Congressional Spending Bill Shuts Down Key Goals of Campaign Finance Reform Community
A major spending bill posted late last night by Congressional leaders contains provisions shooting down two key initiatives of the campaign finance reform community.
Stymied by a Federal Election Commission that has increasingly struggled to find consensus, campaign finance activists in recent years have turned their attention to other federal regulators, pressing those regulators to adopt their own rules governing money in politics. Depending on your perspective, these efforts have been aimed at either bringing more transparency to elections or squelching the political speech of companies and other groups.
At the federal level, activists have long-targeted the Securities & Exchange Commission and IRS. The proposed spending bill would put both efforts on ice.
Most significantly, the bill would bar the SEC from using appropriated funds “to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.” An SEC rulemaking forcing public companies to disclose information about their political activities has long been a dream of the reform community. Law professors, labor organizations, and others have organized campaigns resulting in hundreds of thousands of comments encouraging the SEC to act. At one point a few years ago, the SEC put a potential “corporate political disclosure” rulemaking on its “Unified Agenda,” but never acted. While the SEC has lately shown little appetite to engage in rulemaking in this area, some Members of Congress have increasingly pressured it to do so. Today’s spending bill, if adopted, prevents the SEC from moving forward with any such rulemaking for the next fiscal year.
Activist efforts to press the IRS to issue a rulemaking that could narrowly define 501(c)(4) social welfare organizations would also now be on hold. Critics have maintained that these tax-exempt groups are flooding the airwaves with election advertising without disclosing their donors. Accordingly, they have demanded that the IRS issue rules defining when these so-called “dark money” groups can legitimately claim social welfare status and when they must become section 527 political organizations that must disclose their donors. In 2013, the IRS proposed a rule tackling this issue. After intense criticism from many sides, the IRS pulled the regulation back. We have heard rumblings that the IRS was getting closer to proposing a new rule, but the spending bill would appear to put a stop to that, at least during fiscal year 2016. The bill also confirms that gift taxes would not apply to contributions to 501(c)(4) and (c)(6) organizations, which will provide greater certainty to donors to such organizations.
In the case of the SEC and IRS rulemaking, the spending bill applies only to the use of appropriated funds in fiscal year 2016. Campaign finance reform groups will likely attempt to resurrect these reform initiatives after that. But, at least for now, these reform efforts appear to be on life support.