US-CourtOfAppeals-5thCircuit-SealThe U.S. Supreme Court’s decision in Citizens United v. FEC is wreaking havoc with campaign finance laws across the country, and Texas is no exception. Citizens United overturned 50 years of campaign finance law that outlawed direct corporate expenditures (so-called “independent expenditures”) to advocate the election or defeat of specific candidates. Since the Court handed down the decision in 2010, numerous facial challenges to direct campaign expenditure bans and limitations have spread like wildfire. Just last year the Fifth Circuit followed Citizens United and struck down part of Texas’ longstanding prohibition of corporate contributions to general purpose political committees (GPACs). In Texans for Free Enterprise v. Texas Ethics Commission, 732 F.3d 535 (5th Cir. 2013), the Fifth Circuit cleared the way for corporations to make contributions from corporate funds to GPACs that exclusively make independent expenditure and do not make contributions to individual candidates.

On August 12, the Fifth Circuit issued a decision chipping away further at the Texas campaign finance system. In Catholic Leadership Coalition of Texas v. Reisman, 2014 U.S.App. LEXIS 15558, the Court struck down current law requiring a GPAC to wait 60 days before exceeding $500 in contributions and expenditures and to collect contributions from at least 10 persons. The Court upheld the requirement that the PAC file a campaign treasurer appointment prior to making contributions or expenditures. It also, at least for the time being, upheld the ban on corporate contributions to GPACs that make both independent expenditures and candidate contributions.

The Court reasoned that the 60-day, $500 limit and the 10-contributor requirement unconstitutionally place a ceiling on speech for sixty days, even if the PAC is willing to comply with the applicable disclosure and disclaimer requirements. It likewise ruled that the $500 limit on contributions on expenditures during that period could not be justified by the State’s interest in preventing quid pro quo corruption, since Citizens United ruled as a matter of law that independent expenditures cannot give rise to corruption of the appearance of corruption. Moreover, the Court opined that Texas could strengthen its current disclosure requirements and achieve the same result without overburdening First Amendment political speech. On the bright side for the State, the Court ruled that a non-profit corporation could not donate an e-mail list to a GPAC that makes both independent expenditures and candidate contributions, despite the PAC’s representation that it would use the list solely for independent expenditures. Nevertheless, the Court remarked that the practice of “hybrid” PACs that make both types of expenditures “appears destined to be a coming campaign-finance law battleground.”

Taken together, the two Fifth Circuit decisions invalidate four key provisions of the Texas Election Code (along with Ethics Commission opinions construing these sections):

  • §253.037(a)(1), which prohibits a GPAC from knowingly authorizing a political contribution or political expenditure unless it has filed a campaign treasurer appointment at least 60 days prior to the date the contribution of expenditure is made (it must still file a campaign treasurer appointment);
  • §253.031(b), which prohibits a GPAC from knowingly accepting political contributions totaling more than $500 or make or authorize political expenditures totaling more than $500 at a time when a campaign treasurer appointment is in effect;
  • §253.037(a)(2), which bars a GPAC from knowingly authorizing a political contribution or political expenditure before it has received contributions from at least 10 persons; and
  • §253.094(a), insofar as it prohibits a corporation or labor organization from making a political contribution to an independent-expenditure-only GPAC.

Inevitably, Citizens United will continue to spawn further challenges to Texas campaign finance laws. The most likely target for future litigation is the Judicial Campaign Fairness Act, which limits contributions and expenditures in judicial campaigns. In general, the Judicial Campaign Fairness Act establishes an overall expenditure limit for a Supreme Court candidate of $2 million per election (with lesser amounts for intermediate appellate and trial courts). This limitation applies to political expenditures made or authorized by the judicial candidate, but not to independent expenditures. See §253.168, Election Code. A general-purpose PAC may make independent expenditures on behalf of a judicial candidate, if the PAC treasurer files an affidavit with the Texas Ethics Commission stating that “the committee has not directly or indirectly communicated with the candidate’s campaign regarding a “strategic matter, including polling data, advertising, or voter demographics, in connection with the candidate’s campaign.” See §253.160(c), Election Code.

There is another statutory provision, however, that requires a general-purpose political committee to give notice at least 60 days prior to the election of its intention to make a direct campaign expenditures in a judicial race that in the aggregate exceed $25,000. See §253.163(b), Election Code. Violation of this provision carries a civil penalty of up to three times the amount of political expenditures incurred. §253.163(g), Election Code. Though couched as a simple notice requirement, the statute effectively bars a PAC from deciding to make independent expenditures after the 60-day deadline has passed.

While the U.S. Supeme Court’s ruling in Citizens United seems to leave Buckley v. Valeo intact with respect to pre-election disclosure and registration requirements, a pre-election notice of future intent to make independent expenditures that operates to bar such expenditures on a date certain may not pass constitutional muster. Given the Fifth Circuit’s analysis of the 60-day waiting period prescribed by §253.037(a)(1), it highly is likely that the Court would apply strict scrutiny to §253.163(b) provision as well, since it clearly places a significant burden—indeed a prohibition—on a PAC’s political speech in advance of an election. The State would then have to show a compelling interest to limit such speech, and that the 60-day notice provision is narrowly tailored to achieve that result. Presumably, the State would assert a compelling interest in preventing corruption or the appearance of corruption as the result of unrestrained, “last minute” PAC expenditures in the 60 days prior to an election.

The problem with the anti-corruption argument is three-fold:

(1) The provision on its face allows some PACs to make direct campaign expenditures in a judicial race, while barring others from doing so. The only difference between them is the date on which they form an “intent” to make independent expenditures. As previously noted, the Court stated in Citizens United that the “First Amendment bars attempts to disfavor certain subjects or viewpoints, as well as restrictions distinguishing among different speakers, allowing speech by some but not by others.” The 60-day notice provision arguably has this result.

(2) Citizens United makes it clear that Buckley’s anti-corruption rationale only applies to political contributions, not to independent expenditures. Whether an independent expenditure made 61 days or 59 days before an election does not change the fact that the “absence of coordination” inherent to independent expenditures vitiates the appearance of corruption associated with direct contributions in exactly the same way.

(3) The State might argue that the 60-day notice requirement is necessary to prevent a PAC from organizing and making expenditures near the date of the election without disclosing them in a timely fashion, thus effectively concealing such expenditures from public view until the election is over. This argument is in effect another version of the anti-corruption rationale and would likely fail since the notice requirement effectively bars certain independent expenditures.

In view of the growing number of Election Code provisions either already invalidated or in imminent danger of invalidation pursuant to Citizens United, it may be time for the Legislature to revise Chapter 253 to eliminate unconstitutional (or soon likely to be unconstitutional) provisions and strengthen disclosure and disclaimer requirements. Citizens United and subsequent cases demonstrate that federal courts will apply a lower level of scrutiny to campaign finance that promote transparency as opposed to placing monetary limits on political speech. Perhaps it is time for the Legislature to consider updating disclosure statutes to take advantage of technological advances that allow contemporaneous reporting, especially in the period right before an election. On the other hand, any Texas statutes that purport to limit expenditures, as they do in judicial races, do not make much sense in an era of unlimited corporate independent expenditures.

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