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Hayward on Campaign Finance Reform Efforts

"Reform groups should consider the broader implications of their positions, and the dynamics over time," says Professor Allison R. Hayward in a National Review Online article discussing the Supreme Court's Wisconsin Right to Life v. FEC (WRTL) decision.

Hayward points out that had reformers been less "conventional and reflexive" in pursuing regulation of outside groups, the case itself would have been avoided. Meanwhile, allowing WRTL qualifed nonprofit status would have resulted in greater disclosure and lower constitutional scrutiny.

A Life of Its Own, National Review Online, July 5, 2007. By Allison R. Hayward.

Excerpt:
"Reformers want to preserve laws that prohibit corporations and unions from making 'expenditures' in federal elections. The roots of this preference, and the statute, are in Progressive-era distrust for large corporations 'purchasing' legislatures and reaping beneficial laws. But it would not be enough just to monitor big business. The ban could be circumvented by setting up groups to pass through corporate funding.

"To preserve the line of defense against corporate political activity, reformers oppose any easing of the expenditure ban as it is applied to any incorporated entity. But many groups that might not have sought a corporate charter in 1907 now incorporate for liability limiting purposes. Nevertheless, conventional reform thinking cannot tolerate their inclusion in campaign debate. This is why reformers fight the efforts of groups like Wisconsin Right to Life to carve exceptions to laws like McCain-Feingold's electioneering communication ban, applied to all corporations whatever their size or purpose.

"There are two interwoven conceptual issues at work here. The first is the one confronted in WRTL — what kind of activity is so political Congress can prevent corporations from participating? Here, pro-regulation interests wanted categorical application of the McCain Feingold 'blackout.' If a corporation mentions a candidate in broadcasting targeting to the relevant district within 30 days of the primary or 60 days of the general election, it's toast. This law is clear, broad, and easy to administer. The other side in WRTL, consisting of a wide variety of advocacy organizations, sought a narrower standard that would leave groups free to discuss legislation and policy, and mention (often critically) decisionmakers who happen also to be running for office. For the most part, the groups won in WRTL.

"But content-based speech regulation isn't the only way to control this activity. The second conceptual path considers what it is to be a 'corporation.' Can the group be deemed the 'kind' of entity the Constitution allows Congress to restrict? The character of corporations has changed in the 100 years since the ban was first enacted, so arguably the scope of 'corporation' could flex under statutory construction, too.

"In the Court's 1986 Massachusetts Citizens for Life (MCFL) decision, it established an as-applied exception for certain nonprofit corporations that weren't the kind of groups that posed a danger of corruption. Justice Brennan, writing for the Court, observed (479 U.S. 238, at 259):

Regulation of corporate political activity thus has reflected concern not about use of the corporate form per se, but about the potential for unfair deployment of wealth for political purposes. — While MCFL may derive some advantages from its corporate form, those are advantages that redound to its benefit as a political organization, not as a profit-making enterprise. In short, MCFL is not the type of 'traditional corporatio[n] organized for economic gain,' that has been the focus of regulation of corporate political activity.

"Then the Federal Election Commission turned to the task of crafting an MCFL-appropriate regulation. Reform groups pushed hard for a narrowly applicable construction of the so-called 'MCFL exception' (the FEC calls eligible groups QNPs for 'qualified nonprofit'). Today, to qualify as a QNP under 11 CFR 114.10, a group must be a tax exempt nonprofit under Section 501(c)(4), cannot take funding from corporations, cannot engage in any business activities, and must follow various picayune managerial restrictions set forth in the regulations. The MCFL exception articulated in regulation is narrower than the standard necessitated by the Supreme Court, and reformers can take credit for holding the line.

"Which means, reform advocates can take credit for teeing up WRTL. Wisconsin Right to Life accepted some corporate funding, so could not be considered a QNP under existing law. Had it qualified for a QNP-type exception, there would be no case. QNPs can legally make electioneering communications and expenditures. Moreover, were they to challenge the law, their position would be weaker. A dispute about QNP status, or the legitimacy or scope of the exception, moves into the area of corporate regulation, where the Court recognizes Congress and legislatures have more discretion to regulate.

"By pushing for a narrow QNP standard, reformers left the Wisconsin group with a claim against a content-based abridgment of its speech rights — a scenario entitled to strict scrutiny even on cloudy days. This is well-plowed ground, with cases even preceding the Court's 1976 Buckley v. Valeo decision closely examining such content driven laws. To the extent the WRTL decision repudiates McConnell v. FEC's approval of McCain-Feingold, it strikes at that decision's most controversial and vulnerable spot."

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