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. 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

Whitaker, L. Paige

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Congressional Research Service ˜ The Library of CongressCRS Report for CongressReceived through the CRS WebOrder Code RS21511Updated May 19, 2003Campaign Finance: Brief Overview ofMcConnell v. FECL. Paige WhitakerLegislative AttorneyAmerican Law DivisionSummaryOn 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 asthe McCain-Feingold campaign finance reform legislation prior to enactment.  Mostprovisions of the new law became effective on November 6, 2002.  Shortly afterPresident 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 suitschallenging the campaign finance reform law were brought by more than 80 plaintiffsand were consolidated into one lead case, McConnell v. FEC.  In summary, theMcConnell complaint for declaratory and injunctive relief argued that portions of BCRAviolate the First Amendment and the equal protection component of the Due ProcessClause of the Fifth Amendment to the Constitution.  On May 2, 2003, the U.S. DistrictCourt for the District of Columbia issued its decision in McConnell v. FEC, strikingdown many key provisions of the law.  (See the text of the per curiam opinion at[http://lsmns2o.gtwy.uscourts.gov/dcd/02cv582a.pdf].) This report provides a briefoverview of the court’s decision and will be updated.  The three-judge panel, which wassplit 2 to 1 on many issues, ordered that its ruling take effect immediately.  Since thecourt has issued its opinion, several appeals have been filed.  Under the BCRAexpedited 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, whichleaves BCRA, as enacted, in effect until the Supreme Court issues a decision.  For morei n f o r m a t i o n  s e e ,  C a m p a i g n  F i n a n c e  R e f o r m  O v e r s i g h t[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 itsdecision in McConnell v. FEC, a challenge to the constitutionality of numerous provisionsof the recently enacted Bipartisan Campaign Reform Act (BCRA), which was also knownas the McCain-Feingold campaign finance reform legislation prior to enactment.  Thethree-judge panel, which was split 2 to 1 on many key issues, ordered that its ruling takeCRS-21 Chamber of Commerce, et al. v. FEC, Civ. No. 02-751 (D.D.C., May 19, 2003)(grantingmotions 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 fordeclaratory 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 Congresshas the right to intervene.3 No. 02-CV-0582 (D.D.C., consolidated May 13, 2002).effect immediately.  Since the court has issued its opinion, several appeals have been filedwith the U.S. Supreme Court.  Under the BCRA expedited review provision, the court’sdecision 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 theSupreme Court issues a decision.1BackgroundOn March 27, 2002, the President signed into law the Bipartisan Campaign ReformAct 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 signedBCRA into law, Senator Mitch McConnell filed suit in U.S. District Court for the Districtof Columbia against the Federal Election Commission (FEC) and the FederalCommunications Commission (FCC).  In summary, the McConnell complaint fordeclaratory and injunctive relief argued that portions of BCRA violate the FirstAmendment and the equal protection component of the Due Process Clause of the FifthAmendment to the Constitution.2  Likewise, shortly after enactment, the National RifleAssociation (NRA) filed suit in U.S. District Court for the District of Columbia againstthe FEC and the Attorney General seeking declaratory and injunctive relief against certainprovisions of the Federal Election Campaign Act (FECA), as amended by BCRA.  Insummary, the NRA argued that the new law deprives it of freedom of speech andassociation, of the right to petition the government for redress of grievances, and of therights to equal protection and due process, in violation of the First and Fifth Amendmentsto the Constitution.Ultimately, eleven suits challenging BCRA were brought by more than 80 plaintiffsand were consolidated into one lead case, McConnell v. FEC,3 by the U.S. District Courtfor the District of Columbia.  Section 403(a) of BCRA provides that if an action isbrought for declaratory or injunctive relief challenging the constitutionality of anyprovision of the Act, it shall be brought in the U.S. District Court for the District ofColumbia and shall be heard by a 3-judge court. It further provides that a final decisionin such an action shall be reviewable only by appeal directly to the U.S. Supreme Courtby the filing of a notice of appeal within 10 days and the filing of a jurisdictionalstatement within 30 days after a final decision is rendered. Section 403(a)(4) charges theU.S. District Court for the District of Columbia and the Supreme Court to advance on thedocket and to expedite to the greatest possible extent the disposition of the action andappeal. On December 4 and 5, 2002 oral argument was heard in McConnell v. FEC beforethe three-judge panel of the U.S. District Court for the District of Columbia.  Under theCRS-34  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 communicationthat can be received by 50,000 or more persons in a state or congressional district where theSenate or House election, respectively, is occurring.6 McConnell v. FEC, No. 02-CV-0582, slip op. at 6 (D.D.C., May 2, 2003).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 DecisionIssue Advocacy/Political Advertising by Corporations and Labor Unions(Soft Money).  Generally, sections 203 and 201 of BCRA, respectively, prohibit laborunions and corporations (and any persons using funds donated by a corporation or laborunion) from using treasury funds for “electioneering communications” — they must usea separate segregated fund (also known as a PAC) in order to fund such ads — and requiredisclosure to the Federal Election Commission (FEC) of disbursements for the costs ofproducing and broadcasting “electioneering communications” by any spender exceeding$10,000 per year.  BCRA generally defines an “electioneering communication” as abroadcast, cable, or satellite advertisement that “refers” to a clearly identified federalcandidate, is made within 60 days of a general election or 30 days of a primary and if forHouse or Senate elections, is targeted to the relevant electorate.5  In the event that theprimary 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 acandidate for that office, or attacks or opposes a candidate for that office (regardlessof 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 votefor or against a specific candidate.In McConnell v. FEC, the three-judge district court ruled 2 to 1 that the primarydefinition of “electioneering communication” is unconstitutional and accordingly, ruledthat the prohibition on labor unions and corporations (and any persons using fundsdonated by a corporation or labor union) using treasury funds for “electioneeringcommunications” and the requirement for disclosure to the FEC of spending for all“electioneering communications” is unconstitutional under the primary definition.  Thecourt upheld, however, the backup definition of “electioneering communication,” deletingthe last clause, “and which also is suggestive of no plausible meaning other than anexhortation to vote for or against a specific candidate,” and hence, generally upheld thedisclosure requirements and the prohibition on labor unions and corporations funding“electioneering communications” as defined by a portion of the backup definition.6  Asa result of this ruling, corporations and labor unions are generally prohibited from usingtreasury funds to pay for any broadcast, cable, or satellite communication — at any timein the election cycle — which “promotes or supports” or “attacks or opposes” a candidatefor that office, “regardless of whether the communication expressly advocates a vote foror against a candidate.”CRS-47 This provision of BCRA is named after its primary sponsors in the Senate, Senator OlympiaSnowe 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 purposeof promoting political ideas and cannot engage in business activities; (2) have no shareholdersor other persons affiliated so that members have no economic disincentive for disassociating withit if they disagree with its political activity; and (3) not be established by a business corporationand cannot accept contributions from business corporations.  Id. at 264. 11 This provision of BCRA is named after its primary sponsor in the Senate, Senator PaulWellstone.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” acorporation, 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 203 of BCRA also contains an exemption to the prohibition on corporationsdirectly funding “electioneering communications,” (i.e. using treasury funds instead offunding such advertisements through a PAC) for certain non-profit organizations.  Undera portion of Section 203 known as Snowe-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 the communication is paid for exclusivelywith funds from individuals who are U.S. citizens, nationals, or lawfully admitted forpermanent residence.8  The Snowe-Jeffords provision is an expansion of the law as itexisted 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.10Section 204 of BCRA, however, (known as the Wellstone Amendment)11 effectivelywithdraws the Snowe-Jeffords exception in Section 203, according to the court inMcConnell v. FEC.12  As a result of the Wellstone Amendment in Section 204, entitiesthat are organized under Internal Revenue Code Sections 501(c)(4) and 527(e)(1) are notpermitted to use their general treasury funds for “electioneering communications.”13  Asthe McConnell court noted, the Wellstone Amendment was codified in a separate portionof BCRA in order to preserve severability.14  Indeed, the McConnell three-judge panelstruck down the Wellstone Amendment in Section 204 as it applies to corporations thatmeet the criteria set forth by the Supreme Court in MCFL, also known as “MCFLcorporations.”  Hence, according the court, the prohibition against corporations usingtreasury funds to pay for “electioneering communications” applies only to non-MCFLcorporations.Raising and Spending of Soft Money by Political Parties.  Section 101 ofBCRA, which creates a new section in the Federal Election Campaign Act (FECA),CRS-515 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 Leonconcurred 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 federalelection, but filed a separate dissent with regard to prohibitions on a federal candidate orofficeholder from soliciting or raising soft money for the national parties.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, theMcConnell v. FEC court ruled that Section 323(a) is constitutional only to the extent thatit bans national party committees from using nonfederal funds for public communicationsthat “refer” to a clearly identified federal candidate — “regardless of whether a candidatefor State or local office is also mentioned or identified” — and that “promotes orsupports” or “attacks or opposes” a candidate for that office, “regardless of whether thecommunication expressly advocates a vote for or against a candidate.”16 Section 101 of BCRA creates another new FECA provision, Section 323(b), whichprohibits state and local parties from using nonfederal funds (or soft money) for “federalelection activities.”  Section 301(20)(A) of FECA, as amended by BCRA, defines “federalelection activities” to include: (i) voter registration drives in the last 120 days of a federalelection; (ii) voter identification, Get-Out-The-Vote (GOTV) drives, and generic activityin connection with an election in which a federal candidate is on the ballot; (iii) publiccommunications that “refer” to a clearly identified federal candidate — “regardless ofwhether 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 ofwhether 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 amonth 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 constitutionalonly as applied to Section 301(20)(A)(iii) activities.  That is, according to the court, stateand local parties are prohibited from spending nonfederal or soft money on publiccommunications that “refer” to a clearly identified federal candidate — “regardless ofwhether 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 ofwhether the communication expressly advocates a vote for or against a candidate.”18Raising and Spending of Soft Money by Federal Officeholders andCandidates.  Section 101 of BCRA prohibits, with few exceptions, federal officeholdersand candidates from soliciting, receiving, directing, transferring, or spending nonfederalor soft money for any local, state, or federal election.19  The McConnell v. FEC courtupheld the constitutionality of this section of the statute in its entirety.20CRS-621 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 heldthese 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).Hard Money Sources for Candidates.  Sections 304, 316 and 319 of BCRA,21sometimes referred to as the “millionaire provisions,” were held to be non-justiciable bythe McConnell v. FEC district court.22  In brief summary, Section 304 limits repaymentof candidate loans to his or her own campaign to $250,000, from amounts contributedafter the election occurs.  Section 304 also raises the limit on individual and party supportfor a Senate candidate whose opponent exceeds the designated threshold level of personalcampaign funding.  Section 319 raises the limits on individual and party support for aHouse candidate whose opponent exceeds the threshold of $350,000 in personal campaignfunding.Hard Money Contribution Limits.  Section 307 of BCRA,23 increases the limitson the amount that individuals can contribute to federal office candidates and to politicalparties.  Under Section 307, individuals may contribute no more than $2,000 percandidate, 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 byplaintiffs in regard to Section 307.24Limitation on Lowest Unit Charge for Candidates.  If a candidate makes anydirect 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 andtelevision broadcast advertisements unless certain attribution requirements are met.25  TheMcConnell v. FEC district court held that no plaintiff had standing at this time tochallenge Section 305.26Prohibition on Contributions by Minors.  Section 318 of BCRA prohibitsminors (defined as persons 17 and younger) from making contributions or donations tocandidates or to a political party.27  In McConnell v. FEC, the three-judge courtunanimously held the prohibition to be unconstitutional.28

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