RS21511 -- Campaign Finance: Brief Overview of District Court Opinion in McConnell v.FEC Updated May 19, 2003 On March 27, 2002, the President signed into law the Bipartisan Campaign Reform Act of 2002 (BCRA), P.L. 107-155 ( H.R. 2356 , 107th Cong.), and most provisions of thenew law became effective on November 6, 2002. Shortly after President Bush signed BCRA into law, SenatorMitch McConnell filed suit in U.S. District Court for the District ofColumbia against the Federal Election Commission (FEC) and the Federal Communications Commission (FCC). In summary, the McConnell complaint for declaratory and injunctiverelief argued that portions of BCRA violate the First Amendment and the equal protection component of the DueProcess 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 theDistrict of Columbia against the FEC and the Attorney General seekingdeclaratory and injunctive relief against certain provisions of the Federal Election Campaign Act (FECA), asamended by BCRA. In summary, the NRA argued that the new lawdeprives 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 theFirst 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) bythe U.S. District Court for theDistrict of Columbia. Section 403(a) of BCRA provides that if an action is brought for declaratory or injunctiverelief challenging the constitutionality of any provision of the Act, itshall be brought in the U.S. District Court for the District of Columbia and shall be heard by a 3-judge court. Itfurther provides that a final decision in such an action shall be reviewableonly by appeal directly to the U.S. Supreme Court by the filing of a notice of appeal within 10 days and the filingof a jurisdictional statement within 30 days after a final decision isrendered. Section 403(a)(4) charges the U.S. District Court for the District of Columbia and the Supreme Court toadvance on the docket and to expedite to the greatest possible extentthe 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 BCRAexpedited review provision, (4) the court's decision,which was issued on May 2, 2003, will be reviewed directly by the U.S. Supreme Court. 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 laborunion) from using treasury funds for "electioneeringcommunications" -- 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) ofdisbursements for the costs of producing and broadcasting "electioneering communications" by any spender exceeding $10,000 per year. BCRA generally defines an "electioneeringcommunication" 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 primaryand if for House or Senate elections, is targeted to the relevant electorate. (5) In the event that the primary definition of "electioneering communication" isheld 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 forthat office (regardless of whether the communication expressly advocates a vote for or against a candidate) andwhich also is suggestive of no plausible meaning other than anexhortation 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 theprohibition on labor unions and corporations (and any persons using funds donated by a corporation or labor union)using treasury funds for "electioneering communications" and therequirement for disclosure to the FEC of spending for all "electioneering communications" is unconstitutional underthe primary definition. The court upheld, however, the backupdefinition of "electioneering communication," deleting the last clause, "and which also is suggestive of no plausiblemeaning other than an exhortation to vote for or against a specificcandidate," and hence, generally upheld the disclosure requirements and the prohibition on labor unions andcorporations funding "electioneering communications" as defined by aportion of the backup definition. (6) As a result of thisruling, corporations and labor unions are generally prohibited from using treasury funds to pay for any broadcast,cable, or satellitecommunication -- at any time in the election cycle -- which "promotes or supports" or "attacks oropposes" a candidate for that office, "regardless of whether the communicationexpressly advocates a vote for or against a candidate." 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 suchadvertisements through a PAC) for certain non-profit organizations. Under a portion of Section 203 known asSnowe-Jeffords, (7) Internal Revenue Code Section501(c)(4) and 527(e)(1)organizations are permitted to use their general treasury funds for "electioneering communications" so long as thecommunication is paid for exclusively with funds from individualswho 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 priorto 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-profitcorporations 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 WellstoneAmendment in Section 204, entities that are organized under Internal Revenue Code Sections 501(c)(4) and527(e)(1) are not permitted to use theirgeneral treasury funds for "electioneering communications." (13) As the McConnell court noted, the Wellstone Amendment was codified in a separate portion ofBCRA in order topreserve severability. (14) Indeed, the McConnell three-judge panel struck down the Wellstone Amendment in Section 204 as it applies tocorporations that meet the criteria set forth bythe Supreme Court in MCFL, also known as " MCFL corporations." Hence, according thecourt, the prohibition against corporations using treasury funds to pay for "electioneeringcommunications" 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 ElectionCampaign Act (FECA), Section 323(a), (15) prohibitsnational 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 bansnational party committees from using nonfederal funds for public communicationsthat "refer" to a clearly identified federal candidate -- "regardless of whether a candidate for State or local office isalso mentioned or identified" -- and that "promotes or supports" or"attacks or opposes" a candidate for that office, "regardless of whether the communication expressly advocates avote 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 electionactivities." 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 whicha 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 alsomentioned or identified" -- and that "promotes or supports" or"attacks or opposes" a candidate for that office, "regardless of whether the communication expressly advocates avote for or against a candidate"; or (iv) services by a state or local partyemployee 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-judgecourt ruled that Section 323(b) ofFECA, 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 spendingnonfederal 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 mentionedor identified" -- and that "promotes or supports" or "attacks or opposes" a candidate for that office, "regardless ofwhether the communication expressly advocates a vote for or against acandidate." (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 nonfederal or softmoney for any local, state, or federal election. (19) The McConnell v.FEC court upheld the constitutionality of this section of the statute in its entirety. (20) Hard Money Sources for Candidates. Sections 304, 316 and 319 of BCRA, (21) sometimes referred to as the "millionaireprovisions,"were held to be non-justiciable by the McConnell v. FEC district court. (22) In brief summary, Section 304 limits repayment of candidate loans to hisor her own campaign to $250,000,from amounts contributed after the election occurs. Section 304 also raises the limit on individual and party supportfor a Senate candidate whose opponent exceeds the designatedthreshold level of personal campaign funding. Section 319 raises the limits on individual and party support for aHouse candidate whose opponent exceeds the threshold of $350,000 inpersonal campaign funding. Hard Money Contribution Limits. Section 307 of BCRA, (23) increases the limits on the amount that individualscan contribute tofederal 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 tonational party committees. The McConnell v. FEC district court panel held non-justiciable the issuespresented 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 officein a broadcast advertisement, section 305 of BCRA denies a federal candidate the "lowest unit charge" for radio andtelevision broadcast advertisements unless certain attributionrequirements are met. (25) The McConnellv. 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 makingcontributions or donations to candidates or to a political party. (27) In McConnell v. FEC, the three-judge court unanimously held the prohibition to beunconstitutional. (28)

Summary:
On March 27, 2002, the President signed into law the Bipartisan Campaign ReformAct of 2002 (BCRA), P.L. 107-155 (H.R. 2356, 107th Cong.), which was also known as the McCain-Feingold campaign finance reformlegislation prior to enactment. Most provisions of the new law became effective onNovember 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 FederalElection Commission (FEC) and the Federal Communications Commission (FCC). Ultimately, eleven suitschallenging the campaign finance reform law were brought by more than 80plaintiffs and were consolidated into one lead case, McConnell v. FEC. In summary, the McConnellcomplaint for declaratory and injunctive relief argued that portions of BCRA violatethe First Amendment and the equal protection component of the Due Process Clause of the Fifth Amendment to theConstitution. On May 2, 2003, the U.S. District Court for theDistrict of Columbia issued its decision in McConnell v. FEC, striking down many key provisions ofthe law. (See the text of the per curiam opinion athttp://www.dcd.uscourts.gov/02cv582a.pdf.) This report provides a brief overview of the court's decision and willbe updated. The three-judge panel, which was split 2 to 1 on manyissues, ordered that its ruling take effect immediately. Since the court has issued its opinion, several appeals havebeen filed. Under the BCRA expedited review provision, the court'sdecision will be reviewed directly by the U.S. Supreme Court. On May 19 the U.S. district court issued a stay toits ruling, which leaves BCRA, as enacted, in effect until the SupremeCourt 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.