Does the Citizens United Decision Affect Not-for-Profit Organizations?
In its highly divisive 5-4 opinion in Citizens United v. FEC, the Supreme Court dramatically altered the framework regulating corporate speech during federal elections. Released on January 21, 2010, the Court’s decision struck down legislative and judicial restrictions that have been in place for decades, preventing corporations and labor unions from using general treasury funds on political speech during federal elections. In addition to directly impacting for-profit corporations and labor unions, this case will have a substantial effect on the not-for-profit sector.
The case arose when Citizens United—a 501(c)(4) organization—used general treasury funds to produce a movie highly critical of then-Presidential candidate Hillary Clinton, and then sought to air the movie through video-on-demand services several weeks before the 2008 election. The Federal Election Commission, and subsequently the lower courts, determined that the movie expressly advocated against voting for Hilary Clinton, thus violating the independent expenditure prohibition contained in the Bipartisan Campaign Reform Act of 2002, commonly known as McCain-Feingold Bill.
Prior to Citizens United, if a corporation spent money advocating for or against a candidate during federal elections, it could only do so using funds voluntarily given by individual officers or employees to separate political action committees (PACs or Section 527 organizations). Similarly, labor unions could only use funds voluntarily given by individual union members. Now, as a result of Citizens United, corporations—including certain not-for-profit corporations, such as issue-based 501(c)(4)s and 501(c)(6)s—can use general treasury funds to make independent expenditures expressly advocating for or against candidates in federal elections. The decision left unchanged, however, the existing limits on direct or in-kind contributions to candidates and the required disclosures for corporations making independent advertisements.
Most not-for-profit organizations fall within the purview of this decision, with the exception of 501(c)(3)s. While charities can still engage in nonpartisan election activity, such as voter registration and other get-out-the-vote efforts, the tax-based restriction specific to 501(c)(3)s prohibits these entities from ever endorsing or opposing candidates, rendering them largely unaffected by the Citizens United decision.
Other not-for-profit corporations, such as issue-based 501(c)(4)s and 501(c)(6)s, now find themselves in a position to take advantage of the newly-lifted restrictions on speech during federal elections. Unlike for-profit corporations, however, this new-found spending power is not absolute. Not-for-profit organizations remain subject to the primary purpose restriction under federal tax law, preventing 501(c)(4), (c)(5), and (c)(6)s from making political activities their primary purpose. Not-for-profit organizations can generally remain compliant, however, to the extent that their primary purpose continues to promote social welfare rather than political advocacy.
Since this decision, the not-for-profit community’s response has been divided. Some in the sector, including Common Cause and People for the American Way, are mobilizing efforts to minimize the impact of the decision by urging Congress to pass a constitutional amendment granting Congress the power to limit corporate influence in federal elections. Additionally, these groups are simultaneously pushing for new campaign finance legislation. Others, including the Alliance for Justice, are advocating that not-for-profit organizations embrace the decision and take advantage of the new found ability to publicly communicate with voters about issues germane to their organization. Similarly, other not-for-profit organizations are banding together in using the momentum from Citizens United as a catalyst to justify lifting other restrictions specific to not-for-profit organizations, such as the tax-based cap on lobbying activity for 501(c)(3)s.
While Citizens United only addressed corporate spending on political advertisements during federal elections, some are trying to determine whether the case's central holdings have broader implications. In particular, many are closely watching two cases currently before an en banc panel of the D.C. Circuit Court of Appeals, entitled SpeechNow.org., et al., v. FEC (dockets 08-5223 and 09-5342). These cases touch upon some of the issues left unchanged by Citizens United—specifically, how much money corporations can directly contribute for use in political campaigns. These cases will test, in the wake of Citizens United, the continued vitality of these restrictions.
