United States: Practical Impact And Longer Term Consequences Of Citizens United v. FEC

Political Activity Law Alert: Important Recent Developments, January 25, 2010

In an historic Constitutional development, a divided Supreme Court last Thursday invalidated the decades-old federal prohibition against independent expenditures by corporations in federal political campaigns, holding that corporations have the same First Amendment speech rights as individuals. This decision overrules portions of the Court's 2003 opinion in McConnell v. FEC, in which the Court previously upheld McCain-Feingold provisions regulating political advertising by corporations and unions. The immediate practical impact of the 5-4 decision in Citizens United is that both non-profit and for-profit corporations can now fund independent public communications expressly advocating the election or defeat of political candidates.

By a broader 8-1 margin, however, the Citizens United Court also upheld the disclosure obligations attached to such ads, meaning that the resulting ads themselves will still need to carry a disclaimer identifying the entity responsible for them, and broader disclosures will still need to be filed with the Federal Election Commission by the person or legal entity making the communication listing anyone who gave money to the filer for the purpose of paying for such ads.1 Further, the Court's majority opinion utilized a broad definition of "electioneering communication" to conclude that the movie at issue was regulated by the statute even though it was to be distributed via video-on-demand. This determination confirms that disclosures must be filed for a broader swath of paid communications than some might have thought prior to this decision. The Court also noted that disclosure might not be required where it would place the speaker in actual personal danger.

The decision does not address the legal prohibition against corporate contributions to candidates, meaning that corporations and labor unions must still undertake their federal campaign contribution activity solely through connected political action committees, and must use only funds voluntarily contributed to those committees by corporate executives and shareholders (or, for labor unions, by members) to make contributions to candidates. It also does not address how this new First Amendment right for corporations will apply to numerous state and local statutes that more narrowly restrict political spending by particular classes of corporations (regulated utilities, government contractors, etc).

Some of the lawyers who represented Citizens United have already signaled that they will bring a follow-on suit challenging the remaining prohibition on contributing corporate funds directly to candidates. Since the Court found no difference between the speech rights of corporations and of individuals, this new suit likely will request that corporations be allowed to make contributions in the same amounts as individuals. The government likely will argue in response that under Buckley v. Valeo regulation of contributions is subject to a different and more lenient standard of review than regulation of expenditures, that many corporations control their own connected PACs, and that allowing corporations to make direct contributions will provide opportunities for corporate owners and managers to evade individual contribution limits. If a business owner can contribute through each of a string of subsidiary corporations, for example, alongside his or her personal contribution, the per donor limit on contributions to candidates will be effectively mooted. This is likely to be the next major case initiated in the wake of Citizens United.

Contribution/Expenditure Distinction in Public Communications

There are numerous thorny legal issues that are raised by this decision, and like all landmark cases the full effect will only be clear after other cases have explored areas left unresolved by this one. For the last eight years, the courts and the Federal Election Commission have been struggling to settle on a legally sufficient definition for an "independent expenditure" rather than a "coordinated" one - in other words, those activities and factual predicates which turn an otherwise "independent" corporate expenditure for or against a federal candidate into an "in-kind" corporate contribution to the benefiting candidate. Since independent expenditures by corporations or labor unions are now permissible under Citizens United, but in-kind contributions from those entities are not, the rules on coordination have taken on singular importance for groups funding advertising campaigns about candidates or elected officials. Issues to be resolved include whether any discussion between candidates and corporations about the election and/or a public communication can ever occur if a communication is to be considered "independent" (,and if so what and when), and the use of common vendors. The bad news is that the FEC has not yet finalized a definition of coordinated expenditures, despite these eight years of effort and several court decisions on the subject.

To define coordination for these purposes, the FEC has promulgated a multi-factor test that considers the content of the communication and the conduct of the advertisers, candidates, and/or party committees involved. In many circumstances, like the coordination of express advocacy, the application of the FEC's standards is non-controversial – and in fact, in some regards the Court's opinion in Citizens United may serve to strengthen those applications. All five justices in the majority, without objection from those who dissented, concluded that "Hillary: The Movie" constitutes the functional equivalent of express advocacy, a conclusion that was not obvious under the Court's prior interpretations. Consequently, this part of the Citizens United majority opinion may serve to clarify that content like "Hillary: The Movie" is among the range of communications which the FEC can consider to be in-kind contributions.

Nevertheless, the outer boundaries of the types of communications beyond express advocacy that can be treated as in-kind contributions have been hotly litigated between the FEC and the Congressional sponsors of McCain-Feingold. The current state of play in that litigation is that the FEC is currently undertaking a rulemaking to reconsider which types of content beyond express advocacy, and which types of conduct besides outright agreements, requests, or substantive discussions about particular ads, can constitute coordination. Ironically, the comment period on the FEC's currently-proposed regulations closed the day before the decision in Citizens United was released, but given the breadth of this decision the FEC may consider re-opening the comment period to solicit additional perspectives.

Contribution/Expenditure Distinction in Corporate Fundraising

Even aside from the definition of "coordination" in the advertising context, the breadth of the Court's decision on such a fundamental building block of the nation's campaign finance laws presents other vexing challenges for the FEC. Not least among these is the degree to which the Commission's regulations governing corporate fundraising for federal candidates and party committees are premised on the corporate expenditure prohibition that the Supreme Court just overturned.

Specifically, the FEC has for many years prohibited corporate "facilitation" of individual contributions to candidates. These limitations prevent corporate executives from using their staff employees and physical assets like telephones, photocopiers, and computer services to help raise federal campaign contributions in any ways which increase the cost or overhead expenses to the corporation. Similarly, even use of capital assets like computers or telephones in ways which incur no increased costs to the company is restricted to "incidental use," typically less than an hour per week or four hours per month.

If such fundraising activity is undertaken as an agent of the recipients – as much of it is – those limits and prohibitions on corporate facilitation clearly still apply. However, not all such fundraising is so closely controlled or coordinated with the ultimate recipients of the contributions, and furthermore it is not obvious under remaining law how to tell which is and which isn't. As noted above, the FEC has extensive regulations on coordinated communications to the general public, but the kind of corporate fundraising at issue in these regulations is typically aimed at close friends, colleagues, customers and vendors of the executives, and not to the general public at large. Similarly, there are no advisory opinions or even enforcement actions which look closely into whether facilitation violations are based on a contribution or expenditure analysis, since prior to Citizens United the distinction was irrelevant in this context.

Finally, the statute provides that the cost of any solicitation undertaken "in concert or cooperation with or at the request or suggestion of" a candidate or party committee would be a contribution, but it also isn't obvious how far back into corporate operations that restriction would extend. For example, does that provision only cover the actual solicitations, or does it still prohibit corporate staff from helping with the administrative and logistical sides of raising money while "on the clock" of the corporation?

These are all only illustrations of the range of difficult questions opened by Citizens United, and it will fall to the FEC in the first instance to come up with answers for them. The result could be a new minefield for corporations that wish to aggressively engage in fundraising activities for federal candidates, at least for the moment. All corporate fundraising activities permitted under the old rules will still be completely legal, but determining which additional ones will now be permissible will require careful case by case analysis.

Other Issues: Tax Consequences and Bans on Expenditures by National Banks

Any corporate funder of ads under this new constitutional regime should take care to understand the tax consequences of their independent expenditures. Political advocacy and lobbying expenses are not deductible as business expenses under IRS rules. Accordingly, any new spending which occurs as a result of this decision will be done with non-deductible funds.

Finally, the breadth of the language in the majority opinion suggests that potential future challenges to other similar expenditure prohibitions may also succeed. Federal law currently prohibits national banks from making independent expenditures, but the validity of that ban is unclear under the language of the Supreme Court's holding. The majority opinion concludes with the holding that "[t]he judgment of the District Court is reversed with respect to the constitutionality of 2 U.S.C. §441b's restrictions on corporate independent expenditures." Slip op. at 57. Given that the national bank expenditure prohibition is part of 2 U.S.C. §441b, a strict reading of this holding would suggest that banks are now as free as other corporations to make independent expenditures. However, the special characteristics of banks created under acts of Congress could support arguments that national banks are closer akin to government-sponsored enterprises like Fannie Mae or even the Export-Import Bank, and thus should be left subject to broader controls on their political activities to avoid having government agencies themselves take sides in elections to government office.

Election-Related Spending by Foreign Nationals or U.S. Corporations with International Owners

Another area of interest is the possible effect of this decision on foreign political spending in U.S. elections. It is important to note (as much public comment on this decision does not) that under current law, election spending by non-U.S. persons and entities is prohibited under section 441e of the statute, and that prohibition is unaffected by the ruling in Citizens United. Thus, the existing restriction on expenditures by foreign corporations remains in place not because they are corporations but because they are foreign. Further, the U.S. subsidiaries of international companies are already subject to FEC restrictions on spending non-U.S. funds in U.S. elections, or allowing foreign nationals a role in the decision-making process. 11 C.F.R. § 110.20.

However, the importance the majority places on the First Amendment's protection of "speech" regardless of the identity of the "speakers" suggests a strong argument could be made that the prohibition on campaign expenditures by foreign nationals could be vulnerable to challenge in a future case. Such a result may not rest easily with Congress or the public, however, to the extent that kind of First Amendment absolutism would allow campaign expenditures to be made by foreign governments or even foreign heads of state.

Possible Legislative Responses

Finally, there has been considerable speculation that the Congressional leadership will propose legislation to regulate corporate political expenditures to the extent this decision leaves room to do so. President Obama has urged them to do so (http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-vows-continue-standing-special-interests-behalf-amer) . Reports have focused on possible new disclosure requirements, shareholder approval mechanisms, and limits because of potentially corrupting connections with Congress (applying different treatment to corporations with lobbyists, for example, or to government contractors). At this early stage, it is too soon to know whether such measures will have sufficient support in Congress, or could withstand Supreme Court review under the standards established in Citizens United. Similarly, Justice Stevens' dissent suggests that states could condition their corporate charters on additional disclosure or shareholder rights requirements. We will continue to follow these developments closely and will provide further updates as the laws governing these issues continue to evolve.

1 These disclosures also name the custodian of records for the entity running the ads, along with other information such as a list of the people who exercise or share control over that entity and an itemization of the disbursements paid to create and distribute the ad. These reports must be filed as soon as 24 hours after the ad is first distributed, depending on how soon the ads run before an election and how much money the reports will disclose.

This article is designed to give general information on the developments covered, not to serve as legal advice related to specific situations or as a legal opinion. Counsel should be consulted for legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.