If the U.S. Supreme Court Overturns Political Contribution Limits Next Year, Will Your Campaign Be Ready?

by Snell & Wilmer
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The U.S. Supreme Court, which heard oral argument in McCutcheon vs. FEC this week, may overturn the aggregate contribution caps that have governed federal elections since 1974. If so, candidates should prepare now for the political landscape that will exist come June.

The question posed by Shaun McCutcheon, a wealthy Alabama businessman who sought to step up his political contributions to federal candidates, was this: how can it be constitutional, under the guise of preventing corruption, to permit a donor like him to give maximum contributions to nine federal candidates but not 10? After all, that is the effect of a $48,600 aggregate contribution limit imposed by federal law. There are similar caps restricting aggregate contributions to parties and PACs ($74,600), and an overall limit ($123,600) as well. (These caps are indexed for inflation every two years). The law’s defenders counter that wealthy donors should not exert undue influence on the political process and that aggregate limits are necessary to prevent circumvention of the base limits, currently set at $2,600 per candidate per election. In fact, these aggregate contribution caps passed constitutional muster before the Supreme Court nearly 40 years ago.

Based on the oral argument, most observers predict a divided court will strike down one or more of these aggregate limits. (For example, the court may strike down the contribution cap applicable to candidates but uphold the cap applicable to parties and PACs). A decision may not come until June, but if candidates wait to adjust, it will likely be too late. Your playbook should be amended now.

The reality is that, if the aggregate caps are struck down, certain existing laws will become less restrictive and money will more easily flow through lawful channels. Here are two potential examples.

First Super-PACs, Now Super-JFCs. Joint fundraising committees typically sponsor star-studded events where donors write one big check. In April 2012, for example, a ticket to President Obama’s “Women’s Issues Conference” cost top donors $75,800. (Romney Victory was no different). That amount represented the maximum possible contribution under 2012 limits. Without aggregate caps, JFCs could have raised over $500,000 per person.

The advantage for candidates could come in the form of coordinated party expenditures. As a hypothetical example in a post-McCutcheon world, a donor might contribute $200,000 to a JFC, having four specific Arizona representatives in mind. Those funds are distributed among various state parties but eventually make their way to a state party in Arizona to conduct coordinated expenditures. This is how a party pays for goods/services to benefit a candidate’s general election (for example by paying campaign bills or coordinating campaign advertising) without triggering an “in-kind” contribution. Thus, while direct and in-kind contributions by parties are limited to $5,000, parties may spend up to $46,600 (in 2013 dollars) in coordinated expenditures per House race. This is nothing new. However, our hypothetical JFC donor—who would normally bump up against aggregate limits—now could see that all four preferred candidates receive the full benefit of coordinated expenditures.

The lower court worried that “the candidate who knows the coordinated expenditure funding derives from that single large check … will know precisely where to lay the wreath of gratitude.” But the Supreme Court might decide, notwithstanding these concerns, that the caps are unconstitutional under the First Amendment.

Candidates regularly jockey for coordinated money. It is unclear how that process will change, but it will change if the Court strikes down the limits. Candidates therefore should have a plan in place to tap any new resources that become available.

Candidate-Specific PACs. Candidates cannot establish multiple committees to receive multiple $2,600 contributions. Nor can donors earmark a PAC contribution for a particular candidate if the donor has already maxed out contributions to that candidate. However, nothing prevents a donor from making $5,000 contributions to various PACs that the donor hopes will contribute to his/her preferred candidates. Regulations merely prevent contributions given “with the knowledge that a substantial portion will be contributed to that candidate.”

With aggregate limits, it does not make much sense to test that boundary or attempt to maximize the multiplication effect of PACs. For example, it would probably not be worth the time or effort to establish only a handful of PACs and keep track of various donors’ contribution capacities. In particular, it would be cumbersome to track what amounts donors gave to what federal candidates, evaluate how much “cap room” they have left, and strategically direct their remaining contribution amounts to a handful of candidate-friendly PACs.

But without any caps whatsoever, it may be tempting to establish potentially dozens of PACs that can be expected to support certain candidates. Lawyers will then be asked by clients—likely to be donors or past aides of those candidates who are suddenly interested in forming an array of innocuous-sounding organizations—how much distance they must maintain from a particular campaign. The implicit goal would be to create a network of PACs, “independently” run by unaffiliated volunteers but who can reliably be counted upon to support a particular candidate. The effect, defenders of the aggregate caps worry, will be that donors circumvent the base contribution limits by exponentially making PACs contributions in a way not previously possible.

These are just two examples of what a post-McCutcheon world might look like. While some may think the sky is falling, take solace: myriad prophylactic measures will survive this ruling. Earmarking prohibitions, enforced by the FEC, will still be in place. Contributions and expenditures will be disclosed. And watchdogs can still be expected to shine a light on suspicious activity.

Whether the sea change brought about by McCutcheon will undermine the campaign finance system is ultimately for Congress to decide. In the meantime, however, candidates may want to prepare for this potential change now or risk being at a competitive disadvantage when the Supreme Court’s decision is rendered next year.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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