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Election decision may force disclosure of secret donors

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WASHINGTON — Advocacy groups spending millions of dollars to influence the 2012 election now face the prospect of having to reveal their secret donors, after a federal appellate court panel refused to block a lower-court order requiring the disclosure.

In a 2-to-1 decision issued Monday evening, a U.S. Court of Appeals panel here declined to stay a ruling by a federal judge requiring tax-exempt organizations that run election-related television ads to disclose their donors.

The panel's decision was a significant victory for campaign finance reform advocates who have been fighting against the deluge of money — much of it from undisclosed donors — that has flooded the political landscape in the wake of several Supreme Court decisions, including the 2010 Citizens United case.

"It's the first major breakthrough in overcoming the massive amounts of secret contributions that are flowing into federal elections," said Fred Wertheimer, president of the reform group Democracy 21, one of the groups involved in the case brought by Rep. Chris Van Hollen (D-Md.) against the Federal Election Commission.

"The American people have a right to know who is bankrolling the ads that are designed to influence their votes," Van Hollen said in a statement.

Conservative legal experts argue that requiring disclosure exposes political donors to potential retribution, stifling free speech.

"This is really about incumbent politicians trying to silence voices they don't agree with," election law lawyer Jason Torchinsky said in an interview last week.

It remains to be seen whether the decision will actually force any groups to disclose their donors — many are scrambling to find ways around it. But there is no question that it complicates the political plans of heavyweight players such as the U.S. Chamber of Commerceand an array of well-financed, conservative, nonprofit groups such as Crossroads GPS and Americans for Prosperity that have taken the lead in a costly air war against President Obama and congressional Democrats. Liberal tax-exempt groups, which spend far less on the type of ads in question, will also be affected.

Blair Latoff, a spokeswoman for the chamber, said the organization was disappointed the court was "changing the rules of the road in the middle of an election cycle." The chamber is still reviewing the decision, but plans to continue its outreach to voters "in a way that protects the rights of our members to participate in the political process, free from retaliation and harassment," she added.

Unlike "super PACs," which are independent political committees that must disclose their donors, tax-exempt groups have been permitted to run election-related ads without revealing their backers.

But pending the appeal of the Van Hollen suit, set to be heard in September, groups that run a type of ad known as "electioneering communications" will now have to disclose all of the donations they received since the beginning of 2011, or set up a segregated account to pay for the commercials.

Electioneering communications are television spots that refer to federal candidates but stop short of advocating for their election or defeat and air within 30 days before a primary and 60 days before the general election.

In 2010, outside groups spent nearly $80 million on electioneering, according to data compiled by the nonpartisan Center for Responsive Politics.

Because the presidential primaries extend through June and the political conventions begin at the end of August, electioneering rules will be in place for much of the remaining campaign.

The Van Hollen decision still could be delayed or overturned. Two organizations seeking an appeal of the lower court's ruling are expected to request a stay — perhaps from the Supreme Court — to halt the order. But election law experts say there is no guarantee they will be successful, noting that the high court has repeatedly endorsed the disclosure of contributors, including in the Citizens United case.

"The Supreme Court has been consistently upholding campaign disclosure laws, even as it has been striking down campaign limits," said Rick Hasen, a professor of campaign finance law at UC Irvine's School of Law.

Some organizations have indicated that they will craft their ads to avoid triggering the electioneering rule. One such group, American Future Fund, has already asked the FEC whether it can duck the rule if its anti-Obama ads do not explicitly name him in its commercials but refer instead to "the White House" or "the administration."

"I think you'll see electioneering communications virtually cease because no one is going to want to speak under the disclosure regime," said Torchinsky, who represents American Future Fund and the Hispanic Leadership Fund, a group seeking an appeal of the original ruling.

Ironically, some groups may now begin airing more explicitly political ads — ones that call for the election or defeat of a candidate — because those "express advocacy" ads still require only limited donor disclosure.

But doing more direct political spending could threaten the tax status of nonprofit groups, whose political activity is limited by Internal Revenue Service rules.

For now, the court's decision could prompt some donors — particularly corporations — to halt their giving while they wait to see how the case unfolds.

Stefan C. Passantino, an election-law lawyer who has represented Republican officials, said he had been warning clients that they should not count on their contributions to tax-exempt groups to remain anonymous.

"For these companies, the uncertainty is worse than anything," he said. "It's a weird time."

The Van Hollen suit turns on a 2007 FEC rule that loosened the disclosure required of advocacy groups by mandating only that they report contributions earmarked for specific electioneering ads.

Van Hollen's suit argued that the rule undermined the 2002 McCain-Feingold Act, a sweeping campaign finance reform law. A federal judge agreed, ruling on March 30 that the FEC had overstepped its authority.

"Congress intended to shine light on whoever was behind the communications bombarding voters immediately prior to elections," Judge Amy Berman Jackson wrote in her decision.

Her ruling threw out the 2007 rule and reinstated a 2003 FEC regulation that required organizations doing electioneering to report all donations of $1,000 or more dating back to the first day of the preceding year.

The FEC is not appealing the decision, but the two groups seeking a reversal argue that the ruling infringes on their 1st Amendment rights and will force them to alter their plans for the 2012 election.

In its denial of their request for a stay Monday, the appellate panel noted that the Supreme Court endorsed disclosure in Citizens United.

"The public interest is best served by access to more, not less, information," the appellate judges wrote.

matea.gold@latimes.com

Joseph Tanfani in the Washington bureau contributed to this report.

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