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Campaign Finance: Dems Unveil Bill To Make Corporate CEOs Say 'I Approve This Message' In Campaign Ads

First Posted: 06/29/10 06:12 AM ET Updated: 05/25/11 05:20 PM ET

Congress Campaign Finance

Democrats unveiled legislation on Thursday that will force corporate CEOs to say "I approve this message" in campaign ads bankrolled by their companies.

"You could probably call it say-it-to-my-face politics," said Sen. Ron Wyden (D-Ore.) Thursday morning in front of the Supreme Court, where Senate Democrats, led by Chuck Schumer (N.Y.), denounced the Supreme Court's recent decision in Citizens United v. FEC to allow unlimited corporate spending on campaign ads.

In the legislative tradition of painfully forced acronyms, their bill to blunt that decision is titled the "Democracy Is Strengthened by Casting Light On Spending in Elections Act" -- the DISCLOSE act. ("Get it?" asked Schumer.)

In addition to its "stand by your ad" requirement, the legislation would limit spending on campaign ads by foreign corporations, taxpayer bailout beneficiaries, and government contractors. It would also force more disclosure of who pays for third-party ads, so corporate interests and unions won't be able to launder campaign influence through front groups with names like "Americans for the American Dream and Apple Pie" -- or the Chamber of Commerce, for that matter.

Schumer said he expected the legislation's disclosure requirements will lead to fewer corporate-funded campaign ads in November.

The wildly unpopular Citizens United decision, announced in January, undid the Federal Election Commission's restrictions on corporate and labor union spending on campaign advertisements within 60 days of a general election or 30 days of a primary. Before the decision, money for ads specifically endorsing individual candidates had to be funneled through political action committees. While many expect the decision to unleash an unprecedented amount of money in this November's midterm elections, there are some skeptics. (The decision does not allow unlimited contributions directly to political campaigns.)

Schumer and Sen. Russ Feingold (Wisc.) both called the decision one of the worst in the Supreme Court's history and said it will be an issue in the upcoming confirmation battle for President Obama's nominee to replace the retiring justice John Paul Stevens.

The unveiling of the legislation was delayed as Democrats sought Republican support, ultimately winning over Rep. Mike Castle (R-Del.) in the House but failing to win over a single Republican in the Senate. But Schumer said he expected Republicans to support the bill even though none would co-sponsor it.

"A good number [of Republicans] have said they are favorably disposed to the legislation," Schumer said, adding that Senate Majority Leader Harry Reid promised the bill would be brought to the Senate floor by Independence Day.

Jeff Patch, a spokesman for the Center for Competitive Politics, which opposes the legislation, said he's "been on used car lots where salesmen have employed more honesty hawking lemons than Sen. Schumer displayed selling the DISCLOSE Act."

Patch's organization believes the bill is unconstitutional. It will certainly face a court challenge; Schumer said he believed the bill as written would pass constitutional muster.

Here's a summary of the bill:

The Democracy Is Strengthened by Casting Light On Spending in Elections Act - The DISCLOSE ACT


TITLE I - REGULATION OF CERTAIN POLITICAL SPENDING

Sec. 101. BAN PAY-TO-PLAY

• Prevent Government Contractors from Spending Money on Elections. Government contractors would be barred from making campaign-related expenditures, defined to include independent expenditures and electioneering communications. This is an extension of an existing ban on contributions made by government contractors. Before Citizens United, corporations could not make such campaign-related expenditures. A $50,000 contract threshold will be included to exempt small government contractors.

• Prevent Corporate Beneficiaries of TARP from Spending Money on Elections. Corporations that received bailout funding from the federal government should not be permitted to use taxpayer money to influence elections. This section would prohibit bailout beneficiaries from making campaign-related expenditures. Once that money is repaid, however, the restrictions would be lifted.

Sec. 102. PREVENT FOREIGN INFLUENCE IN U.S. ELECTIONS

• While foreign nationals, including foreign corporations (those incorporated overseas), are banned from making contributions or expenditures to influence U.S. elections, the opinion in Citizens United created a loophole for spending by domestic corporations controlled by foreign nationals. To close the loophole, the legislation extends the existing prohibition on contributions and expenditures by foreign nationals to include domestic corporations under the following circumstances:

1. If a foreign national owns 20% or more of voting shares in the corporation, which is modeled after the control test in many states, including Delaware;
2. If a majority of the board of directors are foreign nationals;
3. If one or more foreign nationals have the power to direct, dictate, or control the decision-making of the U.S. subsidiary; or
4. If one or more foreign nationals have the power to direct, dictate, or control the activities with respect to federal, state or local elections.

Sec. 103. PREVENT ORGANIZATIONS FROM COORDINATING THEIR ACTIVITIES WITH CANDIDATES AND PARTIES

• The legislation ensures that corporations and unions are not allowed to coordinate campaign-related expenditures with candidates and parties in violation of rules that require these expenditures to be independent.

o Current FEC rules bar corporations and unions from coordinating with congressional candidates and parties about ads that refer to the candidate and are distributed within 90 days of a primary election or within 90 days of the general election. For Presidential contests, current FEC rules prohibit coordination on ads that reference a presidential candidate in the period beginning 120 days before a state's Presidential primary election and continuing in that state through the general election. Outside these time frames, current law prohibits coordination only on ads that expressly advocate the election or defeat of a candidate.

o This legislation would do the following:
-- For House and Senate races, the legislation would ban coordination between a corporation or union and the candidate on ads referencing a Congressional candidate in the time period starting 90 days before the primary and continuing through the general election. For presidential campaigns, the legislation would ban coordination between a corporation or union and the candidate on ads referencing a Presidential or Vice Presidential candidate in the time period starting 120 days before the first presidential primary and continuing through the general election.

Sec. 104. POLITICAL PARTY COMMUNICATIONS

• The legislation provides that any payment by a political party committee for the direct costs of an ad or other communication made on behalf of a candidate affiliated with the party is treated as a contribution to the candidate only if the communication is directed or controlled by the candidate.

• Party-paid communications that are not directed or controlled by the candidate are not subject to limits on the party's contributions or expenditures.

TITLE II - PROMOTING EFFECTIVE DISCLOSURE OF CAMPAIGN-RELATED ACTIVITY

The legislation ensures that the public will have full and timely disclosure of campaign-related expenditures (both electioneering communications and public independent expenditures) made by covered organizations (corporations, unions, section 501(c)(4), (5), and (6) organizations and section 527 organizations).
The legislation imposes disclosure requirements that will mitigate the ability of spenders to mask their campaign-related activities through the use of intermediaries.
It also requires disclosure of both disbursements made by the covered organization and also the source of funds used for those disbursements.

SUBTITLE A - REPORTING IMPROVEMENTS TO THE FEC

Sec. 201. INDEPENDENT EXPENDITURES

The definition of an "independent expenditure" is expanded to include both express advocacy and the functional equivalent of express advocacy, consistent with Supreme Court precedent. Additionally, the section imposes a 24-hour reporting requirement for expenditures of $10,000 or more made more than 20 days before an election, and expenditures of $1,000 or more made within 20 days before an election.

Sec. 202. ELECTIONEERING COMMUNICATIONS

This section expands the definition of "electioneering communications" to include all broadcast ads that refer to a candidate within the period beginning 90 days before a primary election, until the date of the general election. Any such "electioneering communication" is subject to the disclosure requirements in the bill. The section also expands the reporting requirements for electioneering communications to include a statement as to whether the communication is intended to support or oppose a candidate, and if so, which candidate.

SUBTITLE B - EXPANDED REQUIREMENTS FOR DISCLOSURE

Sec. 211. IMPROVED DISBURSEMENT REPORTING REQUIREMENTS

The legislation would require corporations, labor unions, and section 501(c)(4), (5), or (6) organizations--as well as section 527 organizations--to report all donors who have given $1,000 or more to the organization during a 12-month period if the organization makes independent expenditures or electioneering communications in excess of $10,000.

If an organization makes a transfer of funds to another person for the purpose of making an independent expenditure or electioneering communication, the organization shall be treated as making an independent expenditure or electioneering communication. A person shall be deemed to have transferred funds for the purpose of making campaign-related expenditures if there have been substantial discussions about such expenditures between the person making the transfer and the person receiving the funds, if the person making the transfer or the person receiving the transfer knows (or should have known) of the intent to make campaign-related expenditures by the person making the transfer or if the making the transfer or the person receiving the funds made a campaign-related expenditure in the last election cycle or the current cycle.

Sec. 212. DISCLOSURE OF GENERAL TREASURY FUNDS

If a donor to a covered organization specifies that his donation may not be used for campaign-related activity, the organization is restricted from using the donation for that purpose, and may not then disclose the identity of the donor. The organization's CEO must certify to the donor within 7 days that such funds will not be used for campaign-related activity.

If a covered organization makes a disbursement for campaign-related activity, the CEO must file a statement with the FEC certifying that the expenditure was not made in coordination with a candidate, that funds designated by the donor not to be used for campaign-related activity have not been used for any campaign-related activity, and that the spending has been fully disclosed and made in compliance with law.

Sec. 213. CREATION OF SEPARATE CAMPAIGN-RELATED ACTIVITY ACCOUNT

An organization can establish a separate "Campaign-Related Activity" account to receive and disburse political expenditures. If an organization makes campaign-related expenditures exclusively from its separate account, then it is only required to disclose only donors who have contributed $10,000 or more for unrestricted use or donors who have contributed $1,000 or more specifically for campaign-related activity.

Sec. 214. ENHANCE DISCLAIMERS TO IDENTIFY SPONSORS OF ADS

• Require Leaders of Corporations, Unions, and Organizations to Identify that they are Behind Political Ads. If any covered organization (corporation, union, section 501(c)(4),(5), or (6) organization, or section 527 organization) spends on a political ad, the CEO or highest ranking official of that organization will be required to appear on camera to say that he or she "approves this message," just like candidates have to do now.

• In order to prevent "Shadow Groups", Require Top Donors To Appear in Political Ads They Funded. In order to prevent individuals and entities from funneling money through shell groups in order to mask their activities, the legislation will include the following requirements:

o The top funder of the advertisement must also record a stand-by-your-ad disclaimer.

o The top five donors of non-restricted funds to an organization that purchases campaign-related TV advertising will be listed on the screen at the end of the advertisement. This has been used very successfully in Washington State and is the model for this section in the legislation.

SUBTITLE C - REPORTING REQUIREMENTS FOR REGISTERED LOBBYISTS

Sec. 221. REQUIRING REGISTRANTS TO REPORT INFORMATION ON INDEPENDENT EXPENDITURES AND ELECTIONEERING COMMUNICATIONS

In an effort to add to the transparency of lobbying activities, all registrants under the Lobbying Disclosure Act must disclose the following information on their semiannual reports: the date and amount of each independent expenditure or electioneering communication of $1,000 or more, and the name of each candidate referred to or supported or opposed.


SUBTITLE D - FILING BY SENATE CANDIDATES WITH THE FEDERAL ELECTION COMMISSION

Sec. 231. FILING BY SENATE CANDIDATES WITH THE COMMISSION

In addition to the increased disclosure and transparency placed on outside organizations, the legislation will incorporate language from the bipartisan S. 1858, which requires Senators to electronically file their campaign finance reports directly to the FEC.

TITLE III - DISCLOSURE OF CAMPAIGN-RELATED ACTIVITY TO MEMBERS & SHAREHOLDERS

Sec. 301. ENHANCE REQUIREMENTS FOR DISCLOSURE OF POLITICAL EXPENDITURES TO SHAREHOLDERS AND MEMBERS OF COVERED ORGANIZATIONS

All campaign-related expenditures made by a corporation, union, section 501(c)(4), (5), or (6) organization, or section 527 organization must be disclosed on the organization's website with a clear link on the homepage within 24 hours of reporting such expenditures to the FEC. Additionally, all campaign-related expenditures made by a corporation, union, section 501(c)(4), (5), or (6) organization, or section 527 organization must be disclosed to shareholders and members of the organization in any financial reports provided on a periodic and/or annual basis to its shareholders or members.

TITLE IV - TELEVISION MEDIA RATES

Sec. 401. PROVIDE LOWEST UNIT RATE FOR CANDIDATES AND PARTIES

Current law allows for candidates to receive the lowest unit rate for airtime in order to get their message out over the airwaves.
If a covered organization (which includes corporations, unions, section 501(c)(4), (5), and (6) organizations, and section 527 organizations) spends $50,000 on airtime to run ads on broadcast, cable, or satellite television that support or oppose a candidate, then that candidate or political party committee is allowed to receive the lowest unit rate for that media market.
The broadcaster must also ensure that the candidate or political entity has "reasonable access" during nonpreemptible airtime.

TITLE V - OTHER PROVISIONS

This Title contains the judicial review, severability, and effective date sections.

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