The Uncertain Future of the Corporate Contribution Ban
49 Pages Posted: 6 Aug 2014
Date Written: July 25, 2014
Concern about the role of corporate money has been a longstanding theme in American politics. The first permanent federal campaign finance law – the Tillman Act of 1907 – prohibited federally-chartered corporations from making contributions in any election and prohibited all corporations from making contributions in federal elections. Subsequently amended, continued, and strengthened over a century the federal corporate contribution ban is still on the books. Twenty-one states also prohibit corporate contributions to candidates in state elections.
The Supreme Court sustained the federal corporate contribution ban as recently as 2003 in FEC v. Beaumont, but that decision and the corporate contribution ban today rest on shaky ground. The Roberts Court has demonstrated little respect for either legislated campaign finance restrictions or the Court’s own campaign finance precedents. In Citizens United v. FEC, the Court struck down a ban on corporate campaign spending. In so doing, it disavowed one of the justifications Beaumont relied on and called into question another. To be sure, Citizens United stressed that the case concerned only spending not contributions and invoked the Court’s longstanding practice of applying more stringent review of spending rules than contribution limits. But Citizens United’s assertion of the First Amendment rights of corporations surely casts a shadow on the contribution bans. This year’s decision in McCutcheon v. FEC – which ratcheted up the Court’s review of contribution restrictions – darkens that shadow still.
This paper argues that, assuming the Court continues to recognize the constitutional validity of contribution limits and to apply a less strict standard of review of contribution restrictions – admittedly a big “if,” a corporate donation ban ought to pass constitutional muster. The ban advances two long-recognized public interests that justify contribution restrictions: the protection of the rights of politically dissenting shareholders, and the prevention of the evasion of constitutionally valid limits on individual donations to candidates. Although Citizens United dismissed the shareholder-protection concern in the expenditure context, shareholder protection is an important interest previously acknowledged by the Court in cases dealing with contribution restrictions, and a contribution ban is closely drawn to protect that interest. So, too, the Court has long accepted the prevention of the circumvention of individual-to-candidate contribution limits as a constitutionally sufficient justification for other contribution restrictions. The use of corporations to evade disclosure requirements has become a regular occurrence since Citizens United freed corporations to engage in independent spending. If corporations could also make contributions, they could easily become a means to avoid the donation limits on the people who are closely associated with a corporation. Although McCutcheon tightened the “fit” required between the important public interest a campaign finance law is intended to sustain and the restrictions imposed by that law, the corporate contribution ban is narrowly tailored, and leaves room for other forms of campaign finance activity for the individuals affiliated with the corporation.
In Citizens United and McCutcheon, the Court emphasized that campaign finance restrictions cannot be justified by the goal of reducing the political power of the wealthy. Although much of the impetus for the corporate contribution ban is public anxiety over corporate wealth and power, the shareholder-protection and anti-circumvention justifications are not triggered by concern about corporate wealth but, rather, reflect other key features of the corporate form – its artificial existence as a legal to achieve ends desired by the individuals who have created it, and the potential for those who control the corporation to exploit shareholders. These two interests work in tandem, with shareholder-protection having greater purchase for multi-shareholder publicly-held entities, and anti-circumvention more relevant for single-shareholder, closely-held or nonprofit corporations. Together, they make the case for the corporate contribution ban for reasons other than the equality-promoting goal that Citizens United and McCutcheon so vehemently rejected.
Keywords: corporate money, Corporate Contribution Ban, finance law, Tillman Act, corporations, corporate contributions, contribution limits, contribution restrictions, shareholder protection, finance
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