On January 21, 2010, the US Supreme Court issued its ruling in Citizens United v. FEC, a dispute in which the creators of a documentary unfavorable to 2008 presidential candidate Hillary Clinton challenged the prohibition on corporations making independent expenditures during campaigns. Independent expenditures consist of campaign spending that expressly advocates for or against the election of a candidate (in this case Hillary Clinton during the Democratic primary election) without coordinating with that candidate. The Court ruled, in a 5-4 decision, that corporations and unions are “people” for the purposes of free speech, and like individuals and PACs, have a constitutional right to make unlimited independent expenditures. Corporations and unions, however, have more often chosen to funnel their unlimited donations through “super PACs,” discussed below.

Public reaction against the Citizens United ruling was strong and swift. Senate Democrats quickly introduced a bill, known as the DISCLOSE Act [PDF], designed to reduce the impact of the ruling by restricting foreign corporations and government contractors from falling under its scope and strengthening disclosure requirements. US President Barack Obama condemned the decision as creating loopholes in existing corporate spending restrictions. In his 2010 State of the Union speech, President Obama criticized its possible effect on the power of special interest groups. While many members of the public shared this opinion, many also noted the perceived electoral advantage to Republicans, who generally raise more funds from corporations than Democrats. However, despite outraising US President Obama with the help of super PAC funding allowed by Citizens United, 2012 Republican presidential candidate Mitt Romney lost the presidential election.

In addition to political ramifications, legal consequences of Citizens United and its overturning of First Amendment precedent have abounded. JURIST Forum Guest Columnist Josh Douglas believes that the US Supreme Court, through its decision in Citizens United, created a restrictive new doctrine regarding campaign finance law:

[T]he majority adopted a very crabbed view of corruption, stating that campaign finance restrictions on independent expenditures in candidate elections are valid only if they are tied to rooting out quid pro quo corruption. Of course, if corruption means only quid pro quo arrangements, then it is impossible to corrupt an inanimate ballot initiative that does not hold office and cannot give legislative favors in return for support. As Justice Stevens argued in his dissenting opinion, however, corruption comes in many forms, including through increased access.

Another interesting legal debate that has sprung from the Court’s conclusion that corporations and unions have free speech rights in at least the context of independent expenditures is whether such entities can be restricted in any campaign spending as free speech. The US District Court for the Eastern District of Virginia ruled as much when it struck down restrictions on corporations and unions’ direct contributions from their treasuries to political campaigns. The US Court of Appeals for the Fourth Circuit subsequently reversed the District Court’s opinion, citing Federal Election Commission v. Beaumont‘s finding that such restrictions are allowed. The Fourth Circuit found that Citizens United did not overrule this finding of Beaumont.

PAC Overview

Individual donors and PACs constitute a majority of campaign contributors in the US. Restrictions on individual and PAC donations to candidates’ campaign committees include a $2,500 spending cap per candidate per election; since primaries and general elections each constitute an “election,” the practical limit a person or PAC can donate to any given candidate per federal election is $5,000. Because campaign contributions are considered speech and thus only carefully restricted, individuals and PACs can donate a maximum of $5,000 to as many candidates as they wish.

Leadership PACs are another kind of political action committee that are run by incumbent members of Congress. The same campaign finance laws govern regular and leadership PACs, meaning such organizations can raise and give money to candidates at a limit of $5,000 per candidate per election cycle. While a member of Congress’s leadership PAC is prohibited from contributing directly to that member’s campaign, the leadership PAC can contribute to another member of Congress’s campaign committee. Similarly, Congressional candidates can direct contributions toward the leadership PACs of prominent members of Congress.

Entities known as super PACs formed in the wake of Citizens United as repositories for unlimited contributions from corporations and unions. Any corporation, union or wealthy individual can donate as much as they choose to any super PAC without the $5,000 limit that applies to individuals’ and PACs’ donations to campaign committees. However, unlike regular and leadership PACs, super PACs cannot give directly to a candidate’s campaign committee; they can only make independent expenditures uncoordinated with candidates. The only restriction on who can donate to super PACs consists of the requirement that the donor be a citizen or permanent resident of the US.

While not technically PACs, 501(c) nonprofits have also played a prominent role in modern campaign finance, particularly since the Citizens United ruling; Citizens United itself is a nonprofit corporation. Unlike super PACs, politically active nonprofits do not have to disclose their donors; for example, Karl Rove’s political fundraising apparatus during the election cycles following the Citizens United ruling consisted of large donations to Crossroads GPS, a 501(c)(4), which then was able to make unlimited donations to super PAC American Crossroads.

In order to maintain their tax-exempt status, nonprofits that participate in the political process through contributions cannot have politics as their primary purpose. The US Chamber of Congress is one prominent example of a politically active nonprofit.