Campaign Season Brings Donor Disclosure Challenges for Nonprofits

September 7, 2012 is an important date for nonprofit organizations to remember. As the campaign season gets into high gear, that date marks the start of the 60 days prior to the general election on November 6, 2012. It is also when the Federal Election Commission (FEC) rules say “electioneering communications” requiring donor disclosure kick in.

The United States District Court for the District of Columbia, on March 30, 2012, issued an opinion in Van Hollen v. FEC, No. 11-0766, 2012 WL 1066717 (D.D.C. Mar. 30, 2012), that has far-reaching consequences for nonprofits engaging in certain political activity. In that case, the court invalidated a 2007 FEC regulation that governed donor disclosure by corporations (including nonprofit corporations) and labor organizations funding electioneering communications. 

An electioneering communication is any broadcast, cable, or satellite communication that: (1) Refers to a clearly identified candidate for federal office; (2) Is publicly distributed within 60 days prior to a general election or 30 days prior to a primary election for the office that candidate is seeking; and (3) Is targeted to the relevant electorate, in the case of a candidate for U.S. Senate or the U.S. House of Representatives. 11 C.F.R. § 100.29.

Specifically, the 2007 regulation added an intent element and required corporations (including nonprofits) and labor organizations to disclose “the name and address of each person who made a donation aggregating $1,000 or more to the corporation or labor organization, aggregating since the first day of the preceding calendar year, which was made for the purpose of furthering electioneering communications.” 11 C.F.R. § 104.20(c)(9) (emphasis added). 

The court found that this limitation on disclosure violated Congress’ intent in enacting the Bipartisan Campaign Reform Act of 2002 (BCRA), Pub. L. 107–155, 116 Stat. 81 (2002), more commonly known as McCain-Feingold. The FEC’s prior regulation, adopted in 2003, followed the statutory language and, as the Court noted, “did not add an intent requirement.” Van Hollen, 2012 WL 1066717 at *14 n.8. 

On April 27, 2012, the court vacated the regulation and reinstated the FEC’s prior regulation, which does not include the intent requirement. The case is currently on appeal in the United States Court of Appeals for the District of Columbia Circuit. The FEC has issued a Statement on how it will comply with the decision pending the appeal of the case. 

The FEC statement makes clear that nonprofit organizations making or financing electioneering communications must report “the name and address of each donor who donated an amount aggregating $1,000 or more to the person making the disbursement, aggregating since the first day of the preceding calendar year.” 11 C.F.R. § 104.20(c)(8) (effective Feb. 3, 2003 to Dec. 25, 2007). It also states that it will apply this requirement retroactively to March 30, 2012, the date of the court’s decision. Dues paid in return for the benefits of membership are not considered “donations.” Also, customers who pay nonprofit organizations for goods and services are not “donors.” 

So, for example, if a nonprofit airs a television or radio advertisement that clearly identifies a federal office candidate between September 7, 2012 and the November 6, 2012 election, it would have to disclose all of its donors who have donated a total of $1,000 or more since January 1, 2011. Note that FEC regulations only apply to federal elections, so this requirement does not apply to a nonprofit’s communications regarding state and local elections (although different state and local laws may apply). 

Also, while IRC Section 501(c)(3) organizations cannot participate in candidate campaign activity, the definition of “electioneering communication” arguably includes any “get out the vote” and other voter information broadcasts that identify a federal office candidate and is in that candidate’s targeted electorate.

This is a major change in federal policy that nonprofits should consider before making any electioneering communication this election season. For more information about the FEC rules, please contact the authors of this alert Sandra M. Cotter at 517-374-9129, M. Catherine Wilcox at 517-374-9152, or any of the listed attorneys.

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