Yes, Virginia (and Dan and Wendy), Citizens United opened the door to unlimited money


Dan Abrams, a legal analyst for ABC News and media entrepreneur in his own right, recently took reporters to task for expressing inaccuracies about what the Citizens United ruling did and did not do. His critique has been further advanced by Wendy Kaminer, who argues in The Atlantic that the New York Times “has repeatedly mischaracterized Citizens United, explicitly or implicitly blaming it for allowing unlimited ‘super PAC’ contributions from mega-rich individuals.”

There is no doubt that huge contributions from individuals, corporations and labor unions have influenced elections long before Citizens United, that the McCain-Feingold ban on soft money did not drive big money from elections, and that wealthy individuals, corporations and labor unions were influencing politics with their checkbooks with almost as much latitude as they do today. To give one example, Harold C. Simmons, who recently made news by writing a $5 million check to American Crossroads, wrote a check for a little more than $2.88 million to a group called the American Issues Project. In 2008–before Citizens United—that group ran ads attacking then-Presidential candidate Barack Obama for his association with 1960s radical Bill Ayers.

Even so, Citizens United, along with subsequent court decisions and FEC rulings stemming from it, has radically broadened the means available to well-heeled individuals, not to mention labor unions and corporations, to influence federal elections. Prior to those decisions, a Miriam Adelson would not have been able to make a $5 million contribution to the type of political committee that benefited from her largesse this year, one that could use her entire check to overtly advocate for the candidate of her choice.

How it worked pre-Citizens United Before the 2010 Citizens United ruling, independent political expenditures could be made only by entities that the Federal Election Commission called qualified nonprofit corporations–501(c)4 organizations that accepted donations only from individuals, had a political purpose and were not created by businesses or labor unions. In the 2008 election cycle, John M. Templeton Jr. made a single contribution of more than $1.46 million to such a group, called Let Freedom Ring, to run ads opposing Barack Obama.

The catch for qualified nonprofit corporations was a limit on their activities that the Internal Revenue Code places on them. A 501(c)4 can’t have, as its primary purpose, political influence. In practice, this means that 501(c)4s have to spend more than half their funds on activities other than things like making independent expenditures in elections, or lobbying the federal government. In other words, for every $1.46 million contribution they get to run ads against Barack Obama or John McCain or the local dogcatcher, they have to raise another $1.46 million to spend on things other than running political ads. Alternatively, a 501(c)4 can take, say, $729,999 of that $1.46 million donation and use it for political ads, as long as it spends the other $730,001 on other activities to satisfy the IRS.

Of course, an individual was free (and still is) to fund an independent expenditure out of his own pocket. Under the Supreme Court’s Buckley v. Valeo decision, individuals can use their own funds to hire a firm to produce an advertisement expressing their views on a candidate and place the ad. It’s happened in the past–but not often, and an individual paying for the ad has to disclose his or her name.

501(c)4s v. independent expenditure committees In Citizens United ruling, the court held that corporations — including not only the plaintiff, a nonprofit corporation organized under section 501(c)4 of the Internal Revenue Code, but any incorporated organization ranging from Apple Inc. to the National Football League to the American Federation of State, County and Municipal Employees — can make independent expenditures using corporate funds to advocate the defeat or election of federal candidates.

Citizens United made it much easier for organizations, including 501(c)4s, for profit corporations, business leagues and so on, to spend big money on politics. But it didn’t directly address what independent political committees, which are also incorporated organizations, could do. These independent political committees are known as 527s after section 527 of the Internal Revenue Code, which allows them to raise money tax-free for political purposes. Unlike qualified nonprofit corporations, section 527 organizations can spend 100 percent of the funds they raise on political activities. All political committees–Obama for America or Smitty Smith for dog catcher, the Republican National Committee or the Walla Walla County Democrats–are organized under section 527 of the Internal Revenue Code. But the subset we’re concerned with here avoided any of the activities that would require them to register with the Federal Election Commission and abide by its contribution limits: They didn’t contribute to federal candidates, they didn’t run ads that qualified as independent expenditures (that is, ads that expressly advocated the election or defeat of a federal candidate). Instead, they exercised their influence on elections by running “issue ads,” or commercials that mentioned a federal candidate and talked about his or her positions on specific issues. Think of the aforementioned Swift Boat Vets & POWs for Truth, or, or political ads with taglines like “Tell Sen. Smith we can’t afford higher taxes,” or “Tell Rep. Jones we need clean air to breathe.”

Individuals, corporations and labor unions could contribute unlimited sums to these 527 organizations. But the 527s had to walk a relatively fine line to avoid running afoul of the Federal Election Commission’s ban on explicitly advocating a vote for or against a candidate. In 2006, the FEC fined Swift Boat Vets, and the League of Conservation Voters 527s a total of $630,000 for straying from that line, required all four groups to register with the FEC, to stop accepting unlimited contributions, and to file disclosure reports with the commission.

How Citizens United opened the floodgates Citizens United paved the way for unleashing independent expenditure committees from the FEC’s restraints.

When the Supreme Court ruled in Citizens United in January 2010, the influential U.S. Court of Appeals for the District of Columbia had already been considering a case filed by a 527 group,, to allow it to ignore the FEC limits on contributions from individuals. Under the pre-Citizens United campaign finance laws, a political committee that spent money to expressly advocate for or against the election of a candidate for the White House or Congress had to abide by those limits – which prohibited any individual from donating more than $5,000 per election. One famous example of a political committee that had an impact while abiding by those rules: the National Security PAC, which ran the famous Willie Horton ads attacking the candidacy of 1988 Democratic presidential nominee Michael Dukakis.

In its April 2010 the case, the D.C. appellate court drew directly on the Supreme Court’s reasoning in Citizen’s United to lift the limits on contributions to “independent” political action committees. If corporations like Citizens United, or more established models like Lockheed Martin, the U.S. Chamber of Commerce or the Service Employees International Union, can spend unlimited funds straight from their treasuries to call for the election or defeat of a federal candidate, there’s no reason that “independent” political committees can’t do the same, the judges decided.

So while campaign committees, political action committees and party committees like the Republican National Committee or the Democratic Senatorial Campaign Committee are limited in who they can take money from (individuals and PACs) and in what amounts (see here for those limits), 527 groups that don’t contribute to or coordinate with politicians or parties can accept unlimited funds Underlying these changes is a theory that unlimited expenditures are not corrupting so long as they aren’t delivered directly to a candidate. Leaving aside the merits of this view, the lack of any anti-corruption interest opened the door for political committees like Swift Boat Vets and that acted independently of politicians and parties to receive unlimited dollars, all of which they can then spend to campaign for or against candidates.

In July 2010, the FEC issued rulings that created independent expenditure only committees–dubbed super PACs by reporter Eliza Newlin Carney. Contributions like Miriam Adelson’s $5 million could now be made, with the assurance that 100 percent of it could be spent influencing elections.

But there’s one more wrinkle to consider.

In the summer of 2011, Republican and Democratic election lawyers opened the door to some coordination between independent, non-corrupting super PACs and the candidates they support. Started by James Bopp Jr., the Republican attorney who initially represented Citizens United in its groundbreaking case, the suit was soon joined by attorneys from Perkins Coie, a law firm that’s home to Robert Bauer, a longtime lawyer for the Democratic National Committee who served Obama’s White House counsel and his campaign lawyer.

As Sunlight’s Reporting Group detailed last summer, these election law specialists argued that politicians should be able to coordinate fundraising with super PACs, and the FEC agreed. The FEC did put some limits on what politicians and party officials could do–they can’t solicit corporations, labor unions and others that can’t give directly to their campaigns, and they can’t ask for contributions larger than FEC limits allow traditional PACs to raise ($5,000 a year from individuals). But the decision means that Newt Gingrich is perfectly able to steer a Miriam Adelson to Winning Our Future, and Obama and his political appointees can steer donors to Priorities USA Action.

So let’s recap briefly. Citizens United opened the door for incorporated organizations to make unlimited campaign expenditures underwritten by their own treasuries or by the unlimited donations of corporations, labor unions or individuals. That, in turn, led a lower court to rule that independent political committees–section 527 committees–can do the same. In a move not called for by Citizens United, but certainly responding to conditions created by that decision, the FEC ruled that politicians can raise money for and direct donors to the resulting super PACs. That’s when we get Miriam Adelson’s check, or for that matter, any of the big donors we’ve seen giving to presidential super PACs. By itself, overturning Citizens United wouldn’t eliminate big money from politics. We’d merely return to the last decade’s favored ways of infusing cash into the political system, like giving to 527s and qualified nonprofit corporations that faced more restrictions on their political activities than corporations face today. And what we wouldn’t see is politicians steering their well-heeled donors, like Miriam Adelson, to super PACs that support them.