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Rules of the Game: Advocacy Groups Face New Ad Rules

Federal Appeals Court Decision Changes Plans For Many Nonprofits

With the stroke of a pen, a federal appeals court ruling has drastically altered the calculus for nonprofits and trade groups poised to spend millions of dollars in this election, from well-funded partisan players to grass-roots groups on the left and right.

The ruling by a three-judge appeals court panel last week has the odd effect of imposing stricter disclosure rules on ads that simply picture or name a candidate at election time than on messages explicitly urging people to vote for or against a candidate.

Beyond forcing advocacy groups of all political stripes to re-evaluate their game plans, the decision underscores how the organizations are moving to the front lines of the battle over unrestricted campaign spending in the wake of the Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling.

“It’s changed the rulebook in the middle of the game,” said Abby Levine, legal director of advocacy programs at the Alliance for Justice, a progressive umbrella group. Levine said she’s spoken with a number of organizers who plan to simply squelch election-eve ads that they had planned, rather than disclose the names of donors who expected to remain anonymous.

Other groups might scramble to set up segregated accounts that disclose only the donors who paid for a certain ad or opt to run straight campaign messages instead. But tax rules bar social welfare organizations from making partisan political activity their primary purpose, meaning that nonprofits that run too many campaign ads may run afoul of the IRS.

“It makes nonprofit management a nightmare,” said David Keating, president of the Center for Competitive Politics, a pro-First Amendment group, “because you have money sitting in this account, which you will be afraid to use.”

Last week’s ruling by the Court of Appeals for the D.C. Circuit has heartened reform advocates but alarmed grass-roots lobbyists, who argue that it could stifle players who simply want to weigh in on public policy issues at election time.

It all began when Rep. Chris Van Hollen (D-Md.) sued the Federal Election Commission last year, arguing that the agency’s disclosure rules for “electioneering communications” were contrary to the 2002 Bipartisan Campaign Reform Act. In March, a federal district court agreed and ordered the FEC to write new disclosure regulations. The FEC didn’t appeal, but a pair of conservative groups that had intervened in the case asked the appeals court to stay the federal district court’s ruling.

Last week, the appeals court panel rejected that request for a stay, handing Van Hollen and his allies their first decisive victory in the wake of Citizens United. The ruling applies only to electioneering communications, defined as ads that picture or name a candidate 30 days before a primary or 60 days before a general election.

The decision is a blow to politically active groups such as the U.S. Chamber of Commerce and the GOP-friendly nonprofit known as Crossroads Grassroots Policy Strategies. Both groups are already spending millions on ads that picture and name candidates but that don’t call for their election or defeat, allowing them to empty their coffers on “educating” voters without triggering disclosure rules that apply to campaign ads.

As of now, those ads don’t qualify as electioneering communications because it’s not yet the eve of a primary or a general election. But the presidential primaries — which for both nominees will be triggered by their major party nominating conventions — are not far off. Ads that run 30 days prior to those conventions will be subject to the strict disclosure rules triggered by the ruling. That window starts in late July for Republicans and early August for Democrats.

A Crossroads GPS spokesman declined to comment. A spokeswoman for the chamber, which has opposed disclosure legislation as partisan and politically motivated, said the ruling will not block the trade group from getting its message out.

“We’re disappointed by the court of appeals’ refusal to stay the lower court’s decision, thereby changing the rules of the road in the middle of an election cycle,” said chamber spokeswoman Blair Latoff, responding via email. “The decision, however, will not deter the chamber from educating voters on the issues important to the business community, which are economic growth and jobs.”

However they proceed, trade and advocacy groups face more risks ahead. Van Hollen is considering a second lawsuit challenging the FEC rules for independent campaign expenditures. Reform advocates will soon file a new round of complaints with the IRS against Crossroads GPS and other nonprofits, said Fred Wertheimer, president of Democracy 21. Disclosure legislation may also reach the Senate floor as early as June, he said.

The push for disclosure affects not just big-spending, controversial groups such as the chamber and Crossroads GPS, but smaller players who say they represent average citizens. All find themselves in uncertain new territory.

“I don’t expect that this is going to shut down political spending — not by far,” said Lawrence Norton, co-chairman of the political law practice at Venable LLP. “But I do think you’ll see groups trying to accommodate the ruling and structure their ads and their governance in a way that allows them to be on the airwaves and to get their message out.”

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