By Fred Wertheimer
President, Democracy 21

The DISCLOSE Act passed the House on June 24, 2010 and is pending in the Senate.

The Act became necessary as a result of the Supreme Court decision earlier this year in the Citizens United case that held unconstitutional the ban on campaign expenditures by corporations and labor unions in federal elections.

 

The Supreme Court decision in the middle of an election cycle left voters facing the prospect of hundreds of millions of dollars being spent to influence their votes in the 2010 congressional races, without meaningful disclosure of these campaign expenditures or the funders behind them.

 

The principal goal of the DISCLOSE Act is to fill this disclosure gap and ensure that voters know what is going on in their 2010 congressional races and who is financing the campaign ads to influence their votes that will flood these elections. It is the Supreme Court’s decision changing the elections rules that has made it essential to enact new disclosure laws now.

 

The DISCLOSE Act does not tilt to Democrats or Republicans. Disclosure laws do not advantage either party unless you believe that providing voters with campaign finance information so they can make informed judgments about voting favors one party or the other.

 

In the course of the public debate on the DISCLOSE Act, there has been a great deal of misinformation concerning the Act’s impact on corporations and labor unions. Opponents of the Act have made a number of inaccurate and misleading claims that the legislation treats labor unions more favorably than corporations. Set forth below are myths and realities about the Act’s treatment of corporations and labor unions.

 
Myth: The DISCLOSE Act treats corporations unfairly compared to labor unions when it comes to disclosing their campaign expenditures.

  

Reality:  The legislation imposes campaign finance disclosure requirements on corporations and labor unions alike. Corporations and labor unions are covered by the same requirements to disclose the expenditures they make for "independent expenditures" and "electioneering communications" and the same requirements to disclose the sources of the funds used to make these expenditures. They are covered by the same stand-by-your ad provision requiring the head of an organization to appear in campaign ads and take responsibility for the ads, and the same requirements to list the top donors funding the ads. They are covered by the same threshold amounts for disclosing expenditures and the funders of these expenditures.

The DISCLOSE Act provides for the kind of comprehensive and timely campaign finance disclosure requirements that Republicans and Democrats alike have supported for decades.

Myth: The $600 threshold for disclosing the donors and the amounts they provided to groups making independent expenditures is designed to benefit labor unions and minimize the disclosure of dues-paying union members.

Reality: The $600 donor threshold in the bill reflects the goal of the legislation to require disclosure of  significant donors and not to require disclosure of every person who provides some funds to an organization. The $600 donor threshold also reflects existing donor disclosure thresholds for independent expenditures, taking into account inflation over the years. The threshold in the legislation is the same for all groups covered by the Act – including all unions, all membership organizations and all corporations- that receive contributions and payments available for campaign spending.

 Myth: The provisions of the Act that ban government contractors (that have one or more contracts of at least $10 million) from making campaign expenditures applies to corporations but not to labor unions. The provisions should but fail to cover collective bargaining agreements between labor unions and the government.

Reality: The ban on government contractors making campaign expenditures applies on an even-handed basis to both corporations and labor unions that have government contracts. Any labor union that has a government contract of $10 million or more is subject to the campaign spending ban in the same way that the ban applies to corporations.

The expenditure ban in the DISCLOSE Act is incorporated into an existing, long-standing statute that bans government contractors from making campaign contributions to federal candidates — an early pay-to-play protection. The existing statute defines a "federal contractor" to include any "person" who enters into a contract with the United States.  2 U.S.C. Section 441c(a).  And "person" is defined to include any "corporation" and any "labor organization."  2 U.S.C. Section 431(11).  Thus, labor unions are treated the same as corporations for purposes of the "federal contractor" provisions of the existing statute and the DISCLOSE Act.

Opponents of the legislation have claimed that the Act should treat collective bargaining agreements as government contracts and in failing to do so gives favorable treatment to unions. This is a red herring claim. The government contractors’ statute has never defined collective bargaining agreements as government contracts and the DISCLOSE Act is intended to build on existing law, not change the definition of government contractors. The existing statute covered contracts where the government pays a fee for goods or services, and it has never covered negotiated collective bargaining agreements between the government and union workers. The effort to equate collective bargaining agreements with government services contracts has no validity.

Myth: The DISCLOSE Act discriminates against corporations by banning campaign expenditures by American-based corporations, but not unions, controlled by a foreign individual,a foreign corporation or a foreign country.

Reality: The Act extends the longstanding ban on campaign expenditures by "foreign nationals" to cover any American-based corporation in which a foreign national, including a foreign individual or a foreign corporation owns 20 percent or more of the stock, or a foreign government owns 5 percent or more of the stock. The reason there is no similar provision for labor unions in the Act is that there are no American-based unions in which a foreign individual, a foreign union or a foreign country exercises a similar kind of control. No one has presented any example of a union that would be covered by such a provision if it did apply to unions. Therefore, to argue that this provision should also apply to unions is simply to seek equal treatment that is illusory and pointless. As for campaign expenditures by foreign unions, they are already barred by existing law from making expenditures to influence federal elections.

The purpose of this provision in the DISCLOSE Act is to prevent foreign entities that are already barred from participating in U.S. elections, from circumventing this prohibition by making campaign expenditures to influence federal elections through domestic entities they control. Since domestic corporations can be used in this way but domestic unions cannot, the claim by opponents of the legislation that corporations are being subject to discriminatory treatment is simply not true.

Myth: The House-passed DISCLOSE Act contains a provision intended to allow labor unions to transfer money to their affiliate groups for purposes of making campaign expenditures without these transfers being disclosed.

Reality: The House-passed bill contains a provision that applies to all organizations that make internal transfers to affiliated groups. The provision is intended to reduce the paperwork burden for internal transfers among affiliates of an organization by eliminating a reporting requirement for the transferor, as long as the transfers are limited to no more than an aggregate total of $50,000 or less during a calendar year. Many organizations make various transfers of funds between state and local chapters and national organizations during the course of a year for reasons that have nothing to do with campaign expenditures.

In reducing the paperwork for the transferring organizations, it is important to recognize that the recipient of the transferred funds is still required to disclose the transferred amounts. So the  provision only eliminates the requirement for the transferor to file disclosure reports and does so in cases where the transferred amounts are an aggregate of $50,000 or less in calendar year; the transferred amounts are still required to be publicly reported by the recipient of the transfers.

There is an additional provision in the House-passed bill that excludes from the $50,000 reporting threshold, portions of certain dues paid to a membership organization (including but not limited to unions) that are transferred from one affiliate to another affiliated organization. The effect of this provision is to exempt from disclosure by the transferor certain transfers of amounts greater than $50,000 between affiliate organizations, if the transferred funds consist of a per capita percentage of membership dues. Although this provision is not confined to unions, it provides a benefit to unions.  The recipient of the transfers still has to report the source of the funds.

This exemption from the $50,000 reporting threshold is a confusing and unnecessary provision that should be eliminated in rewriting the provision, which should occur in the Senate.

 Myth: The DISCLOSE Act is designed to benefit Democrats and labor unions and disadvantage Republicans and corporations.

Reality: The DISCLOSE Act is designed to benefit the American people by providing them with essential campaign finance information about unions and corporations spending money to influence the election of Democratic and Republican federal candidates. Opponents of this legislation would deny voters campaign finance information they have a fundamental right to know, as affirmed by the Supreme Court in the Citizens United decision.