May 15, 2012; Source:The Hill

The Federal Election Commission did not overstep its legislative authority in requiring 501(c)(4)s engaged in “electioneering communications” to disclose their donors, according to a three-judge U.S. Court of Appeals panel for the D.C. Circuit. The argument of the appellants was that “donors would face harassment if their names were disclosed.” The court found the evidence for that argument lacking. The court also noted that 501(c)(4)s could establish separate accounts for donors who wanted their identities secret, though only if the funds in those accounts don’t pay for election-related issue ads. Federal District Court Judge Amy Berman Jackson’s decision that threw out the FEC’s 2007 regulations and “reinstated a 2003 regulation that mandates that independent organizations paying for electioneering ads report all donations of $1,000 or more dating back to the first day of the preceding year.”

This is big news in two ways. First, it challenges not only the notion of 501(c)(4) confidentiality, but it questions the longstanding trope that disclosing donors’ names would subject them to attacks from political opponents. Either the court didn’t buy the harassment argument, or it felt that the public interest in disclosing the names of people or institutions paying for attack ads was more important than the donors’ privacy interests. Second, although this decision can be appealed, it could be that the length of time the case might take to make its way through the judicial hierarchy would leave this Appeals Court decision operational this election season. According to NPR, the court directed the FEC to “start enforcing the law while the appeal goes forward.”

Rep. Chris Van Hollen (D-Md.) deserves some credit for bringing the case and challenging the FEC. You may remember that the FEC required disclosure in the weeks leading up to an election only for donors who contributed to finance a specific election ad, which Van Hollen argued violated the McCain-Feingold campaign finance reform legislation. Two conservative advocacy groups asked for a stay on the court’s decision pending an appeal, but the court denied that request.

This decision will likely throw the plans of existing 501(c)(4)s into disarray, as they will have to tell donors that their confidentiality can no longer be protected. It will also upset the juggernaut of new, planned 501(c)(4)s. At a House Ways and Means Committee hearing on May 16th, attorney Bruce Hopkins told the committee that the Internal Revenue Service has received a substantial number of 501(c)(4) applications, partly motivated—to no one’s surprise—because donors’ names didn’t have to be revealed. If the appeals court decision stands through this election season, the 501(c)(4) juggernaut might slow down. If so, the American democratic process in national elections, as frayed and tattered as it is, will receive a boost in the form of long-needed political donor transparency.—Rick Cohen