The US Supreme Court today held that the Federal Election Campaign Act’s prohibition on the use of corporate treasury funds to pay for advertisements expressly advocating the election or defeat of candidates for federal office violates the First Amendment right to free speech. This decision, Citizens United v. Federal Election Commission, will have a profound effect on elections. Corporations, and apparently labor unions, are now free, as long as they do not coordinate their efforts with campaigns, to spend unlimited amounts of money on advertisements urging the general public to vote for or against specific candidates, including during the period immediately before an election.

Analysis and Effects

We expect that most publicly-traded corporations will largely forego the opportunity to directly fund advertisements urging the election or defeat of federal candidates, especially sitting Members of Congress. Corporations may, however, use this decision to contribute money to political organizations who then, in turn, will fund such advertisements. We believe labor unions, however, will enthusiastically embrace this opportunity to use treasury funds to run such ads.

There will, however, be a proliferation of ideological 501(c)(4) nonprofit corporations that will solicit funds, primarily from for-profit corporations, to run such ads. These 501(c)(4) corporations will be highly attractive vehicles for running such ads because contributions to these organizations are not, under current law, publicly disclosed.

Existing nonprofit organizations such as 501(c)(4)s and 501(c)(6)s benefit from this decision as well. In the past, nonprofits had to be careful regarding what money they could use, and what the content of their advertisements could say. They will now be able to speak more freely, still subject to the tax code’s regulations and this opinion will not, at this juncture, affect the speech rights of 501(c)(3)s.

We expect that Congress will respond to today's ruling by trying to enact legislation to either prohibit corporations that do business with the federal government from using corporate funds to make independent expenditures and/or requiring such corporations to disclose contributions made to any other incorporated entity for purposes of making political expenditures. Indeed, several such bills have already been introduced in the US House of Representatives.

The above does not constitute legal advice, but is a brief analysis of the Citizens United decision. For more information concerning this decision and its effect on your organization, please contact Craig Engle, the head of the Arent Fox Political Law Group at 202-775-5791, Brett Kappel at 202-857-6494, or email PoliticalLaw@arentfox.com.