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Legal Alert
United States Supreme Court Strikes
Down Ban on Political Speech by Corporations
On January 21, 2010, the United States Supreme Court, in a 5-4 decision, ruled that a decades-old prohibition against corporate-funded advertisements supporting or criticizing political candidates is an unconstitutional restriction on a corporation's First Amendment right to free speech. The Court's ruling in Citizens United v. Federal Election Commission represents a significant shift in the Court's application of the First Amendment to political speech by corporate entities, including non-profit corporations. It will have a substantial impact on the ability of those entities to sponsor politically oriented advertisements in the next election cycle.
The state and federal prohibitions upon contributions by corporations to PACs or candidates or their committee were not addressed by the Court.
Under a provision of the Federal Election Campaign Act of 1971 (as amended by the Bipartisan Campaign Reform Act of 2002, frequently referred to as the McCain-Feingold amendment), a corporation, including a non-profit corporation, commits a felony if it expressly advocates the election or defeat of a candidate and broadcasts such "electioneering communication" within thirty days of a primary election or within sixty days of a general election. However, a corporation could form a political action committee (PAC), which was not subject to the same political speech limitations as a corporation.
Citizens United v. Federal Election Commission focused on whether a corporation, independently and not through a PAC, was permitted to fund a documentary critical of then-presidential candidate Hillary Clinton and to show the movie on cable television within thirty days of a primary election. Citizens United, the movie's sponsor, brought a lawsuit against the federal government in 2007, arguing that the ban on corporate-funded "electioneering communication" violated its right to free speech and was therefore unconstitutional.
Although the United States Supreme Court has long recognized that corporations are entitled to First Amendment free speech rights to the same extent as individuals, it previously upheld limits on a corporation's ability to participate in political speech. For example, in 1990, the United States Supreme Court held in Austin v. Michigan Chamber of Commerce that the government has a strong interest in preventing "the corrosive and distorting effects of immense aggregations of [corporate] wealth" on political ideas and advertising, and therefore a federal law banning corporate-funded political advertising was approved as constitutional.
In Citizens United, however, the Court reversed itself, noting that corporate expenditures do not give rise to corruption, and asserting that there is no sufficient governmental interest which justifies a ban on political speech by non-profit and for-profit corporations. The Court also recognized that a corporation's ability to form a PAC does not cure the ban on corporate speech otherwise imposed by the law. For these and other reasons, the Court held that certain political speech restrictions of the Federal Election Campaign Act are unconstitutional as applied to Citizens United and their movie. The Court declined to strike down a separate provision of the law requiring disclosure of an advertisement's sponsor.
Our Opinions and Commentary
We thought it would be helpful to provide our opinions of this case's impact.
1. Corporations, whether for-profit or not-for-profit, can now pay for advertisements or other type of media presentations supporting or criticizing political candidates at any time.
2. The case does not address existing state and federal bans on direct corporate contributions to PACs, candidates or their campaign committees. As of now, neither the Pennsylvania State Ethics Commission nor the Pennsylvania Department of State's Bureau of Commissions, Elections, and Legislation, has released any guidance regarding the effect, if any, of the Citizens United case on Pennsylvania law. Accordingly, at this time we must continue to advise our clients not to accept corporate contributions to federal or Pennsylvania PACs and/or make corporate contributions to PACs, candidates or campaign committees.
3. The Citizens United case does not address tax law and does not impact federal and state tax law disallowing deductions for contributions made to a political candidate or party or expenses of advertising in political programs or for admission to political fundraising or inaugural functions, and similar events.
4. Long term, we would expect corporations to pay a much larger role in media campaigns and advertising, starting in the next election cycle. We would expect large corporations to have many more resources to spend on political advertising than smaller businesses. Where there is a difference in position on an issue between large companies and small companies in a particular industry, the smaller companies probably will be at a financial disadvantage. In our opinion, this would be true even if the state would in the future opine that corporate contributions to PACs and/or candidates and their committees are allowed. Although this would result initially in an influx of money into single corporation PACs or trade association PACs, it will put smaller companies and industries at a disadvantage. It may also result in heightened contribution expectations by candidates. Finally, what impact will public company stockholder action have on a corporation spending non-deductible dollars for these political purposes?
For more information on how the Citizens United ruling affects your corporation, non-profit group or PAC, contact Keith Clark, Esquire at Shumaker Williams, P.C. at (717) 763-1121 or clark@shumakerwilliams.com.
717-763-1121
This Legal Alert should not be construed as providing specific legal advice.
©Shumaker Williams, P.C. 2010
All rights reserved.
717-763-1121 Camp Hill, PA Office
410-825-5223 Towson, MD Office
717-848-5134 York, PA Office
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