As the 2016 presidential campaign heats up, the US Supreme Court decision in Citizens United—which permitted independent political expenditures by corporations and unions—will once again come into the spotlight.
I recently went back and re-read the Citizens United decision that Justice Kennedy wrote for the majority. These two sentences lifted off the page (emphasis mine):
- “If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.”
- “The law that is before us is an outright ban, backed by criminal sanctions, Section 441b makes it a felony for all corporations—including nonprofit advocacy corporations—either to expressly advocate the election or defeat of candidates or to broadcast electioneering communications within 30 days of a primary election and 60 days of a general election.”
Advocates on both sides should re-read these sentences and meditate on them—they may actually suggest the way forward after Citizens United.
Campaign finance reformers who argue for strict limits have to recognize that expenditures of money are integral to political expression. And that many associations—including the Sierra Club and the NRA—are in fact corporations. It is a risk to free speech and free association when we threaten people with jail for running TV ads expressing a political view.
Advocates of unlimited spending as an expression of free speech, in turn, can’t ignore the wide economic inequality in our society, and the harm that inequality causes to our political system. The idea of unlimited spending as speech means that disparities in income and wealth based on class, race, and gender translate into a diminished role for vast parts of our citizenry—not only in elections, but also in government. We can’t stand by a particular absolutist reading of the First Amendment and put at risk the democracy that that very amendment was meant to uphold.
The Constitution can thrive only if we dedicate ourselves to finding reasonable campaign finance policies that ensure free speech, free association, equality, and representative democracy.
To do this, we must move from a debate that advocates fixed positions to a dialogue that searches for solutions, and nonprofit corporations play an important role. While not the source of the money flowing into politics, after Citizens United, 501c4s and other nonprofits are increasingly a part of the problem, serving as the conduit for spending for and against candidates by wealthy individuals and corporations without disclosure. But nonprofits can also be a model for new solutions: the regulation of lobbying by 501c3 corporations can provide important lessons for other types of political speech by other sectors.
Living Happily with Banned Speech
The 501c3 model of regulation provides some important lessons about what a solution to Citizens United could look like. I have spent my entire adult life working in the 501c3 sector. I am barred by law (and good judgment if I want to keep my job) from uttering words such as: “As the executive director of the ACLU Foundation of Northern California, a 501c3 corporation, I stand before you to endorse Donald Trump and Bernie Sanders in their primaries for President of the United States.”
This is an outright ban on speech in the literal sense—a ban on certain words leaving my mouth. It is also a ban on speech in the figurative sense—on spending money on a political ad. We accept that ban, because the fundamental purpose of the 501c3 corporation is charitable and because our donors receive tax deductions (both on income and gift tax). We also accept the ban because those of us involved in the corporation have other ways to express ourselves.
Tens of thousands of nonprofits, including our board members and employees while acting on behalf of the organization, live with that outright ban. The sky does not fall. The First Amendment thrives. The Constitution endures.
Even beyond that, 501c3s are limited in the amount of lobbying we can do. There is a cap on the amount; it’s based on a nonprofit’s size and may not exceed $1 million. Tens of thousands of nonprofits live with that cap. Again, the First Amendment thrives.
The penalty, if we exceed that lobbying limit, is not “fining or jailing citizens” in the words of Justice Kennedy. It is an excise tax of 25 percent. And only after four years of exceeding the limit does the organization even begin to risk losing its 501c3 status. No one goes to jail.
Types of Speech, Types of Speakers
The nonprofit sector includes a range of 501c corporations, including 501c3s and 501c4s, as well as labor unions, chambers of commerce, and many other entities. It also includes 527s and political action committees (PACs), which may not be incorporated but are tax-exempt. A central challenge to campaign finance regulation is that people and organizations engage in different types of political speech, including issue education (which 501c3s and other nonprofits can all do without limit), lobbying on bills (for which 501c3s have a limit but 501c4s do not), express candidate advocacy (which uses key words like “support,” “defeat,” or “vote for”) and independent expenditures for or against candidates.
Of course, along the way, there are a lot of grey areas. When does a lobbying ad targeting a sitting elected official who is concurrently running for reelection become an election ad? In the current election cycle, if a 501c3 wants to correct the record with an ad that the Constitution permits a Muslim to become president, can the organization name the candidates who said a Muslim shouldn’t be president?
Here are six ideas for nonprofit leaders, campaign finance reformers, and policymakers to consider for public policy:
- Establish standards to limit the amount of independent expenditures by nonprofit corporations such as 501c4s, instead of an outright ban, similar to our limit on lobbying for 501c3s. For example, 501c corporations that wish to engage in electioneering advocacy for or against candidates would have a limit of, say, 10 percent of their budget, up to a total of $1 million. Perhaps the cap would be firm at $1 million, or policies could be designed to provide flexibility to exceed that cap with additional requirements, such as the following.
- Make the income of these tax-exempt organizations that exceed the $1 million candidate advocacy limits subject to an excise tax of 25 percent. As citizens and voters, we can determine that after a certain threshold, it no longer serves the public interest to make a nonprofit exempt from income taxes. Other activities protected by the First Amendment, such as income from book sales or movie tickets, are taxable.
- Require disclosure of donors (giving above a certain amount) to nonprofit corporations that engage in this type of advocacy beyond the $1 million limit. We should protect free association rights of people to join organizations in a manner that protects their privacy and anonymity—a right we enjoy when we join or contribute to most 501c corporations. But we need to balance that with the right of voters to know who is paying for candidate campaigns, with disclosure requirements for contributors to candidate-controlled committees, PACs and 527s. If a 501c corporation chooses to engage in candidate advocacy beyond the $1 million threshold, then donors giving above a certain amount (say $1,000) should know up front that their name is subject to disclosure.
- 501c organizations that attract a broad base of support should be allowed a greater degree of candidate advocacy without triggering these taxation thresholds and disclosure rules. For example, the first $10 of the average gift to a corporation could be available for this type of advocacy without aggregate limits or disclosure requirements. The broader the base, the closer the organization is to representing the electorate itself, rather than concentrated wealth and economic power. This idea is somewhat akin to the public support test that 501c3s use to provide better tax advantages for a broad base of donors, as compared to a private foundation.
- Make the contributions to 501c entities that exceed the candidate advocacy limit of $1 million subject to the gift tax. The gift tax is surprisingly expansive: Donors may express love for their children by giving them a gift, but they still have to pay a gift tax if they exceed a certain amount. It is a public policy choice that we exempt political contributions of all kinds and in all amounts from the gift tax. Because 501c3s are prohibited from this type of advocacy, this gift tax would not apply to any 501c3 gifts.
- Use both the excise tax paid by these organizations and the gift tax paid by the donors to fund public finance through small, donor-matching programs. These programs, such as one operating successfully in New York City, provide a match of public funds for small donations made to candidate-controlled committees. For example, a donor may give $50, and a public finance gift may match that five fold with $250 to the same candidate.
We can apply at least seven lessons from 501c3 regulations to campaign finance by promoting:
- Elasticity instead of outright bans
- Privacy protection to protect free association, with disclosure above certain thresholds for certain types of political speech
- Proportionality to allow greater expenditures with a broader base of support
- Security and responsibility, allowing corporations and donors to know the rules choose the level of risk they assume, and pay taxes accordingly
- Taxability as the legitimate public policy lever, not bans, jail or fines
- Guidelines of responsibility in exchange for the privileges that come with being tax-exempt entities
- Self-regulation by nonprofits similar to the audits that we already conduct, backed by additional oversight and compliance, but not prior restraints on speech
Instead of just listening to this debate, or even joining it, I want to be part of a dialogue. That is the purpose of my new project, Campaign Finance Dialogue. I hope you’ll share your feedback on these ideas and what solutions you propose for campaign finance reform.