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Supreme Court Ruling May Push Political Donations Toward Trade Associations

Jim Prevor’s Perishable Pundit, January 28, 2010

If you value freedom of speech, you have to be pleased that the Supreme Court, by a 5-4 vote, decided Citizens United v. Federal Election Committee in a way that overturned restrictions on a corporation to engage in political speech.

The specifics of the case were that an organization produced a movie attacking Hillary Clinton, and the Federal Election Commission blocked it from being shown as a pay-per-view movie on cable, claiming that corporations were forbidden to engage in that kind of advocacy.

If you want to understand what was at stake, take a look at this video produced by the Cato Institute, a libertarian-leaning think tank in Washington, DC:

The Supreme Court had already ruled that individuals could not be blocked from directly spending money in advocating their political views. This new decision held that organizations, such as corporations and unions, could also not be blocked. Note that this does not affect limits on donations to campaigns — it simply allows people to speak independently about topics or candidates they are passionate about.

Some have argued that because corporations are artificial persons created by law, they had no first amendment rights and so could be regulated at will. Others held that corporations grew out of citizen’s rights to peacefully assemble and to collaborate and that just because citizens are doing something jointly — as through a corporation — they don’t lose their first amendment rights.

More generally, in a society such as ours, in which almost everything is done through various corporate entities, a judgment that the government can restrict the speech of these entities severely constrains political discourse — and thus strikes at the heart of the first amendment.

The justices upheld, however, disclosure requirements — with only Justice Clarence Thomas calling for the elimination of these as, inherently, an obstacle to the freedom of political speech. This will have significant consequences for precisely how corporations will choose to contribute and may lead to a dramatic influx of money into trade associations.

Ben Ginsberg, who was national counsel for both of the Bush-Cheney campaigns, and several colleagues at Patton Boggs wrote a memo that political columnist Ben Smith got hold of and published. The memo analyzed the possible consequences of the court decision, and included this comment (note that trade associations are typically organized under 501c6 of the tax code):

501c4s and 501c6s: Likely to emerge as the biggest players in the 2010 and 2012 elections, ideological groups and trade associations also have been granted the ability to engage much more robustly in the political process. Meager disclosure requirements of their donors will make them a favorite repository of funds for independent expenditures.

In other words, corporations desiring to engage in political speech will often elect to do so through a trade association, because trade associations would not have to disclose precisely who is paying for the advocacy.

Some of the regional grower groups have endorsed candidates, but they are much more homogeneous than the national associations. United Fresh has had a political action committee but it is small, and most of the funding has been raised independently thus avoiding conflict among the members.

One trusts our associations are even now preparing policies on how they will deal with efforts to use them as political conduits.

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