Trade associations, 501(c)(4) social welfare organizations, other outside groups that pay for
political advertisements, and their donors now have more answers to long-running questions
regarding when donations to these groups are publicly reportable. After postponing
consideration of the issue during its previous meeting, the Federal Election Commission (“FEC”)
approved Wednesday an interim final rule on donor disclosure. The interim rule amends the
federal regulations that describe when outside groups that pay for independent expenditures–
advertisements that expressly advocate the election or defeat of a clearly identified candidate–
must publicly disclose on FEC reports the names of their donors. The amended rule will take
effect 30 legislative days after the FEC transmits the new rule to Congress, which the FEC
anticipates will be September 30, 2022.

The interim rule brings the FEC’s regulations into harmony with a 2018 court decision that
invalidated a long-standing regulation, 11 C.F.R. § 109.10(e)(1)(vi), requiring outside groups to
disclose only those donors who contributed at least $200 to the outside group “for the purpose
of furthering the reported independent expenditure.” The interim final rule strikes the regulation
entirely. However, the FEC added a note to 11 C.F.R. § 109.10(e)(1) that clarifies the remaining
portions of the regulation and the relevant statute are still in effect.

In the wake of the 2018 decision, many questions remained about when these groups must
disclose donor names. The revised regulation itself was not meant to answer those questions; it
was simply meant to harmonize regulations on the books with existing court decisions. Some of
these questions were answered by an unusual guidance document the Commission posted to
its website after the 2018 decision. That guidance, which remains in effect, provides that groups
(other than political committees) that pay for independent expenditures must disclose the names
of donors of over $200 who made contributions “earmarked for political purposes” during the
reporting period.

But when is a contribution “earmarked for political purposes”? If a donor provides funds for get-out-the-vote activities, is that donation “earmarked for political purposes”? If a donor makes a
contribution following a presentation from an outside group describing its political activities, is
the donation reportable? What about a donation intended to further a hard-hitting issue
advertisement whose purpose, at least in part, is to defeat a particular candidate? These
questions are all left unaddressed in the interim final rule and the website guidance.

In tandem with the approval of the interim final rule, however, three FEC Commissioners issued
a rare “interpretive statement” addressing some of these questions, citing Covington’s previous
analysis which had highlighted the uncertainty and confusion in the current approach. In the
statement, the Commissioners express their view that the new regulation should be interpreted
to comply both with the court decision, but also “with the First Amendment and Supreme Court
precedent” and “be fair to non-committee organizations and their donors and feasible for the
Commission to administer.” Absent definitive rulemaking, the Commissioners take the position
that alleged violations of this particular donor disclosure requirement “are effectively
unenforceable due to the absence of clear direction from the Commission on which donations to
non-committee organizations are ‘earmarked for political purposes.’” Nevertheless, the
Commissioners expressed their view that a contribution is “earmarked for political purposes,”
and therefore reportable, “only if it is designated or solicited for, or restricted to, activities or
communications that expressly advocate the election or defeat of a clearly identified candidate
for federal office.”

Thus, a donor who gives money with a specific instruction that the funds be used for
independent expenditures would make a reportable contribution. On the other hand, “an
unrestricted donation” or a donation designated for non-electoral purposes, or a donation in
response “to a general solicitation to support the organization’s mission” would not be
reportable, even if the funds are later used to fund express advocacy activities.

What does this mean going forward? Of course, the Commissioners’ policy statement is not a
binding statement of law by the Commission as a whole. Still, absent a court decision or a
change in position by the three Commissioners, enforcement matters alleging that social welfare
organizations, trade associations, and other groups failed to disclose their donors are unlikely to
find the required four votes to move forward unless the underlying contributions were allegedly
designated or solicited for, or restricted to, express advocacy communications or activities.
Contributions made to support issue advocacy communications (other than electioneering
communications), get-out-the-vote activities, and other efforts to influence elections that do not
involve express advocacy would not be reportable under this interpretation.

Contributions that are “designated” or “solicited” for express advocacy, however, would still be
reportable. Donors concerned about whether their donations would be publicly reported should
therefore carefully consider any solicitations received from the outside group, the specific details
of any communications with outside groups, and any instructions provided for the contributions,
either formally in an assurance letter or in informal communications.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Zachary G. Parks Zachary G. Parks

Zachary Park advises a wide range of corporate and political clients on federal and state campaign finance, lobbying disclosure, pay to play, and government ethics laws. Mr. Parks regularly advises corporations and corporate executives on instituting political law compliance programs and conducts compliance…

Zachary Park advises a wide range of corporate and political clients on federal and state campaign finance, lobbying disclosure, pay to play, and government ethics laws. Mr. Parks regularly advises corporations and corporate executives on instituting political law compliance programs and conducts compliance training for senior corporate executives and lobbyists. He also has extensive experience conducting corporate internal investigations concerning campaign finance and lobbying law compliance and has defended clients in investigations by the Federal Election Commission, the U.S. Department of Justice, and the House Oversight & Government Reform Committee.

Photo of Derek Lawlor Derek Lawlor

Derek Lawlor is an of counsel in the firm’s Washington office and a member of the firm’s Election & Political Law and White Collar practice groups.  He assists corporations, nonprofit organizations, and trade associations with federal and state lobbying, campaign finance, and government…

Derek Lawlor is an of counsel in the firm’s Washington office and a member of the firm’s Election & Political Law and White Collar practice groups.  He assists corporations, nonprofit organizations, and trade associations with federal and state lobbying, campaign finance, and government ethics issues.  Mr. Lawlor also represents clients in government investigations and inquiries conducted by the Federal Election Commission, Office of Congressional Ethics, and Congressional Committees and Commissions.  Prior to receiving his law degree, Mr. Lawlor worked in the Office of General Counsel at the U.S. House of Representatives.

Kimberly Railey

Kimberly Railey is an associate in the firm’s Washington, DC office. She is a member of the Election and Political Law Practice Group and the Data Privacy and Cybersecurity Practice Group.

Prior to law school, Kimberly was a political reporter for a nonpartisan…

Kimberly Railey is an associate in the firm’s Washington, DC office. She is a member of the Election and Political Law Practice Group and the Data Privacy and Cybersecurity Practice Group.

Prior to law school, Kimberly was a political reporter for a nonpartisan publication in Washington, DC.