Trade associations, 501(c)(4) social welfare organizations, other outside groups that pay for political advertisements, and their donors now have more answers to long-running questions regarding when donations to these groups are publicly reportable. After postponing consideration of the issue during its previous meeting, the Federal Election Commission (“FEC”) approved Wednesday an interim final rule on donor disclosure. The interim rule amends the federal regulations that describe when outside groups that pay for independent expenditures–advertisements that expressly advocate the election or defeat of a clearly identified candidate–must publicly disclose on FEC reports the names of their donors. The amended rule will take effect 30 legislative days after the FEC transmits the new rule to Congress, which the FEC anticipates will be September 30, 2022.
The interim rule brings the FEC’s regulations into harmony with a 2018 court decision that invalidated a long-standing regulation, 11 C.F.R. § 109.10(e)(1)(vi), requiring outside groups to disclose only those donors who contributed at least $200 to the outside group “for the purpose of furthering the reported independent expenditure.” The interim final rule strikes the regulation entirely. However, the FEC added a note to 11 C.F.R. § 109.10(e)(1) that clarifies the remaining portions of the regulation and the relevant statute are still in effect.
In the wake of the 2018 decision, many questions remained about when these groups must disclose donor names. The revised regulation itself was not meant to answer those questions; it was simply meant to harmonize regulations on the books with existing court decisions. Some of these questions were answered by an unusual guidance document the Commission posted to its website after the 2018 decision. That guidance, which remains in effect, provides that groups (other than political committees) that pay for independent expenditures must disclose the names of donors of over $200 who made contributions “earmarked for political purposes” during the reporting period.
But when is a contribution “earmarked for political purposes”? If a donor provides funds for get-out-the-vote activities, is that donation “earmarked for political purposes”? If a donor makes a contribution following a presentation from an outside group describing its political activities, is the donation reportable? What about a donation intended to further a hard-hitting issue advertisement whose purpose, at least in part, is to defeat a particular candidate? These questions are all left unaddressed in the interim final rule and the website guidance.
In tandem with the approval of the interim final rule, however, three FEC Commissioners issued a rare “interpretive statement” addressing some of these questions, citing Covington’s previous analysis which had highlighted the uncertainty and confusion in the current approach. In the statement, the Commissioners express their view that the new regulation should be interpreted to comply both with the court decision, but also “with the First Amendment and Supreme Court precedent” and “be fair to non-committee organizations and their donors and feasible for the Commission to administer.” Absent definitive rulemaking, the Commissioners take the position that alleged violations of this particular donor disclosure requirement “are effectively unenforceable due to the absence of clear direction from the Commission on which donations to non-committee organizations are ‘earmarked for political purposes.’” Nevertheless, the Commissioners expressed their view that a contribution is “earmarked for political purposes,” and therefore reportable, “only if it is designated or solicited for, or restricted to, activities or communications that expressly advocate the election or defeat of a clearly identified candidate for federal office.”
Thus, a donor who gives money with a specific instruction that the funds be used for independent expenditures would make a reportable contribution. On the other hand, “an unrestricted donation” or a donation designated for non-electoral purposes, or a donation in response “to a general solicitation to support the organization's mission” would not be reportable, even if the funds are later used to fund express advocacy activities.
What does this mean going forward? Of course, the Commissioners' policy statement is not a binding statement of law by the Commission as a whole. Still, absent a court decision or a change in position by the three Commissioners, enforcement matters alleging that social welfare organizations, trade associations, and other groups failed to disclose their donors are unlikely to find the required four votes to move forward unless the underlying contributions were allegedly designated or solicited for, or restricted to, express advocacy communications or activities. Contributions made to support issue advocacy communications (other than electioneering communications), get-out-the-vote activities, and other efforts to influence elections that do not involve express advocacy would not be reportable under this interpretation.
Contributions that are “designated” or “solicited” for express advocacy, however, would still be reportable. Donors concerned about whether their donations would be publicly reported should therefore carefully consider any solicitations received from the outside group, the specific details of any communications with outside groups, and any instructions provided for the contributions, either formally in an assurance letter or in informal communications.
* * *
If you have any questions concerning the material discussed in this client alert, please contact the members of our Election and Political Law practice.
Back
