Campaign Finance: Brief Overview of McConnell v. FEC

CRS Report for Congress
Campaign Finance: Brief Overview of District
Court Opinion in McConnell v. FEC
L. Paige Whitaker
Legislative Attorney
American Law Division
Summary
On March 27, 2002, the President signed into law the Bipartisan Campaign Reform^th
Act of 2002 (BCRA), P.L. 107-155 (H.R. 2356, 107 Cong.), which was also known as
the McCain-Feingold campaign finance reform legislation prior to enactment. Most
provisions of the new law became effective on November 6, 2002. Shortly after
President Bush signed BCRA into law, Senator Mitch McConnell filed suit in U.S.
District Court for the District of Columbia against the Federal Election Commission
(FEC) and the Federal Communications Commission (FCC). Ultimately, eleven suits
challenging the campaign finance reform law were brought by more than 80 plaintiffs
and were consolidated into one lead case, McConnell v. FEC. In summary, the
McConnell complaint for declaratory and injunctive relief argued that portions of BCRA
violate the First Amendment and the equal protection component of the Due Process
Clause of the Fifth Amendment to the Constitution. On May 2, 2003, the U.S. District
Court for the District of Columbia issued its decision in McConnell v. FEC, striking
down many key provisions of the law. (See the text of the per curiam opinion at
[http://www.dcd.uscourts.gov/02cv582a.pdf].) This report provides a brief overview of
the court’s decision and will be updated. The three-judge panel, which was split 2 to 1
on many issues, ordered that its ruling take effect immediately. Since the court has
issued its opinion, several appeals have been filed. Under the BCRA expedited review
provision, the court’s decision will be reviewed directly by the U.S. Supreme Court. On
May 19 the U.S. district court issued a stay to its ruling, which leaves BCRA, as enacted,
in effect until the Supreme Court issues a decision. For more information see,
Campaign Finance Reform Oversight [http://www.congress.gov/erp/legissues
/html/isele2.html], and CRS Report RL30669, Campaign Finance Regulation Under the
First Amendment.
On May 2, 2003, the U.S. District Court for the District of Columbia issued its
decision in McConnell v. FEC, a challenge to the constitutionality of numerous provisions
of the recently enacted Bipartisan Campaign Reform Act (BCRA), which was also known
as the McCain-Feingold campaign finance reform legislation prior to enactment. The
three-judge panel, which was split 2 to 1 on many key issues, ordered that its ruling take

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effect immediately. Since the court has issued its opinion, several appeals have been filed
with the U.S. Supreme Court. Under the BCRA expedited review provision, the court’s
decision will be reviewed directly by the U.S. Supreme Court. On May 19, 2003, the U.S.
district court issued a stay to its ruling, which leaves BCRA, as enacted, in effect until the
Supreme Court issues a decision.¹
Background
On March 27, 2002, the President signed into law the Bipartisan Campaign Reform
Act of 2002 (BCRA),P.L. 107-155 (H.R. 2356, 107^th Cong.), and most provisions of the
new law became effective on November 6, 2002. Shortly after President Bush signed
BCRA into law, Senator Mitch McConnell filed suit in U.S. District Court for the District
of Columbia against the Federal Election Commission (FEC) and the Federal
Communications Commission (FCC). In summary, the McConnell complaint for
declaratory and injunctive relief argued that portions of BCRA violate the First
Amendment and the equal protection component of the Due Process Clause of the Fifth
Amendment to the Constitution.² Likewise, shortly after enactment, the National Rifle
Association (NRA) filed suit in U.S. District Court for the District of Columbia against
the FEC and the Attorney General seeking declaratory and injunctive relief against certain
provisions of the Federal Election Campaign Act (FECA), as amended by BCRA. In
summary, the NRA argued that the new law deprives it of freedom of speech and
association, of the right to petition the government for redress of grievances, and of the
rights to equal protection and due process, in violation of the First and Fifth Amendments
to the Constitution.
Ultimately, eleven suits challenging BCRA were brought by more than 80 plaintiffs
and were consolidated into one lead case, McConnell v. FEC,³ by the U.S. District Court
for the District of Columbia. Section 403(a) of BCRA provides that if an action is
brought for declaratory or injunctive relief challenging the constitutionality of any
provision of the Act, it shall be brought in the U.S. District Court for the District of
Columbia and shall be heard by a 3-judge court. It further provides that a final decision
in such an action shall be reviewable only by appeal directly to the U.S. Supreme Court
by the filing of a notice of appeal within 10 days and the filing of a jurisdictional
statement within 30 days after a final decision is rendered. Section 403(a)(4) charges the
U.S. District Court for the District of Columbia and the Supreme Court to advance on the
docket and to expedite to the greatest possible extent the disposition of the action and
appeal.
On December 4 and 5, 2002 oral argument was heard in McConnell v. FEC before
the three-judge panel of the U.S. District Court for the District of Columbia. Under the

¹ Chamber of Commerce, et al. v. FEC, Civ. No. 02-751 (D.D.C., May 19, 2003)(granting
motions to stay all or part of the court’s May 1, 2003 final judgment in McConnell v. FEC)
² Section 403(c) of BCRA provides that any Member of Congress may bring an action for
declaratory or injunctive relief challenging the constitutionality of the Act and Section 403(b)
provides that in any action challenging the constitutionality of the Act, any Member of Congress
has the right to intervene.
³ No. 02-CV-0582 (D.D.C., consolidated May 13, 2002).

BCRA expedited review provision,⁴ the court’s decision, which was issued on May 2,

2003, will be reviewed directly by the U.S. Supreme Court.

Summary of Key Portions of the District Court’s Decision
Issue Advocacy/Political Advertising by Corporations and Labor Unions
(Soft Money). Generally, sections 203 and 201 of BCRA, respectively, prohibit labor
unions and corporations (and any persons using funds donated by a corporation or labor
union) from using treasury funds for “electioneering communications” — they must use
a separate segregated fund (also known as a PAC) in order to fund such ads — and require
disclosure to the Federal Election Commission (FEC) of disbursements for the costs of
producing and broadcasting “electioneering communications” by any spender exceeding
$10,000 per year. BCRA generally defines an “electioneering communication” as a
broadcast, cable, or satellite advertisement that “refers” to a clearly identified federal
candidate, is made within 60 days of a general election or 30 days of a primary and if for⁵
House or Senate elections, is targeted to the relevant electorate. In the event that the
primary definition of “electioneering communication” is held to be unconstitutional,
Section 201 of BCRA provides a backup definition:
any broadcast, cable, or satellite communication which promotes or supports a
candidate for that office, or attacks or opposes a candidate for that office (regardless
of whether the communication expressly advocates a vote for or against a candidate)
and which also is suggestive of no plausible meaning other than an exhortation to vote
for or against a specific candidate.
In McConnell v. FEC, the three-judge district court ruled 2 to 1 that the primary
definition of “electioneering communication” is unconstitutional and accordingly, ruled
that the prohibition on labor unions and corporations (and any persons using funds
donated by a corporation or labor union) using treasury funds for “electioneering
communications” and the requirement for disclosure to the FEC of spending for all
“electioneering communications” is unconstitutional under the primary definition. The
court upheld, however, the backup definition of “electioneering communication,” deleting
the last clause, “and which also is suggestive of no plausible meaning other than an
exhortation to vote for or against a specific candidate,” and hence, generally upheld the
disclosure requirements and the prohibition on labor unions and corporations funding⁶
“electioneering communications” as defined by a portion of the backup definition. As
a result of this ruling, corporations and labor unions are generally prohibited from using
treasury funds to pay for any broadcast, cable, or satellite communication — at any time
in the election cycle — which “promotes or supports” or “attacks or opposes” a candidate
for that office, “regardless of whether the communication expressly advocates a vote for
or against a candidate.”

⁴ P.L. 107-155 § 403, codified at 2 U.S.C. §437h note (2002).
⁵ Section 201 of BCRA further defines “targeted to the relevant electorate” as a communication
that can be received by 50,000 or more persons in a state or congressional district where the
Senate or House election, respectively, is occurring.
⁶ McConnell v. FEC, No. 02-CV-0582, slip op. at 6 (D.D.C., May 2, 2003).

Section 203 of BCRA also contains an exemption to the prohibition on corporations
directly funding “electioneering communications,” (i.e. using treasury funds instead of
funding such advertisements through a PAC) for certain non-profit organizations. Under
a portion of Section 203 known as Snowe-Jeffords,⁷ Internal Revenue Code Section
501(c)(4) and 527(e)(1) organizations are permitted to use their general treasury funds for
“electioneering communications” so long as the communication is paid for exclusively
with funds from individuals who are U.S. citizens, nationals, or lawfully admitted for
permanent residence.⁸ The Snowe-Jeffords provision is an expansion of the law as it
existed prior to BCRA. Prior to BCRA, the 1986 Supreme Court decision, FEC v.
Massachusetts Citizens for Life (MCFL),⁹ had provided an as-applied exception for non-
profit corporations that satisfied certain criteria.¹⁰
Section 204 of BCRA, however, (known as the Wellstone Amendment)¹¹ effectively
withdraws the Snowe-Jeffords exception in Section 203, according to the court in
McConnell v. FEC.¹² As a result of the Wellstone Amendment in Section 204, entities
that are organized under Internal Revenue Code Sections 501(c)(4) and 527(e)(1) are not
permitted to use their general treasury funds for “electioneering communications.”¹³ As
the McConnell court noted, the Wellstone Amendment was codified in a separate portion
of BCRA in order to preserve severability.¹⁴ Indeed, the McConnell three-judge panel
struck down the Wellstone Amendment in Section 204 as it applies to corporations that
meet the criteria set forth by the Supreme Court in MCFL, also known as “MCFL
corporations.” Hence, according the court, the prohibition against corporations using
treasury funds to pay for “electioneering communications” applies only to non-MCFL
corporations.
Raising and Spending of Soft Money by Political Parties. Section 101 of
BCRA, which creates a new section in the Federal Election Campaign Act (FECA),

⁷ This provision of BCRA is named after its primary sponsors in the Senate, Senator Olympia
Snowe and Senator Jim Jeffords.
⁸ Codified at 2 U.S.C. § 441b(c)(2)(2002).
⁹ 479 U.S. 238 (1986).
¹⁰ In order to satisfy the MCFL criteria, a corporation is required to: (1) be formed for the purpose
of promoting political ideas and cannot engage in business activities; (2) have no shareholders
or other persons affiliated so that members have no economic disincentive for disassociating with
it if they disagree with its political activity; and (3) not be established by a business corporation
and cannot accept contributions from business corporations. Id. at 264.
¹¹ This provision of BCRA is named after its primary sponsor in the Senate, Senator Paul
Wellstone.
¹² McConnell v. FEC, No. 02-CV-0582, slip op. at 9 (D.D.C., May 2, 2003).
¹³ Codified at 2 U.S.C. § 441b(c)(6)(2002). The Wellstone Amendment provides that the Snowe-
Jeffords exemption applicable to Internal Revenue Code § 501(c)(4) and § 527(e)(1)
organizations “shall not apply in the case of a targeted communication that is made by” a
corporation, labor union or person using funds donated by a corporation or labor union.
¹⁴ McConnell v. FEC, No. 02-CV-0582, slip op. at 69 (D.D.C., May 2, 2003).

Section 323(a),¹⁵ prohibits national parties from soliciting, receiving, directing,
transferring, and spending nonfederal funds, i.e., soft money. In a 2 to 1 split, the
McConnell v. FEC court ruled that Section 323(a) is constitutional only to the extent that
it bans national party committees from using nonfederal funds for public communications
that “refer” to a clearly identified federal candidate — “regardless of whether a candidate
for State or local office is also mentioned or identified” — and that “promotes or
supports” or “attacks or opposes” a candidate for that office, “regardless of whether the
communication expressly advocates a vote for or against a candidate.”¹⁶
Section 101 of BCRA creates another new FECA provision, Section 323(b), which
prohibits state and local parties from using nonfederal funds (or soft money) for “federal
election activities.” Section 301(20)(A) of FECA, as amended by BCRA, defines “federal
election activities” to include: (i) voter registration drives in the last 120 days of a federal
election; (ii) voter identification, Get-Out-The-Vote (GOTV) drives, and generic activity
in connection with an election in which a federal candidate is on the ballot; (iii) public
communications that “refer” to a clearly identified federal candidate — “regardless of
whether a candidate for State or local office is also mentioned or identified” — and that
“promotes or supports” or “attacks or opposes” a candidate for that office, “regardless of
whether the communication expressly advocates a vote for or against a candidate”; or (iv)
services by a state or local party employee who spends at least 25% of paid time in a
month on activities in connection with a federal election.¹⁷ The McConnell v. FEC three-
judge court ruled that Section 323(b) of FECA, as amended by BCRA, is constitutional
only as applied to Section 301(20)(A)(iii) activities. That is, according to the court, state
and local parties are prohibited from spending nonfederal or soft money on public
communications that “refer” to a clearly identified federal candidate — “regardless of
whether a candidate for State or local office is also mentioned or identified” — and that
“promotes or supports” or “attacks or opposes” a candidate for that office, “regardless of
whether the communication expressly advocates a vote for or against a candidate.”¹⁸
Raising and Spending of Soft Money by Federal Officeholders and
Candidates. Section 101 of BCRA prohibits, with few exceptions, federal officeholders
and candidates from soliciting, receiving, directing, transferring, or spending nonfederal¹⁹
or soft money for any local, state, or federal election. The McConnell v. FEC court
upheld the constitutionality of this section of the statute in its entirety.²⁰

¹⁵ Codified at 2 U.S.C. § 441i(a)(2002).
¹⁶ McConnell v. FEC, No. 02-CV-0582 slip op. at 5-6 (D.D.C., May 2, 2003).
¹⁷ Codified at 2 U.S.C. § 431(20)(2002).
¹⁸ McConnell v. FEC, No. 02-CV-0582 slip op. at 6 (D.D.C., May 2, 2003).
¹⁹ Codified at 2 U.S.C. § 441i(e)(2002).
²⁰ McConnell v. FEC, No. 02-CV-0582 slip op. at 7 (D.D.C., May 2, 2003). Judge Leon
concurred with respect to the restriction on federal officeholders and candidates receiving,
directing, transferring or spending nonfederal or soft money in connection with a state or federal
election, but filed a separate dissent with regard to prohibitions on a federal candidate or
officeholder from soliciting or raising soft money for the national parties.

Hard Money Sources for Candidates. Sections 304, 316 and 319 of BCRA,²¹
sometimes referred to as the “millionaire provisions,” were held to be non-justiciable by²²
the McConnell v. FEC district court. In brief summary, Section 304 limits repayment
of candidate loans to his or her own campaign to $250,000, from amounts contributed
after the election occurs. Section 304 also raises the limit on individual and party support
for a Senate candidate whose opponent exceeds the designated threshold level of personal
campaign funding. Section 319 raises the limits on individual and party support for a
House candidate whose opponent exceeds the threshold of $350,000 in personal campaign
funding.
Hard Money Contribution Limits. Section 307 of BCRA,²³ increases the limits
on the amount that individuals can contribute to federal office candidates and to political
parties. Under Section 307, individuals may contribute no more than $2,000 per
candidate, per election, and no more than $25,000 per year to national party committees.
The McConnell v. FEC district court panel held non-justiciable the issues presented by
plaintiffs in regard to Section 307.²⁴
Limitation on Lowest Unit Charge for Candidates. If a candidate makes any
direct reference to another candidate for the same office in a broadcast advertisement,
section 305 of BCRA denies a federal candidate the “lowest unit charge” for radio and
television broadcast advertisements unless certain attribution requirements are met.²⁵ The
McConnell v. FEC district court held that no plaintiff had standing at this time to
challenge Section 305.²⁶
Prohibition on Contributions by Minors. Section 318 of BCRA prohibits
minors (defined as persons 17 and younger) from making contributions or donations to
candidates or to a political party.²⁷ In McConnell v. FEC, the three-judge court
unanimously held the prohibition to be unconstitutional.²⁸

²¹ Codified at 2 U.S.C. § 441a (2002).
²² McConnell v. FEC, No. 02-CV-0582 slip op. at 10 (D.D.C., May 2, 2003). The court held
these sections of BCRA non-justiciable finding that the court lacked standing.
²³ Codified at 2 U.S.C. § 441a(a)(1)(2002).
²⁴ McConnell v. FEC, No. 02-CV-0582 slip op. at 11 (D.D.C., May 2, 2003).
²⁵ Codified at 47 U.S.C. § 315(b)(2002).
²⁶ McConnell v. FEC, No. 02-CV-0582 slip op. at 11 (D.D.C., May 2, 2003).
²⁷ Codified at 2 U.S.C. § 441k (2002).
²⁸ McConnell v. FEC, No. 02-CV-0582 slip op. at 11 (D.D.C., May 2, 2003).