For the first time in our history, a President of the United States criticized the Supreme Court in the State of the Union address. Equally as surprising was Justice Alito’s response to the President’s criticism. The controversy involves a landmark 5-4 decision in Citizens United v. Federal Election Commission.

The case held that laws prohibiting corporate funding of independent political broadcasts in primary elections are an unconstitutional prohibition on free speech in violation of the First Amendment.

The case centers around section 203 of the Bipartisan Campaign Reform Act of 2002 (“BCRA”) (also known as McCain-Feingold campaign finance reform), which prohibits corporations and unions from using their general treasury funds to make independent expenditures for speech that is an “electioneering communication” or for speech that expressly advocates the election or defeat of a candidate. An electioneering communication is “any broadcast, cable, or satellite communication” that “refers to a clearly identified candidate for Federal office” and is made within 30 days of a primary election, and that is “publicly distributed,” which in “the case of a candidate for nomination for President…means” that the communication “[c]an be received by 50,000 or more persons in a State where a primary election…is being held within 30 days.” Corporations and unions may establish a political action committee (“PAC”) for express advocacy or electioneering communications purposes. In Austin v. Michigan Chamber of Commerce, the Supreme Court held that political speech may be banned based on the speaker’s corporate identity.

In January 2008, Citizens United, released a documentary critical of then-Senator Hillary Clinton, a candidate for the Democratic party’s Presidential nomination. Anticipating that it would make the documentary available on cable television through video-on-demand within 30 days of primary elections, Citizens United produced television ads to run on broadcast and cable television.

Concerned about possible civil and criminal penalties for violating the BCRA, Citizens United sought declaratory and injunctive relief, claiming that the law was unconstitutional as applied to the documentary; and (2) the BCRA’s disclaimer, disclosure, and reporting requirements were unconstitutional as applied to the documentary and the ads. The District Court rejected Citizens United’s arguments, and it appealed.

The Supreme Court held that Austin is overruled, and thus provides no basis for allowing the Government to limit corporate independent expenditures. Accordingly, the BCRA’s restrictions on such expenditures are invalid and cannot be applied to Citizens United’s documentary. Given this conclusion, the BCRA’s restrictions on independent corporate expenditures were also overruled. Some believe that foreign corporations may arguably be able to advertise and influence the nation’s political process until Congress passes a new finance reform law.

However, the Court held that BCRA’s disclaimer and disclosure requirements are valid as applied to the ads for the documentary and for the documentary itself. Section 311 requires that televised communication must display (1) “the name and permanent street address, telephone number, or World Wide Web address of the person who paid for the communication,” and (2) a statement “that the communication is not authorized by any candidate or candidate’s committee.” 2 U.S.C. 441d(a)(3); 11 C.F.R. 110.11(b)(3). The televised communication must also include a statement that the entity funding the communication “is responsible for the contact of this advertising,” and that the statement must be both (1) made orally by a representative of the entity making the communication and (2) printed “for a period of at least 4 seconds” in text meeting specified size and contrast requirements. 2 U.S.C. 441d(d)(2); 11 C.F.R. 110.11(c)(4).

Although the court noted that disclaimer and disclosure requirements may burden the ability to speak, they impose no ceiling on campaign-related activities and provide the electorate with information about election-related spending sources.

Additionally, the BCRA disclaimer and disclosure requirements insure that the voters are fully informed about who is speaking. At the very least, they avoid confusion by making clear that the ads are not funded by a candidate or political party.

–Jason Gordon, Esq.

These materials have been prepared by Winston & Strawn for informational purposes only. These materials do not constitute legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code.