The ultimate failure of the DISCLOSE Act, which actually originally possessed some bipartisan support, is a classic Washington tale of what happens when too many cooks spoil the broth.

This story had it all, the timeless attempt to regulate money in politics, the strangest of bedfellows (Chris Van Hollen (D-MD), a high ranking Congressional Democrat, striking a deal with the conservative National Rifle Association), intense political pressure from stakeholders to tailor the bill to their own interests, and even a public and much documented inter-federal branch showdown at the President's most recent State of the Union address.

Senators John McCain and Dennis Feingold worked tirelessly for years to alter campaign finance laws (which they finally accomplished with the passage of BCRA), and the lingering result of their labors is general distaste for both lawmakers from their respective parties. McCain, the 2008 nominee of the Republican Party, has suffered tireless attacks from the right for his work on that legislation.

The DISCLOSE Act did originally contain some provisions both major parties agreed were in need of tweaking. Tightening of regulations on political giving by foreign corporations (through their American subs - sometimes merely shells) irritated members of both parties. So too did the inability of the FEC to instantaneously disclose contributions made to political parties and candidates. Lawmakers couldn't help themselves, however, from wading into the Citizens United decision, which was likely the straw that broke the camel's back.

Van Hollen, in order to appeal to his more liberal base, needed to appear to be a staunch hard money advocate, but realized that in order to succeed, he needed carve outs for specific groups critical to the Democratic money machine. To his credit, he even went as far as to reach out to a traditional Republican organization, presumably to preserve the aura of some bipartisan support.

Despite all of the work, Speaker Pelosi pulled the plug on the bill late Thursday night. The criticism from her base was that the legislation was too politically risky, filled with too many loopholes and reeked of inside Washington baseball.

Whatever one's position on the influence of money in politics, the DISCLOSE Act perfectly embodies a favorite saying of my grandfather's: "Try to please everybody and you end up pleasing nobody."

With all the kerfuffle around the DISCLOSE Act, it is important to remember why this measure is necessary in the first place. 8 in 10 Americans disapproved of the Supreme Court in Citizens United v. FEC which opened up virtually bottomless corporate and union treasury funds for spending on political advertising. Much of the new influx of money is expected to be laundered through shady groups with patriotic names or even trade associations. The goal for many campaign finance reform opponents is complete anonymity for donors – no fingerprints “Swift Boating” if you will. Below are recent examples plucked from the headlines.

A third-party group, the Committee for Truth in Politics, is out with an ad blasting the House’s "Wall Street Reform and Consumer Protection Act." The group, which has no Web site and has made no disclosures to the Federal Election Commission, was created by a North Carolina GOP operative, according to National Public Radio, and is represented by lawyer James Bopp, who sued the FEC on the grounds that the group shouldn’t have to file any kind of spending report to that agency. Source: FactCheck.org 2/3/10

“We believe that the U.S. Constitution protects them from having to file that report. The problem is having to file a report at all. To be regulated at all. To be accountable to the government at all.” - James Bopp on National Public Radio.

First, without the DISCLOSE Act, anonymous groups will be able to hide their financial backers. As the excerpt above shows, without the DISCLOSE Act, Americans will never know who is funding the Committee for Truth in Politics which also ran an ad in 2008, according to FactCheck.org, accusing then-Senator Barack Obama of “favoring early release for sexual offenders.” FactCheck.org said they found the Committee’s name “pretty misleading in the case of this ad, which includes a gross oversight on a 1999 vote.” Without the DISCLOSE Act, the Committee for Truth in Politics and its ilk will continue to operate and be able to keep the source of their funding hidden from the public and the press.

Just as dealings with the Obama administration and congressional Democrats soured last summer, six of the nation's biggest health insurers began quietly pumping big money into third-party television ads aimed at killing or significantly modifying the major health reform bills moving through Congress. That money, between $10 million and $20 million, came from Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group and Wellpoint, according to two health care lobbyists familiar with the transactions. The companies are all members of the powerful trade group America's Health Insurance Plans. …”There's no question that AHIP has quietly solicited monies from their members which were funneled over to the chamber for their ads," said a source. The total donated by the health insurers, according to one estimate, was as much as one-quarter of the chamber's total health care advertising budget. …Asked about the health-insurer funding for its ad blitz, the chamber's top lobbyist Bruce Josten said, "No comment. We never disclose funding or what we're going to do." Source: Under the Influence, National Journal, 1/12/10

Second, without the DISCLOSE Act, the true source of the funding of the ads run under the banner of a larger organization will remain hidden. A major concern raised by Citizens United is that corporations and unions will evade disclosure of their electoral spending by laundering money through third-party organizations. The Court, by a vote of 8-1, upheld the electioneering communications disclosure requirement. However, the FEC has already weakened this disclosure requirement by requiring third-party organizations to disclose only those donors that specifically designate their contributions for the organization’s electioneering communications. The FEC rules thus create a roadmap for evasion of the law and most recently the FEC deadlocked on its General Counsel’s recommendation to investigate what appeared to be a clear violation of federal disclosure requirement laws and the complaint was dismissed. The DISCLOSE Act ensures that the significant sources of funds used by groups for political advertising are disclosed.

All the noise surrounding the DISCLOSE Act should not distract from the importance of knowing the true source of funds in order to provide voters with the ability to evaluate the message of those trying to influence them.

DISCLOSE - "Democratic Incumbents Seeking to Contain Losses by Outlawing Speech in Elections" - is one of the most indefensible pieces of legislation ever to come out of Washington, and that's saying something. The NRA carve out merely illustrates that DISCLOSE is not really about "good government" or even "disclosure." The exemption for one of Washington's most powerful interest groups - now expanded slightly to cover another of Washington's most powerful interest groups, Sierra Club - in a bill claimed to be necessary to limit "special interest influence," make it highly likely that the law would not even pass the most lenient standard of legal review, "rationale basis," when it is challenged in Court, as it surely will be should it pass. So the NRA can speak, but the Gun Owners of America can not. This, we're told, is the price we have to pay for reform. Hogwash. We have advanced now from "crony capitalism" to "crony freedom" - if you are powerful enough, or play golf with the right guys, you get speech rights that others don't. Shameful, and shame on the "reform" community which has endorsed this. Let's address three myths about DISCLOSE. The first is that more disclosure is needed or would be useful. Under existing law, a group that has electing candidates as its major purpose, and spends or contributes $1000 or more to advocate the election or defeat of a candidate, must register with the Federal Election Commission as a "political committee," and disclose all of its donors over $200, and all of its receipts and expenditures, to the FEC. Many of these reports must be filed within 24 or 48 hours of the event. So called 527 organizations (groups that do not specifically advocate for the election or defeat of candidates, but may reference candidates in their activities) must report all of their donors to the IRS. Any corporation, union, individual, trade association, non-profit group, or any other spender making expenditures for or against a candidate in excess of $250 must report to the FEC the name of the spender, the date the spending occured, the amount spent, the candidate supported or opposed, the purpose of the expenditure (i.e. whether the money was spent for TV ads, phone calls, etc.), a statement certifying that it was made without coordination with any candidate or political party, and the name and address of any other person or entity that contributed more than $200 for the expenditure. Ads that do not specifically support or oppose a candidate, but which merely mention a candidate within 30 days of a primary or 60 days of the general election, and are funded in whole or in part by a corporation or union, must also report to the FEC the identity of the speaker and any other person exercising control over the activities, each amount over $200 disbursed, the person to whom the disbursement was made, and the candidates mentioned. The identity of any person contributing over $1000 to the effort must also be disclosed. All political ads have to state in the ad who paid for them, and if they advocate the election or defeat of a candidate, whether the candidate authorized or approved the ad. What's left to "disclose" that the public needs? Proponents of the legislation talk much about "shadowy groups," but let's get real - can you name any "shadowy" groups in the last decade that have not been exposed by a modestly enterprising journalist within hours? Voters understand that an ad paid for by the Chamber of Commerce represents business - this isn't rocket science. Voters grasp that a "527" group organized by Democratic political operatives and using a Democratic campaign finance lawyer probably seeks to help Democrats. DISCLOSE simply piles up layer upon layer of disclosure, such as one provision in the bill that would require up to six separate disclaimers of who is paying for the ad in a single 30 second ad. The point is not to "disclose," but to suffocate - as indicated by the fact that the bill will require some groups to "disclose" even if they make no political expenditures in the election cycle. Far from informing the public, that provision will merely confuse the public. Second, DISCLOSE is not just about disclosure. It actually prohibits much political speech that was legal before the Supreme Court decision in Citizens United. Beginning around Labor Day weekend and running all the way through the November 2012 election, literally thousands of would-be speakers would be prohibited from mentioning the name of any active 2012 presidential candidate. In Congressional races, the ban on mentioning a candidate in an ad, for thousands of speakers, would be as long as a year for states with early primaries, such as Illinois. The bill is sold as an effort to "contain" Citizens United, but this is speech that was legal before Citizens United.

DISCLOSE has also been sold as necessary to prevent foreign influence in American politics. In fact, it is already illegal for any foreign national - including any corporation headquartered or incorportated outside the U.S., to make any expenditure in any U.S. election. What DISCLOSE does is to extend this prohibition to thousands of American corporations with minority foreign ownership. For example, Verizon, a Delaware corporation headquartered in New Jersey and employing over 80,000 U.S. workers, would be prohibited from political speech that it had a right to do even before the decision in Citizens United, simply because the British company Vodaphone is a minority shareholder. Congress may not react to a Supreme Court decision guaranteeing speech rights by outlawing speech that was legal even before that decision, but that is what DISCLOSE does. When the truth about DISCLOSE is disclosed, it reveals a nakedly partisan effort to protect incumbents and Democrats from competition. So-called "reformers" have latched on to it in the hopes that later that can extend its speech muzzling provisions to the powerful interests it was forced to exempt now. But this bill deserves a quick, if highly shameful death. The special deals for some of the most powerful special interests in D.C. merely indicate what a sham the bill is.

To state the proposition is to refute it: “Is it appropriate for Democratic Leaders to exempt application of a bill to a powerful special interest in order to secure passage of a bill designed to curb the influence of powerful special interests in Washington?” Of course not.

The principal objection many have to the DISCLOSE Act is that it is advertised as permitting constitutionally protected speech while requiring transparency as to the identity of the speaker, when it is, in reality, partisan political legislation designed to disincentivize constitutionally protected political speech by a disfavored group (large corporations). Buying off a powerful political adversary to secure its acquiescence does little to convince us that those objections are unfounded. The philosophical defect this deal exposes is that constitutional freedoms of expression and association belong to everyone - not just favored groups and the politically powerful. Any legislation straying from this principle is immediately suspect.

As Supreme Court Justice William Douglas observed, “The dominant purpose of the First Amendment was to prohibit the widespread practice of government suppression of embarrassing information.” Picking and choosing who among us have the right to associate with anonymity and who has the right to speak out against our political establishment cannot be seen as consistent with our founding principles.

Ultimately, as I’ve argued here before, the DISCLOSE Act is highly unlikely to succeed in the one arena in which its stated purpose enjoys public support: preventing corporations, unions and wealthy individuals from concealing their identity by funneling their money through a series of tax exempt 501(c)(4) organizations. The DISCLOSE Act can certainly regulate direct spending on political speech by mandating that corporations file disclosures, obtain shareholder approval, and use “political activities accounts.” It is unlikely, however, that Congress can pass legislation passing constitutional muster which requires that groups which do not lobby or directly finance independent expenditures disclose their donors or membership rolls but simply fund other groups. The Supreme Court has never wavered from the principle that the constitutional freedom of association must include the right to associate anonymously and I do not anticipate that it will do so when the DISCLOSE Act is brought before it.

It sounds like the deal-making this week on the DISCLOSE Act could cost the bill’s sponsors some votes, but we’ll see. I’m certainly understanding of how deals get struck to placate critics and advance legislation, although I think the exemption they created is very narrow and won’t apply to very many organizations.

I think the volume of criticism and concern about the bill has been pretty loud, so I would like to see the bill’s sponsors sit down and really sift through the full range of concerns people have with this bill before they rush it to the floor. You know, they had to significantly rework this bill in committee to assuage some objections and now they’re cutting another deal. That tells me there were some provisions in the original bill that perhaps its authors had not fully considered. I think part of putting forth good legislation is listening to the criticism, weighing the unintended consequences and making sure you’ve got it right. So we know House leaders are listening and have been willing to make some changes, but this still feels like a rushed process to me.

Unfortunately, there are still a lot of concerns out there and, if they’re not addressed, then we could see some organizations burdened with some onerous compliance issues. ASAE has voiced its concerns about the bill with House offices and, without some additional changes, we think it could make compliance a burdensome task for associations and other organizations that have rights to political speech protected by the First Amendment.

Is the NRA exception ideal, or pretty? No. Is it likely to complicate the defense of the DISCLOSE Act when it is challenged? Yes. But, is it worth dropping support of the legislation altogether? No.

I don't claim the current version of the legislation is perfect. It has some parts that seem complicated at first blush. For example, sorting out the circumstances when an organization would have to report that a transfer is subject to disclosure will take some clarification by the "plain English" writers in the FEC's Information Division. But this, and similar questions, can and will get answered reasonably quickly.

But the fact that certain aspects of DISCLOSE will exempt certain organizations should not be deemed surprising or unusual. The current campaign finance law makes many distinctions. It regulates corporations and unions in a way different from partnerships and most LLC's. It regulates media entities (including Citizens Action itself, according to a recent advisory opinion of the FEC) in a way different from other corporations. It regulates groups whose major purpose is influencing elections in a way different from other groups. For purposes of staging debates, it allows 501(c)(3) or 501(c)(4) groups and media entities to perform this task, but not other groups and entities. The list goes on and on. Importantly, though, the Supreme Court in the California Medical Association case recognized that different types of organizations do not have to be treated equally.

It may well be that as the DISCLOSE Act goes through the final stages, clarifications can be provided to assure groups outside the "NRA exception" that there is no intent to require disclosure of individuals paying small membership dues or ordinary business customers. There simply has to be a way to require reasonable disclosure of those persons or organizations that have provided relatively large amounts in circumstances that demonstrate an intent to fund the campaign ads.

Current law is woefully inadequate. A moderately intelligent lawyer will advise a client that by earmarking a donation to an organization "for general purposes." there will be no disclosure by the recipient organization of the donor's role. The better rule, as laid out in rather opaque prose of the DISCLOSE Act, is to spell out the particular types of cirumstances where a donor's funds WILL have to be disclosed, and to specify how a donor can assure that funds given will NOT be used for any campaign ads. This leaves donors with the ability to prevent being listed as a campaign ad donor if they choose.

The Supreme Court's Opinion in Citizens United makes it clear that the
Court believes disclosure of the sources of funding for political ads
during election campaigns is not only constitutional but desirable.
Justice Kennedy stated that disclosure of the sources of funding of
political advertising "provide[s] the electorate with information" and
"insure[s] that the voters are fully informed about the person or group
who is speaking." Eight of the nine Justices joined this portion of the
Court's Opinion. This principle is embodied in the disclosure provisions
of the DISCLOSE Act currently before Congress. Now that the Supreme
Court has given us unlimited corporate (and union) political speech in
federal elections, Congress should do its job and give us full
disclosure of the sources of that speech.

Groups who have opposed such disclosure now attack the new provision
exempting certain donor reporting for huge , long-established, national
organizations such as the NRA, AARP, and The Humane Society. The limited
exemption for such well-known organizations, though, is consistent with
the Court's campaign finance principles--no one knows who is really
behind the anonymous spending of new groups with names like "Americans
for A Better Country" that spring up and run political ads every
election--but no one is confused by the agenda of the NRA, AARP and the
Humane Society. Thus, requiring these few large groups to put their own
names and CEOs on their ads, and fully report the amount of their
spending, without requiring the listing of their enormous donor lists,
does not deprive the voters of the information the court believed was
essential to a functioning democracy. We know who these large groups
are, and what their agenda is. That is not necessarily true of the
hundreds of smaller groups that raise funds and run political
advertising in elections--which is why requiring the listing of their
political donors makes sense.

The Citizens United decision was one that literally terrified me. The thought that corporate entities could spend in an unlimited fashion and hide it to influence our democratic process became a stark reality the second the Supreme Court issued its egregious ruling. Through the process of the creation of the DISCLOSE Act, U.S. PIRG has applauded the quick, initial response by Senator Schumer and Representative Van Hollen. The sponsor’s ability to move in lockstep to address the unpopular overreach by the courts in Citizens United vs. FEC has been masterful. However, as much as PIRG strongly supports a response to the Supreme Court we feel that with the new exemption for the NRA, the bill has gotten it seriously off track.

The irony is obvious-- a bill with the initial purpose of disclosing corporate contributions to elections, now exempts from disclosure corporate contributors to one of the nation’s biggest spenders in American elections.

However, in addition to the creation of a two-tiered system for political speakers – one for the NRA and one for everyone else, the bill also created a potentially damaging loophole.

Looking at the NRA’s IRS Form 990 from 2007 and 2008 (election year 2008), their revenues were $332 million in 2007 and $247 million in 2008. This means total NRA election cycle revenue added up to $579 million.

What this means, is that the NRA can take $87 million (15% of its total revenues) in corporate money without triggering any disclosure of these corporate sources.

Now the supporters of the carve-out will note that the NRA cannot take corporate funds specifically to spend on elections.

That is absolutely true.

However, the business as usual culture of DC has so many “contributions with a wink and a nod” moments that sometimes it seems like everyone in the city has tourettes. Its not a stretch to imagine that corporations will give general revenue funds which will then free up the NRA's individual donor money from their 4 million members for spending on elections--money they would not have otherwise spent.

Over the long term, we hope that the DISCLOSE Act has a pathway forward without this carve-out and look forward to again workinig in support at that point.

I personally am not a fan of the exemption and not a fan at all of the Supreme Court’s decision but that is an issue for another topic. As far as the exemption goes, I understand the politics behind it but feel that the House leaders opened themselves up as unnecessary targets to the claim that they are pawns of special interests. Granted the NRA can mobilize constituents very well but if this bill is meant to correct the problems with the Supreme Court’s decision doesn’t it lose credibility when you start exempting groups out of the bill?

To me this states that there are different rules for different players and that to me is the biggest problem with the Court’s decision in the first place. Do corporations, as an entity, have the same rights as an individual does? Maybe their employees and shareholders do but the corporation itself, I don’t think so. By allowing this, you create a greater divide between the people and their ability to have their individual voices heard compared to the flow of cash that a corporation can throw at an issue.

Now we are saying that the DISCLOSE bill can have different levels of compliance? Sounds like a recipe for disaster and confusion. This could open the floodgates for other big special interests to ask for similar exemptions simply because they can raise havoc. Where is the line in the sand on this one?

Regardless, I have to applaud the NRA for once again making their presence felt and demonstrating their political shrewdness. It will be interesting to see how much they utilize this exemption to their benefit in the coming election. After that, maybe we should revisit this conversation to truly judge the impact of the exemption.

Carving out an exemption for the NRA to the individual donor disclosure requirement of the DISCLOSE Act (H.R. 5175) is a strategic decision by congressional leaders to get the measure approved by the House. It is a troubling decision, but the carve-out poses little damage to the overall objectives of the bill.

The legislation still provides what the public desperately needs in the wake of the Supreme Court’s disastrous Citizens United decision: full disclosure of corporate and wealthy funding sources behind express advocacy ads and electioneering communications; extends the electioneering communications window to cover most of an election period; and applies some restrictions on major government contractors and foreign entities in financing campaign ads.

The NRA (and AARP and Humane Society) will still have to disclose in their ads that they are financed by the NRA and report to the FEC how much the NRA spends on electioneering activity. The head of the NRA will have to do a stand-by-your-ad disclaimer in each ad. Corporate money cannot be used by the NRA to finance these ads, and the sources of funds given to the NRA and earmarked for campaign ads will continue to be subject to disclosure under campaign finance laws. Personally I ardently disagree with the NRA’s politics, and I find the exemption reprehensible as a give-in to a powerful special interest, but the NRA is not a front group for corporate interests and so its exemption from disclosing its individual donors does not fundamentally undermine the DISCLOSE Act.

When the Supreme Court decided unilaterally to re-write the nation’s campaign finance laws and allow unlimited corporate spending in elections, it has become imperative for Congress to give voters a chance to know who is paying how much to influence our elections. The DISCLOSE Act closes major loopholes in the current disclosure laws – loopholes that will become all the more problematic as corporations seek ways to influence elections and pressure lawmakers by funneling money into innocuous-sounding outside groups to handle their advertising campaigns secretly on their behalf. This measure is far too important to sacrifice.

It is not at all evident to me that passage of this bill required a special provision exempting the NRA from disclosing its individual donors. We had a great bill written and ready on May 27th. But when other non-profit groups joined the NRA in demanding loopholes in the disclosure requirements, congressional leaders withdrew the bill and renegotiated it. Rep. Van Hollen held firm against poking gaping loopholes in the measure, and finally agreed to the limited exemption principally benefiting the NRA. The political strategy seems to be a wash, because now other non-profits are opposing the legislation unless they too get carve-outs.

We cannot let special interest politics prevail. Any further amendments or negotiations to weaken the disclosure requirements must be rejected, and the DISCLOSE Act made law by the July 4th recess. Though no one is sure because there are no effective disclosure requirements, it appears that corporate political spending has already increased threefold in the first quarter of 2010 – and we have not even entered the high-spending general election yet. Unless the DISCLOSE Act is approved promptly, and perhaps improved after becoming law, we will enter the free-spending 2010 elections totally blind.