Opinion ID: 169649
Heading Depth: 3
Heading Rank: 1

Heading: MCFL exemption

Text: In MCFL, the Federal Election Commission (FEC) charged MCFL, a nonprofit membership corporation created to oppose abortion rights, with violating the Federal Election Campaign Act of 1971 (FECA), 86 Stat. 11, as amended, 2 U.S.C. § 441b, by distributing a voter guide in the 1978 congressional election. 479 U.S. at 244-45, 107 S.Ct. 616. When MCFL refused to pay a fine, the FEC sued. MCFL claimed FECA abridged its First Amendment rights, and the Supreme Court agreed. The Court first reiterated that independent expenditures could not be regulated as strictly as contributions. Id. at 259-60, 107 S.Ct. 616. Independent expenditures are similar to pure issue discussion and therefore remain far removed from the valid state interest of preventing election corruption. Id. The Court also held that FECA could be applied to business corporations and other entities that presented some danger of unfair deployment of wealth for political purposes. Id. at 259, 479 U.S. 238. Direct corporate spending on political activity raises the prospect that resources amassed in the economic marketplace may be used to provide an unfair advantage in the political marketplace. Id. at 258, 107 S.Ct. 616. The Court observed that the concerns motivating prohibition of corporate political spending were absent in regard to MCFL, however, because [v]oluntary political associations do not suddenly present the specter of corruption merely by assuming the corporate form. Id. at 263, 107 S.Ct. 616. In delineating this exemption, the Court cited three essential features of MCFL: (1) the entity was formed for the purpose of promoting political ideas, and did not engage in business activities; (2) it had no shareholders or others with a claim to its assets or earnings; and (3) it was not formed by a corporation, and had a policy against accepting corporate contributions. Id. at 263-64, 107 S.Ct. 616. As noted above, Colorado's campaign finance amendment includes an exemption for such corporations. See Colo. Const. art. XXVIII, § 3(4)(b). Although the prohibition on corporate funding of electioneering communications does not explicitly contain the same exemption, the Secretary promulgated Rule 4.13, which construes § 6(2) to exclude MCFL corporations. The parties do not dispute that CRLC satisfies the second prong. Although the Secretary does not concede that CRLC has satisfied the first prong, [8] he focuses his arguments on appeal on the third MCFL prong. It is the third prong that poses the rub: CRLC admits that it does not have a policy against accepting contributions, and that it has accepted contributions  in the amount of about $50 per year. In response, the Secretary argues that because the MCFL Court deemed the characteristics `essential,' the Court created a bright line allowing the government to regulate the political expenditures of any corporation as long as it does not share the precise MCFL characteristics. 395 F.Supp.2d. at 1012. The district court refused to adopt the Secretary's unbending argument that Colorado may prohibit direct political expenditures by an advocacy corporation such as CRLC if it accepts de minimis corporate contributions. Id. The Secretary acknowledges that § 3(4)(b) and Rule 4.13 comport with MCFL. But, he argues that by allowing an exception for de minimis corporations, the district court diverts the analysis to a review of a corporation's day-to-day actions. As a practical matter, [t]he courts and the public do not have the resources to conduct such reviews. Aplt's Br. at 27. Because [e]ven minimal expenditures can have a significant impact, the Secretary argues that the district court's approach is impractical and invites corruption. Id. We disagree with the Secretary's analysis for substantially the same reasons as the district court. The district court relied in part on the reasoning of every other circuit to have addressed this issue, noting that if corporate contributions made up a minimal part of an organization's revenue, the MCFL exemption applies. See FEC v. Nat'l Rifle Ass'n, 254 F.3d 173, 192 (D.C.Cir.2001) (holding that sponsorship of non-political activities, provision of non-political goods and services such as magazines and accident insurance to members, lack of policy against corporate contributions, and actual receipt of up to $1,000 in corporate contributions did not turn an incorporated advocacy group into a potential conduit for corporate funding of political activity); N.C. Right to Life, Inc. v. Bartlett, 168 F.3d 705, 714 (4th Cir.1999) (lack of policy against corporate donations and receipt of up to a modest percentage [8%] of revenue from corporations did not prevent corporation from claiming MCFL exemption); FEC v. Survival Educ. Fund, Inc., 65 F.3d 285, 293 (2d Cir.1995) (stating that a nonprofit political advocacy corporation, which in fact receives no significant funding from unions or business corporations, does not surrender its First Amendment freedoms for the want of such a policy and holding that lack of policy against corporate contributions and actual receipt of up to 1% of funds from corporations did not place group outside scope of MCFL exemption); Day v. Holahan, 34 F.3d 1356, 1363-65 (8th Cir.1994) (holding that the lack of policy against corporate donations and engaging in incidental business activities did not put group outside MCFL exemption). We agree with these courts that MCFL does not establish an immobile set of parameters. See, e.g., Day, 34 F.3d at 1365 (The state goes too far in concluding that the factual findings of MCFL translate into absolutes in legal application.). Instead, they are really factors to determine whether a corporation is more like the type of traditional corporatio[n] organized for economic gain, or the voluntary political association of MCFL. MCFL, 479 U.S. at 259, 107 S.Ct. 616 (internal quotation marks omitted); see id. at 263, 107 S.Ct. 616 (Some corporations have features more akin to voluntary political associations than business firms, and therefore should not have to bear burdens on independent spending solely because of their incorporated status.). As previously noted, CRLC receives approximately $50 of corporate funding per year. This figure, [b]oth as a percentage of its gross income (significantly less than 1%) and an absolute number, . . . could not `have turned [CRLC] into a potential conduit for corporate funding of political activity.' 395 F.Supp.2d. at 1014 (quoting Nat'l Rifle Ass'n, 254 F.3d at 192).