Highlights of Campaign Finance History – Part 1

by Kellye

Before the Federal Election Campaign Act (FECA) was passed in 1971, there were few laws to govern campaign finance at the federal level. The Tillman Act (1907) banned corporations from making political contributions to candidates in federal races. The Taft-Hartley Act (1947) barred unions from doing the same. Taft-Hartley also was the first law that prohibited both corporations and unions from making “independent expenditures” in support of or in opposition to candidates in federal elections. As will be shown in this post (Part 1) and the next (Part 2), whenever Congress would pass laws to reform campaign finance, the Supreme Court would strike down significant parts of each one of them.

The main purpose of the original 1971 FECA law was to require stronger disclosure requirements for federal candidates, political parties, and PACs. In 1974, FECA was amended due to the discovery of corruption and abuses in the electoral process from the Watergate investigations. FECA now placed caps on contributions to a federal candidate, on the amount that a federal candidate’s campaign could spend, and on the amount of personal funds that federal candidates could use for their own campaigns . Even though corporations and unions were already banned from making any “independent expenditures” in federal elections, FECA now placed caps on everyone else, including individuals.

It didn’t take long before the limits on political spending imposed by FECA were challenged. Senator James Buckley of New York (brother of noted conservative writer and political commentator William F. Buckley, Jr.) and others filed a lawsuit. In Buckley v. Valeo (1976), the Supreme Court upheld the limits on campaign contributions but held that “independent expenditures” made by individuals and groups (not corporations or unions) to influence elections is protected speech under the First Amendment. In addition, the Court ruled as unconstitutional the FECA cap on campaign spending, including campaign spending by candidates from their own personal funds.

Since it wasn’t clear what “independent expenditures” were, the Buckley Court defined them to be expenditures for communications that expressly advocate the election or defeat of a clearly identified candidate which are made without cooperation or consultation with the candidate. In addition, the Court defined “express advocacy” as using 8 specific words or phrases (vote for, vote against, elect, defeat, support, reject, cast your ballot for, and “Smith” for Congress).

In First National Bank of Boston v. Bellotti (1978), the Supreme Court ruled that corporations could spend money on non-candidate elections, such as ballot initiatives and referendums.

The Supreme Court ruled in FEC v. Massachusetts Citizens for Life (1986) that certain non-business non-profit corporations (QNCs) were exempt from FECA’s ban on corporate “independent expenditures” provided that they did not accept donations from labor unions or for-profit corporations. A Qualified Nonprofit Corporation (QNC) must meet 5 criteria; one criteria is that it be a 501(c)(4).

In a forewarning to what was to come, the FEC argued in the Massachusetts Citizens for Life case that allowing a loophole for certain 501(c)(4)s involved in political activity would “open the door to massive undisclosed political spending by similar entities and to their use as conduits for undisclosed spending by business corporations and unions.” Unfortunately, the Court’s foresight was not as good as the FEC’s because the Court responded that they saw no danger in that happening. In all fairness to the Court, they were expecting the law requiring disclosure for certain types of political ads to be enforced (see the last few paragraphs of a prior posting for more details).

In Austin v. Michigan Chamber of Commerce (1990), the Supreme Court upheld the right of the state of Michigan to impose a ban on the use of corporate treasuries to support or oppose candidates in elections. In its decision, the Court stated that “corporate wealth can unfairly influence elections.” (In its Citizens United ruling, the Court chose to ignore this precedent. Instead, it stated that the Court had erred in its ruling in Austin).

FECA also placed limits on “independent expenditures” made by political parties to elect or defeat federal candidates. In Colorado Republican Federal Campaign Committee v. FEC (1996), the Supreme Court struck down that FECA provision. This ruling enabled political parties to spend freely on behalf of federal candidates and thereby circumvent FECA’s limits on campaign contributions.

Under FECA, any entity (corporations, unions, associations, and individuals) could contribute unlimited “soft money” to political parties. This money was not subject to federal limits because it was intended only for activities that influenced state and local elections. However, the political parties found ways to divert the money back into federal elections. Much of this soft money was used to broadcast so called “issue” ads. This coupled with a political party’s newly gained right to make unlimited “independent expenditures” made a mockery of FECA and campaign finance reform.