DISCLOSE Act shields Democrat-leaning groups from disclosure requirements

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Washington is shocked top Democrats gave the National Rifle Association – one of the most powerful lobbies in town – its own loophole in legislation designed to increase disclosure requirements on campaign spending following the Supreme Court’s Citizens United decision.

The untold story is that Democrats assuaged organized labor’s early opposition to the bill by tailoring its provisions to eke out space for unions.

For example, restrictions on companies that received government bailouts during the financial crisis apply to businesses, but not unions: Under the DISCLOSE Act, General Motors can’t tell you who to vote for, but the United Auto Workers union can.

And consider the bill’s laborious record-keeping rules for certain types of donations. Corporations, unions, non-profits and 527 groups will, for the first time, be required to report donors who give more than $600 if they engage in “express” advocacy — urging voters to support one candidate or another by name.

Conveniently, as Republican staff on the House Administration Committee point out, average union dues in 2004 were $377 – below the $600 threshold. Since unions get the vast majority of their funds from member dues, “the new threshold for reporting is likely to have little effect on unions … but a huge effect on associations and advocacy groups,” a GOP summary of the bill says.

Government contractors with contracts of more than $7 million are not permitted to engage in express advocacy. Unions that receive their dues from the taxpayer-funded salaries of public sector employees face no such restriction. Neither do recipients of grants.

The bill includes strict rules on foreign-owned businesses engaging in express advocacy. The rules are so strict, critics fear, they will ensnare American companies with American employees and revenue. For instance, if a foreign entity owns, directly or indirectly, 20 percent or more of a company’s shares, that company isn’t allowed to urge citizens to vote for candidates, even if it’s based in the U.S.

No such restrictions are placed on unions. Under the bill, the All-China Federation of Trade Unions could have a heavily-regulated field day if they really wanted to.

Neither Rep. Chris Van Hollen, Maryland Democrat, nor House Administration Committee Chairman Robert Brady, Pennsylvania Democrat, responded immediately for comment. Van Hollen, the key architect of the bill, said June 15, “Our key objective in responding to the Supreme Court’s radical ruling in Citizens United has been to increase transparency and disclosure, and the final bill achieves that goal.”

Interestingly for a transparency bill, the process of writing it was kept secret, even from key Democrats.

Insiders say the bill was primarily driven by the White House, with Van Hollen and Sen. Charles Schumer, the New York Democrat, spearheading the effort on Capitol Hill. In private conversations, House Administration Committee Chairman Brady revealed that even he was being kept in the dark as the White House, Van Hollen and Schumer crafted the bill. One thing Brady did know was that organized labor was part of the talks, which he repeatedly mentioned in hearings about the bill.

In Van Hollen’s defense, the DISCLOSE Act does apply some of its requirements evenly. Top union officials must certify, as must corporate executives, that express advocacy spending is not coordinated with political parties or candidates and is otherwise kosher.

Unions are also subject to the new “stand by your ad” requirements. Under a 2002 campaign spending law, political candidates must state in television and radio advertisements they approved the message of their advertisements. Commonly, this statement reads, for example, “I’m Barack Obama and I approved this message.”

The DISCLOSE Act takes this idea and runs with it.

A hypothetical television ad would read, “I’m Eli Pariser, the executive director of Moveon.org Political Action and George Soros approves this message.” Soros, in this case, would be a “significant funder” for the ad, or would have given money for the ad to run. Then, Soros would appear on screen himself.

If he were the only funder of the ad, Soros would say, “I’m George Soros. I helped pay for this message, and I approve it.”

If Soros was part of a group that helped fund the ad, he would say, “I’m George Soros, chairman of Soros Fund Management. Soros Fund Management helped pay for this message and Soros Fund Management approves it.”

The longest version of this hypothetical “stand by your ad statement” takes about 15 seconds to read. Many political spots are 15 seconds. For the most common, 30-second spot, the statement would eat up 50 percent of the ad time.

Critics say the bill will create chaos because it would come into the effect at a crucial point in the campaign cycle.

“What you’re going to have is mass confusion,” said Bill McGinley, a partner at Patton Boggs and former top campaign lawyer for Republicans.

McGinley noted that the DISCLOSE Act would come into effect 30 days after it was passed, but under federal law, it’s impossible for the Federal Election Commission to issue implementing regulations that fast for the law.

For new reporting requirements, the FEC probably won’t be able to even issue reporting forms, leaving would-be campaign spenders in the dark about how to report the newly required information. McGinley argues the confusion is a means for Democrats to intimidate corporations so they don’t spend on the 2010 election.

“Nobody’s going to be able to say for certain where the boundaries are,” McGinley said.

While some experts argue the law is on shaky legal ground, it does not include a provision for expedited review by federal courts. Instead, Democrats left a legal rats’ nest for courts to struggle to untangle. The bill assigns jurisdiction in a complicated way that is at odds with other campaign spending laws. McGinley and others predict the confusion will keep courts from hearing challenges to the law until well after November.

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