisan voter
registration and get-out-the-vote activities by a corporation aimed at its stockholders and
executive and administrative personnel and their families or by a labor organization aimed
at its members and their families; and (3) the establishment, administration and solicitation
of contributions to a separate segregated fund (commonly known as a political action
committee or PAC or SSF) to be utilized for federal election purposes by a corporation, labor
organization, membership organization, cooperative, or corporation without capital stock.
2 U.S.C. § 441b(b)(2)(A)-(C); see also 11 C.F.R. § 114.1(a)(2)(i)-(iii).
In Communication Workers of America v. Beck, 487 U.S. 735 (1988), the Supreme
Court held that labor unions are not permitted to spend funds exacted from dues-paying
non-union employees under an agency shop agreement for certain activities unrelated to
collective bargaining when those employees object to such expenditures. According to the
Court, Congress’ purpose in providing the union shop was to force employees to bear their
fair share of the costs of labor-management negotiations and collective bargaining activities,
but not to force employees to support unrelated labor union political activities they oppose.
As a result of Beck, non-union employees in an agency shop agreement can request a refund
of that portion of their dues used by the union for political activities. Accordingly, if workers
exercise their rights under Beck, labor unions would lose some soft money funds, which
would otherwise be available for election-related expenses. Campaign finance reform
legislation that would simply codify the Beck decision, without expanding on the Court’s
ruling, would appear to be constitutional.
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Bipartisan Campaign Reform Act of 2002 (BCRA) (P.L.
107-155) (enacted March 27, 2002; effective Nov. 6, 2002)
The following summarizes BCRA provisions addressing political party soft money and soft
money spent on issue advocacy.
Political Party Soft Money
Prohibits national party committees from soliciting, receiving, directing, transferring,
or spending soft money; generally prohibits spending of soft money for a “federal election
activity” by state and local party committees, including an association or group of state or
local candidates or officials. Prohibits state or local candidates from using soft money for
public communications that promote or attack a clearly identified federal candidate, but
exempts communications referring to a federal candidate who is also a state or local
candidate. Permits state, district or local party committees to use some funds raised under
state law for an allocable share (at a 50-50 hard to soft money ratio) of voter registration
drives in the last 120 days of a federal election, and voter identification, get-out-the-vote
drives, and generic activity if it: (1) does not refer to a federal candidate; (2) does not pay for
a broadcast, cable or satellite communication (unless it refers solely to state/local
candidates); (3) takes no more than $10,000 per year from any person for such activity (or
less, if state law so limits); and (4) uses only funds raised by that party committee expressly
for such purposes, with no transfers from other party committees. Defines “federal election
activity” to include: (1) voter registration drives in last 120 days of a federal election; (2)
voter identification, get-out-the-vote drives, and generic activity in connection with an
election in which a federal candidate is on the ballot; and (3) “public communications” that
refer to a clearly identified federal candidate and promote, support, attack, or oppose a
candidate for that office (regardless of whether it expressly advocates a vote for or against)
or services by a state or local party employee who spends at least 25% of paid time in a
month on activities in connection with a federal election. Requires disclosure by national
parties of all activity (federal and non-federal), and by state and local parties of specified
activities, that might affect federal elections; removes building fund exemption.
Issue Advocacy
Creates a new term in federal election law, "electioneering communication," in order
to regulate political ads that: "refer" to a clearly identified federal candidate, are broadcast
within 30 days of a primary or 60 days of a general election, and for House and Senate
elections, are “targeted to the relevant electorate.” Generally, it requires disclosure of
disbursements over $10,000 for such communications, including identification of each donor
of $1,000 or more, and prohibits such communications from being financed with union or
certain corporate funds. With respect to corporate funds, it exempts Internal Revenue Code
§ 501(c)(4) or § 527 tax-exempt corporations from making “electioneering communications”
with funds solely donated by individuals who are U.S. citizens or permanent resident aliens,
unless the communication is “targeted,” i.e., it was distributed from a broadcaster or cable
or satellite service and is received by 50,000 or more persons in the state or district where
the Senate or House election, respectively, is occurring. If the definition of “electioneering
communication” is ruled unconstitutional, the Act provides an alternative definition, based
on FEC v. Furgatch, 807 F.2d 857 (9th Cir. 1987): a communication promoting, supporting,
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attacking, or opposing a candidate, regardless of whether it expressly advocates a vote for
or against a candidate and is suggestive of no plausible meaning other than an exhortation
to vote for or against a candidate.
FOR ADDITIONAL READING
CRS Electronic Briefing Book on Campaign Finance Reform,
[http://www.congress.gov/brbk/html/ebcam1.shtml]
CRS Electronic Briefing Book page, Tax-Exempt 527 Organizations,
[http://www.congress.gov/brbk/html/ebcam32.html]
CRS Issue Briefs
CRS Issue Brief IB87020. Campaign Financing, by Joseph E. Cantor.
CRS Reports
CRS Report 97-973. Business and Labor Spending in U.S. elections, by Joseph E. Cantor.
CRS Report RS21511. Campaign Finance: Brief Overview of McConnell v. FEC, by L.
Paige Whitaker.
CRS Report RL31290. Campaign Finance Bills Passed in the 107th Congress: Comparison
of S. 27 (McCain-Feingold), H.R. 2356 (Shays-Meehan), and Current Law, by Joseph
E. Cantor and L. Paige Whitaker.
CRS Report 98-282. Campaign Finance Reform: a Legal Analysis of Issue and Express
Advocacy, by L. Paige Whitaker.
CRS Report RS20849. Campaign Finance Reform: Constitutional Issues Raised by
Disclosure Requirements, by L. Paige Whitaker.
CRS Report RS20854. Campaign Finance Reform and Incentives to Voluntarily Limit
Candidate Spending from Personal Funds: Constitutional Issues Raised by Public
Subsidies and Variable Contribution Limits,
by L. Paige Whitaker.
CRS Report RL30669. Campaign Finance Regulation under the First Amendment: Buckley
v. Valeo and its Supreme Court progeny, by L. Paige Whitaker.
CRS Report 97-1040. Campaign Financing: Highlights and Chronology of Current Federal
Law, by Joseph E. Cantor.
CRS Report 97-555. Compulsory Union Dues and Agency Fee Objectors, by Gail
McCallion.
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CRS Report 96-484. Political Spending by Organized Labor: Background and Current
Issues, by Joseph E. Cantor.
CRS Report RL31288. Soft Money, Allegations of Political Corruption, and Enron, by Jack
Maskell and L. Paige Whitaker.
CRS Report 97-618. The Use of Union Dues for Political Purposes: a Legal Analysis, by L.
Paige Whitaker.
Selected World Wide Web Sites
Federal Election Commission:
[http://www.fec.gov]
For access to full text of court decisions:
[http://www.findlaw.com/casecode/cases.html]
For access to U.S. Supreme Court BCRA cases page:
[http://www.supremecourtus.gov/bcra/bcra.html]
For access to McConnell v. FEC comprehensive case materials from Stanford Law School:
[http://www.law.stanford.edu/library/campaignfinance/#case]
For ongoing tracking of issue advocacy by the Annenberg Public Policy Center of the
University of Pennsylvania:
[http://www.appcpenn.org/issueads/]
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