Public Policy Advocacy Highlights For November 2022

Public Policy Advocacy Highlights For November 2022

Characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not represent the views or positions of the Public Policy Legal Institute, the First Tuesday Lunch Group or their members and participants. Suggestions and corrections welcome.

FIRST TUESDAY LUNCH GROUP

Big Leadership Transition at First Tuesday Lunch Group: The First Tuesday Lunch Group has existed in a variety of forms and under several names for more than thirty years, serving as an independent and neutral discussion forum for some of the country’s top legal and public policy advocacy practitioners to exchange news and information about public policy advocacy and political activity. The FTLG was co-founded by Elizabeth Kingsley and Barnaby Zall, along with Susan Leahy and many others, in May 2010, as an expansion of an earlier discussion group focused more on tax-exempt organizations. Now, as of December, 2022, the FTLG will have a new set of experienced and capable public policy advocacy practitioners at the top of the luncheon table, including David Keating, President of the Institute for Free Speech, Katherine LaBeau, partner at the Elias Law Group, and Steve Roberts, partner at Holtzman Vogel Baran Torchinsky & Josefiak. Kingsley, Zall, and Leahy, long-time FTLG “Cat-Herders,” are expected to remain active in the group during the transition.

IRS

IRS Commissioner Rettig Kicked to the Curb: Internal Revenue Service Commissioner Charles Rettig, a former top tax lawyer from Beverly Hills, California, steered the IRS through the pandemic, including processing massive stimulus payments, but the Washington Post and other outlets reported last month that the Biden Administration decided to replace him when his five-year term expired in November. Rettig’s last message stresses the Service’s accomplishments and doesn’t mention exempt organizations. Treasury Secretary Janet Yellen told the Post: “I want to thank Commissioner Rettig for his tireless service to the American people across two administrations, and his leadership of the IRS during the difficult and unique challenges posed by covid-19. I am grateful to him for his partnership and efforts to ensure taxpayers had the resources they needed to make it through the pandemic.” Douglas O’Donnell, Deputy Commissioner for Enforcement and Service, who started as a revenue agent in 1985, will lead the agency on an interim basis beginning Nov. 12.

FY 2023 TE/GE Program Letter: Personnel, Data-Driven Compliance Reviews, New IRM Audit Manual Highest Priorities: Tax Exempt/Government Entities Division Commissioner Edward Killen and Deputy Commissioner Rob Choi released IRS Pub. 5313, the Fiscal Year 2023 Program Letter for TE/GE. The program letter – one and a half pages – is likely short because TE/GE’s priorities are entirely drawn from the IRS Strategic Plan FY 2022-2026 – a one page diagram. TE/GE has the same four strategic goals:

  • Service – “we must ensure that taxpayers have a positive experience supported by professional, timely, and effective interactions,”
  • Enforcement – “our commitment to using data to select the most appropriate returns for compliance action remain [sic] steadfast,”
  • People – “We seek to create an open environment and inclusive culture that supports our employees in their personal and professional growth as they pursue their full potential,” and
  • Transformation – “Support the IRA Transformation and Implementation Office in compliance transformation and implementation of the tax provisions of the IRA impacting TE/GE customers [and] … Launch the new consolidated TE/GE Examination Internal Revenue Manual (IRM).”

For those who wondered, the program letter points out that “In FY2022 we hired 187 new employees, and we anticipate a greater number in FY2023. Engaging our new colleagues, welcoming, mentoring and training them is imperative.” Indeed, given that in recent years, the TE/GE workforce has welcomed many new employees without much experience with tax-exemption principles and issues. In that vein, also memorable is a reminder that the Frontline Leadership Readiness Program is routinely called “FLRP,” and the plan is to “Revise the Frontline Leadership Readiness Program (FLRP) training to include hands-on training early on in the curriculum to enable FLRP candidates to be successful.” Nothing like being thrown into the deep-end of the pool early to ensure a “positive experience’ for taxpayers. We wish much success to the new “early hands-on” FLRPers.

Blockbuster Report That Trump Sought to Weaponize IRS Against Opponents: This was one of the charges that brought down President Richard Nixon. See Impeachment Of Richard M. Nixon, Articles of Impeachment, II(2), H. Rept. 93-1305, at 3 (1974) (“He has, acting personally and through his subordinates and agents, endeavored to obtain from the Internal Revenue Service, in Violation of the constitutional rights of citizens; confidential information contained in income tax returns for purposes not authorized by law, and to cause, in violation of the constitutional rights of citizens, income tax audits or other income tax investigations to be initiated or conducted in a discriminatory manner.”). Those abuses sparked, among other things, tax confidentiality provisions in IRC § 6103 and the limits in IRC § 6104 on releasing donor information.

Now the New York Times and other media outlets are reporting that former White House Chief of Staff  John Kelly said that President Donald Trump demanded the Service investigate and audit FBI officials who were, wrongfully in his opinion, pursuing him. “Officials said the two men [the Director and Deputy Director of the FBI] were chosen randomly,” some reports suggesting that the simultaneous audits were triggered by big book-signing bonuses.

Sen. Whitehouse Pressured IRS to Investigate Conservative Organizations: Trump is not the only top federal official to pressure the IRS, and Politico is not the only media organization to publish hard-hitting attacks on politicians who do so. On Nov. 30, the Daily Signal published an exclusive report on the results of FOIA requests for communications from Senator Sheldon Whitehouse to the IRS (h/t IFS). “Sen. Sheldon Whitehouse, D-R.I., called for revoking a tax exemption for a conservative group for not masking up and socially distancing during the pandemic, insisted on a slew of investigations of other conservative groups, and pressed for the Internal Revenue Service to expand its reach.” The FOIA requests were filed by the American Accountability Foundation.

The IRS routinely handles investigative requests like Whitehouse’s, and in the past, the IRS Tax-Exempt Division pointed to investigation complaints from the public as a principal targeting resource. (See article below under Department of Justice on pressure from DoJ’s Public Integrity Section as being part of the impetus for Lois Lerner to begin the 2010 targeting scandal.) Sometimes, congressional offices will solicit outside organizations to complain to them so that they can forward the requests to the IRS without seeming to do what Whitehouse is doing.

What sets Whitehouse’s requests apart is that he has a long-term “working the refs” strategy to pressure the IRS to go after 501(c)(4) organizations on grounds that objectively do not warrant IRS intervention, such as reporting differently to the IRS and the Federal Election Commission, separate agencies whose reporting requirements are different:

The final letter the IRS made available was an inquiry from Whitehouse to Rettig, Treasury Secretary Janet Yellen, and Attorney General Merrick Garland about why his concerns had not been investigated. “I have described to you flagrant and persistent instances in which 501(c)(4) organizations engage in political activity—and report that political spending to the Federal Election Commission (FEC) or its state equivalents—while telling the Internal Revenue Service (IRS) that they did not engage in any political activity,” Whitehouse wrote in the letter dated May 5, 2022. … “This fact pattern, where tax-exempt organizations’ submissions under oath to different government entities are plainly inconsistent, should present straightforward cases for the IRS and the Department of Justice (DOJ) to pursue,” Whitehouse wrote. “Such facts present prima facie cases of noncompliance with IRS rules, and predicate ‘false statement’ investigations.”

PLR 202247012 Conclusorily Finds 501(c)(4) Had More than “Insubstantial” Political Campaign Intervention “Under Whatever Test One Uses to Measure:” Private Letter Ruling 202247012, issued April 21, 2022, (h/t Katherine LaBeau) is a final determination that a c4 had too much political campaign intervention to qualify for exemption because of payments for advertisements and payments to vendors who also worked for political campaigns. The heavily-redacted PLR has little analysis and simply cites the usual suspects – American Campaign Academy, Vision Service Plan, and so on – and none dated after 2009 or any references to issue advocacy, such as WRTL II. There isn’t really any application of the law to the facts of the organization, just conclusory statements like: “it engages almost entirely in activities that constitute political campaign intervention and in activities that serve a private benefit to the interests of [redacted].” Just based on what is public, including the heavy emphasis on private benefit, this might be similar to American Campaign Academy, where the organization’s activities were deemed to promote the private interests of a political party, but in the absence of more information, that’s just speculation. The analysis does say that “Under whatever measure one uses to determine what is insubstantial, fails the test”, which is troubling unless the facts were substantially egregious. Unfortunately, the PLR also says the organization “has notified us that they will be dissolving the organization sometime this year,” so it’s unlikely to appeal the ruling in a fashion to shed more light on the situation.

Tax Gap Increases Even As Americans Pay A Higher Percentage of Taxes On Time: The U.S. has long had the highest rate of voluntary payment of taxes in the world, but there is still a massive gap between estimated true tax liability and the amount of tax paid on time. Maintaining that level of voluntary compliance is one of the major reasons for the protection of donor privacy, which federal courts have long upheld. “Congress has decided that, with respect to tax

returns, confidentiality, not sunlight, is the proper aim. Tax returns contain highly personal information that many taxpayers might wish not to have broadcast. Moreover, without clear taxpayer understanding that the government takes the strongest precautions to keep tax information confidential, taxpayers’ confidence in the federal tax system might erode, with harmful consequences for a tax system that depends heavily on voluntary compliance.” Aronson v. IRS, 973 F.2d 962, 966 (1st Cir. 1992).

Accounting Today reports on the latest tax gap estimates (which always lag many years behind current payments): “The estimated gross U.S. tax gap increased to $496 billion annually for tax years 2014 through 2016, a rise of over $58 billion from the prior estimate — and the Internal Revenue Service estimates the gross tax gap will rise to $540 billion for 2017-2019.” The Wall Street Journal added: “In tax years 2014 through 2016, Americans paid 85% of their taxes on time, up from the agency’s 83.7% estimate for tax years 2011 through 2013, the IRS said Friday. That compliance rate climbed to 87% after IRS enforcement and late payments were included, from 85.9% in the prior estimate. The IRS projects that those higher percentages were consistent for tax years 2017 through 2019.”

Republicans Vow to Address “IRS Abuse:” Following up on last month’s discussion of the plans offered by Republicans vying for seats on important oversight committees, several influential Republicans also weighed in on what they will do after being given control on Capitol Hill. Sen. John Thune, the second-ranking Republican, wrote a Wall Street Journal op-ed complaining that there was no follow-up to the massive June 2021 breach of leaked confidential taxpayer information: “Under Biden, the agency is bent on squeezing more revenue without oversight or accountability.” Rep. Jason Smith, ranking member on the House Budget Committee, published an op-ed in The Hill about “IRS Abuse Demands Answers” and used as an example, the Lois Lerner-era IRS “TAG vs. BOLO” targeting program:

Nine years ago, it was revealed that the IRS division that grants non-profit status to political organizations, overseen by a Lois Lerner, had been targeting for additional scrutiny conservative groups in the lead up to the 2012 Presidential election. Despite being at the center of a scandal where Americans’ freedom of speech was being suppressed, Lerner received nearly $130,000 in taxpayer-funded bonuses between 2010 and 2013, including a $42,000 bonus while she was under investigation for the targeting activity that occurred under her watch.

Years later, American taxpayers are just now learning how much this scandal has cost them. At the House Budget Committee, we have traced that over the years, taxpayers have footed the bill for Lerner’s legal defense to the tune of at least $3.6 million — forcing the same taxpayers whose First Amendment rights were violated by the IRS to defend the bureaucrat who violated them. Another $3.5 million has been paid to victims of the Lerner targeting scheme, totaling at least $7.1 million to deal with the fallout from the IRS’ illicit activity.

As more information comes to light about the scandal, it is increasingly baffling and frustrating that to date not a single federal employee has been held accountable. Recently unsealed emails from Lerner showed she was aware as early as 2010 that conservative groups were being held to a different standard than other applicants, and yet she did nothing. Unfortunately, this is unsurprising as her emails make it clear why she did nothing. Lerner reveals a remarkable level of disdain for conservatives and the values they hold dear — referring to her fellow Americans as “crazies” and “a[**]holes,” and writing that their “rabid, hellfire piece of religion” was destroying the country.

The Power of One Pixel: Pixels, tiny pieces of code embedded in software and Internet messages and graphics, are integral parts of the infrastructure of the modern Interwebs, since they can carry substantial amounts of information essentially without notice. Now The Markup, a new nonprofit “quantitative journalism” publication has teamed up with The Verge to release a scoop about how those secret pixels send confidential taxpayer information to Facebook from millions of taxpayers who use certain tax-reporting software:

Major tax filing services such as H&R Block, TaxAct, and TaxSlayer have been quietly transmitting sensitive financial information to Facebook when Americans file their taxes online, The Markup has learned. The data sent through widely used code called the Meta Pixel [here is a concise but understandable explanation of what that means with background documents], includes not only information like names and email addresses but often even more detailed information, including data on users’ income, filing status, refund amounts, and dependents’ college scholarship amounts. The information sent to Facebook can be used by the company to power its advertising algorithms and is gathered regardless of whether the person using the tax filing service has an account on Facebook or other platforms operated by its owner, Meta.

“Johnson Amendment” Stirs Less Controversy This Election Cycle, But Still Kicking Around: The Texas Tribune and ProPublica have an in-depth article on the Johnson Amendment, including some extended history of the 1960’s-era prohibition on political activity by churches, and intensive looks at Texas churches that continue to endorse candidates and engage in other election-related activity without fear that the IRS will sanction them. A much more professional version of journalism than other recent ProPublica efforts, not least because several participants in the First Tuesday Lunch Group make appearances to discuss tax-exempt organization law and practice, including Lloyd Mayer and Ellen Aprill.

FEC

FEC Adopts Some Final Regulations to Cover Disclaimers on Internet-related Media, Opens New Comment Period on Changing Definition of “Promoted For A Fee:” The Federal Election Commission has begun updating its regulations on required disclaimers on political ads to include those placed on web sites and other Internet-related media. The FEC has been working on these regulations for more than ten years, and this Final Rule, drafted by FEC Chair Allen Dickerson and Commissioner Shana Broussard, incorporates much of the thousands of comments the agency received over the years. The Internet-related provisions are similar to those long used to determine whether specific legacy media required disclaimers, including an exception for “small” or otherwise inappropriate media.

Commissioners Dickerson and Trainor issued a long and detailed explanation and history of FEC and judicial treatment of Internet disclaimer regulation (h/t David Keating):

During the twelve-year period this rulemaking has been pending, the internet has changed dramatically. Some internet sites and applications that were popular in 2010 no longer exist, while others that are popular now did not exist then. Technology is fleeting and ephemeral, it moves faster than the regulatory state, and neither the Commission nor the federal government at large can accurately and consistently predict how people might choose to engage in political speech in 2030, or 2050, or 2100. Therefore, the technological characteristics of a particular website, internet ad, or online platform should not be the primary basis for regulating core political speech—and demanding that an advertiser refrain from using a particular advertising format or requiring that they truncate their message to accommodate a disclaimer is not a viable solution under our Constitution.

Instead, the Commission should ground its regulations in essential First Amendment principles and draw upon technological minutia only as necessary. Accordingly, this regulation is intended to address advertising formats that exist now, formats that are in development, and formats that have not yet been invented or even conceived. After all, the medium through which a political speaker chooses to communicate can hold just as much value as the message itself, and political speakers have the right to meet their audience where that audience is, using the medium of their choosing.

Note that what was approved, 5-0 (Weintraub abstaining) (h/t David Keating) at the December 1 FEC meeting was Version B of the proposed regulations, which deleted from Version A the definition of “promoted for a fee,” a requirement intended to limit the scope of disclosures. The Commissioners voted to open a new rulemaking with a separate comment opportunity on the proposed new definition.

The FEC was set to discuss the proposed regulations at its November 17 meeting, but the agency cancelled the meeting. Not all Commissioners were on board with the original version of the proposed rules, and Commissioner Sean Cooksey told Axios that he would not support this expansion of “burdensome and confusing new disclaimer requirements” to cover Internet communications.

Outside commenters were also concerned: Institute for Free Speech Chair and former FEC Commissioner Brad Smith and IFS head David Keating issued a statement saying the proposal “needs more work.”  Former FEC Chair (and First Tuesday Lunch Group participant) Lee Goodman told the Washington Examiner that “The proposal could be read to expand the regulation of free online content if a nonprofit organization pays its own staff to disseminate or ‘promote’ the content. Think of a nonprofit organization that posts a political video for free on YouTube while its staff pushes the video out across the internet — all for free. This proposal might regulate that for the first time in history. The FEC needs to define what it means to promote a free YouTube video before adopting this proposal.” Apparently, the Commissioners heeded the concerns.

FEC Asks for Comments on Possible Regulations to Permit Political Campaigns to Pay Salaries to Candidates: In its decision in FEC v. Ted Cruz for Senate, the Supreme Court expressed concern about federal regulations which discriminated against new and less well-funded candidates: “deference to Congress would be especially inappropriate where, as here, the legislative act may have been an effort to ‘insulate[] legislators from effective electoral challenge.’” At first glance, this principle could presage a challenge to 52 U.S.C. § 30114(b)(2), which prohibits personal use of campaign funds, and has long been the basis for FEC rejection of various mechanisms for permitting campaign funds to be used for expenditures to benefit individual candidates.

This conundrum alone might explain why the FEC has twice now asked for comments on how and whether to open a rulemaking on campaigns paying compensation to candidates. Currently, “the Commission determines on a case-by-case basis whether the use of campaign funds to pay expenses other than those listed would be a prohibited conversion of the funds to personal use. … See 11 CFR 113.1(g)(1)(ii) (providing non-exhaustive list of expenses to be determined for personal use on a case-by-case basis).” Now, the agency is asking for comments on what should be considered regularly to be “for personal use” and what might not be. IOW, the FEC is asking if, despite the statute, it can open the door to some compensation to candidates. The rationale? “As the Commission explained in the [2002] explanation and justification accompanying the final rules, the commenters argued that the proposed rule would favor incumbents who do not face a reduction in compensation for time spent campaigning, and wealthy challengers who can afford to forego compensation.” This isn’t the first time the FEC has urged this loophole, positing it as a permissible interpretation of the statutory language.

The Commission “agree[d] with the [2002] commenters that the payment of a salary to a candidate is not a prohibited personal use as defined under Commission regulations.” The Commission explained that this use of campaign funds satisfied the “irrespective” test because, “but for the candidacy, the candidate would be paid a salary in exchange for services rendered to an employer.” Moreover, the Commission stated, a “salary paid to a candidate would be in return for the candidate’s services provided to the campaign and the necessity of that salary would not exist irrespective of the candidacy.”

But the Commissioners are obviously conflicted about moving forward, and they ask a series of questions for commenters to address, including how to choose among a variety of alternative interpretations. At the December 1 FEC meeting (h/t David Keating), the Commissioners approved the draft rulemaking, accepting a request from Commissioner Broussard to change the draft to, inter alia, clarify some terminology and compensation caps, apparently with an eye toward helping with childcare obligations similar to those recently addressed in MURs and AOs.

Office of General Counsel Confuses Foreign Investment With Foreign Control: In MUR 7491 (American Ethane), three Federal Election Commission Commissioners issued a Statement of Reasons explaining why they did not accept the FEC Office of General Counsel’s contention that the respondent American company should be investigated for violation of the prohibition against foreign campaign involvement:

American Ethane is not a foreign national—it is an American corporation that was founded in Louisiana in 2014 … American Ethane’s initial capital came from both American and Russian persons, and the company “had not generated any income from its business activities and was funding its business operations” using that initial capital. Therefore, OGC contended that American Ethane’s contributions were made with Russian funds, and that the company thus violated both our foreign national and our corporation contribution rules. …While FECA prohibits foreign corporations from making political donations, the Commission has permitted some contributions from domestic subsidiaries of foreign parent corporations. These advisory opinions recognized that while “the government may bar foreign citizens (at least those who are not lawful permanent residents of the United States) from” making “political contributions and express-advocacy expenditures,” U.S. companies with foreign parents still have the ability to make such contributions so long as they are made pursuant to certain safeguards against direct foreign funding and control. … In fact, OGC found that there was no foreign control of American Ethane’s political giving.

Commissioners Broussard and Weintraub issued their own Statement of Reasons declaring that American Ethane was a Russian corporation: “When considering whether contributions by U.S. corporations constitute prohibited foreign national contributions, the Commission has consistently required that the contributions be made with funds that are ‘home-grown,’ that is, solely generated by the corporation’s domestic operations, and that no foreign national be involved with the decision to make the contributions. Both criteria are required. Even if a U.S. citizen makes the decision to donate a corporation’s funds, that citizen is prohibited from injecting foreign funds into the U.S. political system. The money used may not be from foreign sources.” Commissioner Weintraub also wrote a separate Statement for herself raging against her Republican colleagues: “But my colleagues are so eager to grease the skids for corporate spending in U.S. elections that they don’t seem to care where the money comes from – in this case, from (I kid you not) Russian oligarchs. This is, in a word, alarming.”

CREW Asserts Commissioner Weintraub “Is Now The Controlling Commissioner”: If you can’t beat them, join them? Long a fount of long-shot, but sometimes effective legal tactics, Citizens for Responsibility and Ethics in Washington has filed a third complaint against the FEC in its long-running struggle to sanction the American Action Network for failing to disclose its donors. CREW has opened a new front in the ongoing legal interpretation battles over the FEC’s direction and control. This time, CREW is offering a “perhaps perplexing explanation” (their phrase) of what the FEC did wrong, now relying on the fact that Commissioner Ellen Weintraub, acting alone, blocked FEC action: “the direct result of D.C. Circuit precedent providing that the commissioners who blocked the last reason-to-believe vote before the dismissal are the ‘controlling commissioners’ who speak on behalf of ‘the Commission’ with respect to the following dismissal. CREW v. FEC, 993 F.3d 880, 883 (D.C. Cir. 2021) (‘New Models’). In this case, Commissioner Ellen L. Weintraub is now the controlling commissioner as she is the commissioner who single-handedly blocked the last reason-to-believe vote.” It’s a novel theory, and perhaps a logical extension of the rejection of recent assertions by Weintraub and others that formal votes are the only way to interpret requirements of the FEC’s organic statute. See, e.g., CREW v. FEC 993 F.3d at 884-85, quoting Chamber of Commerce of U.S. v. FEC, 69 F.3d 600, 603 (D.C. Cir. 1995) (describing FECA’s judicial review provision as “unusual in that it permits a private party to challenge the FEC’s decision not to enforce”). It will be interesting to see how this plays out.

Ready For Ron Sues FEC Over Decision Not to Permit List Sharing of PAC List with Campaign: Continuing the unfortunate pattern of very prolix Complaints being filed in FEC-related cases, a SuperPAC which has built up a list of persons who would be likely to support Florida Governor Ron DeSantis if he decides to run for President has sued the FEC, claiming that Advisory Opinion 2022-12 (Ready for Ron) is wrong. The Complaint contends that providing the list of persons for free is “literal, pure political speech”, id., at P. 1, and “distorts the FECA’s plain meaning by treating a signed political petition as a ‘contribution’ … [and] flatly ignores the U.S. Court of Appeals for the District of Columbia’s binding ruling in Federal Election Comm’n v. Machinists Non-Partisan Political League, 655 F.2d 380 (D.C. Cir. 1981), holding the Commission may neither regulate efforts to draft federal candidates nor regulate disbursements to individuals who are not yet federal candidates).” Id., at P. 2. Open Secrets apparently does not like the suit.

Is Paying Influencers to Carry A Campaign Message A Way for Campaigns to “Skirt” Campaign Finance Rules? The New York Times thinks so, even though it admits that the purpose may be more to avoid social media bans and censorship:

These social media influencers and microinfluencers — noncelebrity users who have attracted a moderately large following — are paid hundreds and sometimes thousands of dollars per post to circulate political messages, and they are part of a growing group of people who are being paid by campaign operatives to create content aimed at influencing the midterm elections. Political firms, mostly those aligned with Democrats and progressive causes, are increasingly turning to them in hopes of finding ways to reach Generation Z and non-English-speaking voters, according to researchers, and they represent a novel — and unregulated — way of promoting political messages. Strategists say using influencers can enhance how campaigns engage with crucial voters who could help sway competitive races. They provide a cost-effective way to communicate to large and localized audiences that draws higher engagement and circumvents bans on political advertising on platforms like Twitter, TikTok and Instagram.

Perhaps the NYT is conflating social media advertising bans with campaign finance “rules?” And in light of recent (and increasing) governmental efforts to encourage social media platforms to monitor and ban certain speakers (see Homeland Security “misinformation” control efforts item below under Department of Justice), there may be some truth to that conflation.

FTX Founder Says He Gave to Republicans Through “Dark Money” Organizations to Avoid Media Criticism: Speaking of ways to “skirt” campaign finance rules without violating them, Sam Bankman-Fried, whose FTX cryptocurrency exchange just failed, was the second-largest donor to Democratic causes, but Insider reports that he says in a YouTube interview that he was also secretly the third-largest donor to Republicans (h/t IFS). Bankman-Fried says he gave roughly $40 million each to Democratic and Republican causes, but he made all his Republican contributions through organizations that would not reveal his identity to avoid criticism from “liberal media,” not to avoid required regulatory filings.  

“Reporters freak the f*** out if you donate to a Republican,” he said. “They’re all secretly liberal and I didn’t want to have that fight, so I made all the Republican ones dark.” “Despite Citizens United being the literally the highest-profile Supreme Court case of the decade and the thing everyone talks about with campaign finance, for some reason in practice no-one can possibly fathom the idea that someone actually gave dark.”

CONGRESS

The Republican House Investigation Agenda Continues to Take Shape: With the Republicans gaining control of the U.S. House of Representatives, various Republican House leaders have posted op-eds and statements describing their plans for future official actions. But the Republican Staff of the House Judiciary Committee jumped the gun, and released an extensive discussion of politicization of the FBI four days before the election. The Staff Report, “FBI Whistleblowers: What Their Disclosures Indicate About The Politicization Of The FBI And Justice Department,” is 1,050 pages long and provides a detailed road map of issues, evidence, and background which can be expected to guide a future Judiciary Committee investigation of the FBI and its DoJ parent. And they could be described as explosive:

This report presents what is known so far about the extent of problems festering within the FBI’s Washington bureaucracy. There is likely much more to be uncovered in the months ahead. But from what is known, it is clear the FBI needs repair. Too many whistleblowers have said that they are “saddened” by what they see happening at the Bureau. Too much is at stake to sacrifice the trust and accountability in our federal law-enforcement apparatus. The necessary first step in fixing the FBI’s broken culture and out-of-control hierarchy is to identify and understand the problem.

The New York Post has commentary. CNN doesn’t include the likely IRS investigation in its top five of expected congressional inquiries.

A Reminder of the Limits of Money – 90% of Biggest Self-Funding Candidates Failed to be Elected: Bloomberg (paywall), home of failed Presidential self-funder Michael Bloomberg, reminds us how very hard it is to substitute money for votes. “It was a brutal election year for self-funding candidates. Eight candidates poured more than $10 million of personal funds into their 2022 midterm campaigns — only one came up a winner. Democratic Representative David Trone of Maryland was the only top spender to win his race as he scored a narrow victory. Trone, co-founder of Total Wine & More and the sole incumbent among the self-funders, invested more than $12 million of his own money into the contest. That’s nearly 15 times the amount raised by his Republican opponent Neil Parrott, according to data compiled by OpenSecrets, a nonpartisan group that tracks campaign finance.”

IFS Urges Congress to “Protect the Tax Code From Being Weaponized:” Alex Baiocco from the Institute for Free Speech posted an op-ed reciting recent instances in which the IRS was asked to “police political speech.” “If the IRS opened an investigation into ‘potential violations of the Internal Revenue Code’ every time an advocacy organization made controversial claims about a highly politicized issue, the agency would quickly turn into the Ministry of Truth.”

DEPARTMENT OF JUSTICE

Leaked DHS Documents Showing Expanding Government Monitoring of “Misinformation” Stirs Controversy: The IRS is not the only leaky federal agency with secrets that cause controversy when leaked. The Intercept reported that the unreleased annual report of the federal Department of Homeland Security shows that the demise of the “Misinformation Project” did not end the federal government’s intensive efforts to uncover and intervene against tax-exempt organizations’ activities online.

The work, much of which remains unknown to the American public, came into clearer view earlier this year when DHS announced a new “Disinformation Governance Board”: a panel designed to police misinformation (false information spread unintentionally), disinformation (false information spread intentionally), and malinformation (factual information shared, typically out of context, with harmful intent) that allegedly threatens U.S. interests. While the board was widely ridiculed, immediately scaled back, and then shut down within a few months, other initiatives are underway as DHS pivots to monitoring social media now that its original mandate — the war on terror — has been wound down.

Fox News reacted with a moderate tone that surprised some observers:

A handful of President Biden’s most important federal agencies are stepping up efforts to monitor and counteract “disinformation” on social media platforms, even in the face of criticism that the administration is attempting to silence conservative or opposing viewpoints. The actions by the federal agencies come as Missouri and Louisiana are pursuing legal action against Biden, former White House press secretary Jen Psaki, Dr. Anthony Fauci and other top administration officials. The two states say these officials “pressured and colluded” with Big Tech social media companies to censor and suppress information on the Hunter Biden laptop story, COVID-19 origins and security of voting by mail during the pandemic.

Despite the ongoing lawsuit and vocal criticism by members of Congress, Biden’s agencies remain focused on countering disinformation from foreign adversaries attempting to influence U.S. elections and on certain topics, including COVID-19 origins, the deadly Afghanistan withdrawal and more.

The Washington Post’s Cybersecurity 202 ignored the Fox caution and warned: “Look for conservatives to go after DHS counter-disinformation work,” which is, as the Fox News piece shows, only partially what happened. The Post noted:

“Simply put: The American People do not approve of the Department engaging in unclear, unaccountable, and opaque efforts led by the Biden administration’s ever-changing definition of ‘truth,’” Rep. John Katko (R-N.Y.), the top Republican on the panel, said in a statement Tuesday. “Homeland Republicans continue to engage DHS to get answers and will continue to conduct intense oversight. We will continue to demand the highest levels of transparency by DHS with Congress and the public.” Katko is one of the more moderate members of his caucus and is retiring next year. That he spoke out suggests how deeply Republicans are concerned about the DHS efforts, which they label censorship.

To its credit, the Post also noted a decidedly-not conservative critic: “The American Civil Liberties Union also raised concerns on Twitter.”

The New York Post noted:

Government and law enforcement officials are able to request censorship of Facebook and Instagram posts using a special portal — despite the Biden administration’s failed attempt to establish a Disinformation Governance Board, according to a new report. The previously unknown portal allows officials with .gov or law enforcement email addresses to request censorship in the name of fighting “disinformation,” The Intercept reported. Facebook reportedly created the portal for the Department of Homeland Security and other entities to squelch content. The link remains live despite the public furor over the proposed board to police domestic political speech, which was scrapped earlier this year due to backlash and questions about its legality.

Ari Blaff, writing in National Review, points out “One of the Intercept’s biggest findings was that the FBI agent who played an instrumental role in pushing social-media platforms to censor the infamous New York Post story about Hunter Biden’s laptop continued to shape DHS policy discussions.”

On the other hand, ProPublica complained that the Biden Administration jumped back too soon and inappropriately:

On his first full day in office, President Joe Biden directed his national security team to make a plan to confront domestic terrorism. In their ensuing report, Biden’s advisers homed in on “a crisis of disinformation and misinformation.” The new administration, they pledged, would work to “counter the influence and impact of dangerous conspiracy theories that can provide a gateway to terrorist violence.” But the reality of the administration’s efforts has been less robust than its rhetoric. Instead, a ProPublica review found, the Biden administration has backed away from a comprehensive effort to address disinformation after accusations from Republicans and right-wing influencers that the administration was trying to stifle dissent.

The difference? At least partially one of definition: critics point to over-reach in government targeting of legitimate speech – in other words, classic First Amendment chilling. Supporters of government action, like ProPublica, point to concerns about the security of election workers in a time of public distrust and anxiety. Perhaps a middle ground would be not calling speech “domestic terrorism” or other thinly-supported dog whistles, but instead following the long-standing judicial interpretations of what sorts of speech are “actual threats” or other exceptions to First Amendment protections. In other words, use the Supreme Court’s view: “Where the First Amendment is implicated, the tie goes to the speaker, not the censor.” FEC v. Wisconsin Right to Life, Inc., 551 U.S. 449 (2007).  

Did John (“Jack”) Smith, Just Appointed As Special Prosecutor For Trump Prosecution, Start the Lois Lerner-led IRS Targeting Scandal in 2010? Lois Lerner did a fine job when she was in charge of public outreach at the Federal Election Commission, and tried hard when she took over the helm at the IRS Tax-exempt Organizations Division. However, her implementation of the “Be On The Lookout” (BOGO) strategy instead of the tried-and-true Touch and Go (TAG) system to look at potential political intervention by mostly conservative c4s ended up wrecking TE/GE’s reputation and working relationship with practitioners, and the damage still resonates today. There’s a reason why IRS TE/GE and the FEC stay separate; if nothing else, the laws are different, as are the First Amendment considerations. 

One of the well-known things behind the Lerner/IRS scandal is the pressure that Lois was under from the Department of Justice to “do something about” the Tea Party and Citizens United. Lois was quite candid about it later (here’s Lois on YouTube discussing the “everybody’s screaming at us” pressure).

And one of the people applying the pressure? John (“Jack”) Smith. According to  both Politico and CNN, the same Jack Smith just appointed special counsel for the current Donald Trump investigations. (Prof. Jonathan Turley explains the tangled web of investigations underway.) Jack Smith was new to the Public Integrity Section of the DoJ Criminal Division in 2010, and he was looking for things to focus on. One of those was Citizens United and the role of 501(c)(4) organizations; based on nothing more than a media article, he wrote his superiors on Sept. 21, 2010 (P. 189):

Check out [the] article on front page of ny times [sic] regarding misuse of non-profits for indirectly funding campaigns. This seems egregious to me – could we ever charge a [18 U.S.C. §] 371 conspiracy to violate laws of the USA for misuse of such non profits to get around existing campaign finance laws + limits? I know 501s are legal but if they are knowingly using them beyond what they are allowed to use them for (and we could prove that factually)? IRS Commissioner sarah ingram [sic] oversees these groups. Let’s discuss tomorrow but maybe we should try to set up a meeting this week.

CNN noted that Smith testified in closed-door interviews with the House Oversight Committee in May 2014 during an investigation of the scandal: 

The meeting [between TE/GE and DoJ] had been convened to discuss the “evolving legal landscape” of campaign finance law following the Citizens United Supreme Court decision, according to a May 2014 letter written by Issa and Rep. Jim Jordan, the Ohio Republican who is expected to be House Judiciary chairman next year. “It is apparent that the Department’s leadership, including Public Integrity Section Chief Jack Smith, was closely involved in engaging with the IRS in wake of Citizens United and political pressure from prominent Democrats to address perceived problems with the decision,” Issa and Jordan wrote in the letter seeking Smith’s testimony.

Smith testified that his office “had a dialogue” with the FBI about opening investigations related to politically active non-profits following the meeting with Lerner, but did not ultimately do so, according to a copy of his interview obtained by CNN. Smith explained that he had asked for the meeting with the IRS because he wanted to learn more about the legal landscape of political non-profits following the Citizens United decision because he was relatively new to the public integrity section. He said that Lerner explained it would be difficult if not impossible to bring a case on the abuse of tax-exempt status.

Smith repeated at several points in the interview that the Justice Department did not pursue any investigations due to politics. “I want to be clear – it would be more about looking at the issue, looking at whether it made sense to open investigations,” he said. “If we did, you know, how would you go about doing this? Is there predication, a basis to open an investigation? Things like that. I can’t say as I sit here now specifically, you know, the back-and-forth of that discussion. I can just tell you that – because I know one of your concerns is that organizations were targeted. And I can tell you that we, Public Integrity, did not open any investigations as a result of those discussions and that we certainly, as you know, have not brought any cases as a result of that.”

Smith also testified that he was not aware of anyone at the Justice Department placing pressure on the IRS – and that he was never pressured to investigate any political groups. “No. And maybe I can stop you guys. I know there’s a series of these questions. I’ve never been asked these things, and anybody who knows me would never even consider asking me to do such a thing,” Smith said.

But other documents released in the litigation against the IRS which resulted in a DoJ apology and payment of millions in attorneys fees to affected organizations suggest otherwise. For example, an internal DoJ memo released under FOIA litigation with Judicial Watch shows that the meeting resulted in a substantive discussion of specific theories proposed by the DoJ Public Integrity Section, at which Lois explained the difficulties in bringing cases against c4s that relied on IRS rules. More importantly, the IRS began to deliver 1.25 million pages of taxpayer documents to the FBI, mostly 990s from targeted c4s. At the meeting, the Public Integrity Section, then headed by Smith, proposed joint investigations: “whether a three -way partnership among DOJ, the FEC, and the IRS is possible to prevent prohibited activity by these organizations.” The 2014 House Oversight Committee Report noted that “partnership” resulted in the designation of Janet Johnson – “an employee in its Criminal Investigation unit to serve as a liaison with the Justice Department on criminal enforcement relating to non-profit political speech.” (P. 176).

Note that Jack Smith carefully testified in 2014 that “I can tell you that we, Public Integrity, did not open any investigations as a result of those discussions and that we certainly, as you know, have not brought any cases as a result of that.” (Emphasis added.) That may be true in the sense of never opening a specific investigation or case in “Public Integrity,” but it certainly to have sparked activity in IRS TE/GE.

COURTS

Oral Argument in Percoco v. U.S. Reveals Gap Between Views of Potential Corruption Caused by Former Government Officials Who Become Lobbyists: On Nov. 28, the U.S. Supreme Court heard oral argument on Percoco v. U.S., No. 21-1158, a case in which Joseph Percoco, a former top political aide and campaign manager to former New York Governor Andrew Cuomo, “accepted $35,000, allegedly in exchange for helping a real estate developer secure a release of certain labor law duties from a state agency. Even though Percoco was a private citizen during this entire period, he was charged with depriving the public of his ‘honest services’ by accepting a ‘bribe.’ The theory was that Percoco’s past employment as an aide to Cuomo, and his ongoing relationship with the Governor, put him in a position of ‘dominance’ over state affairs.” Brief for Petitioner, at 4.  

When a public official accepts money to convince the government to do something, we call him a crook. But when a private citizen accepts money to convince the government to do something, we call him a lobbyist. That is not an arbitrary distinction. It reflects the fact that public officials hold a fiduciary obligation to act in the public’s best interests, while private citizens do not. That basic dichotomy lies at the foundation of our system of representative democracy: Citizens are constitutionally entitled to petition the government in service of their self-interests, while public officials are entrusted with making decisions in the public good. Yet in the decision below, the Second Circuit held that private citizens can owe a fiduciary duty to the public and thus be guilty of honest-services fraud for accepting “bribes” to influence government decisions.

Id.,at 1.

Percoco plows both new and familiar ground in the arguments over what constitutes “corruption” and an “appearance of corruption.” For more than forty years, the Supreme Court has struggled to define “corruption,” which underlies the only government interest sufficient to outweigh First Amendment protections for political speech. Briefs include citations to AFPF/TMLC v. Bonta, Citizens United, FEC v. McCutcheon, and others well-known to public policy practitioners.

D.C. Circuit Hears Former RNC Official’s Request to Obtain Confidential Government Documents About Alleged “Hack and Leak” Campaign: Sometimes foreign governments hire or use U.S. agents to help on lobbying and civil matters, and courts in D.C. are exploring new ground in determining whether these agents can protect their documents against civil claims. The questions raised may affect the Foreign Agents Registration Act and other issues affecting public policy advocacy by, inter alia, tax-exempt organizations.

For example, former Republican National Committee Deputy Finance Chair Elliott Broidy filed suit seeking to uncover details of how a large trove of his emails leaked, allegedly by agents of Qatar, to news outlets in 2018 as part of what he has claimed was an illegal “hack and smear” campaign. “The suit, reported first by POLITICO, could have implications for the future of political warfare at a time when it is increasingly waged through ‘hack-and-leak’ campaigns like the one that targeted Hillary Clinton’s 2016 presidential campaign. It is part of a campaign by the former Republican National Committee fundraiser — who resigned amid multiple controversies last April — to turn the tables after his reputation was damaged by a raft of embarrassing news reports.” Broidy’s claims are based on RICO, as are similar claims filed in a lawsuit by the Democratic National Committee against the 2016 Trump campaign and others.

In June, District Judge Dabney Friedrich ruled that Broidy was entitled to discovery from Qatar to support his claim. Friedrich relied, in part, on the fact that FARA required the documents to be produced to the Department of Justice upon request, so there was no discovery privilege or other protective expectation. Slip op., at 17-21.   

Now the federal government is weighing in on these claims as Freidrich’s decision is being appealed. Politico reports that:

A judge’s ruling allowing a close ally of former President Donald Trump to obtain documents about Qatar’s activities in the U.S. could endanger the safety of American diplomats abroad, a Justice Department attorney argued to a federal appeals court Friday. … “One critical concern to the United States is that the district court’s categorical error poses a serious threat to how the United States operates its embassies overseas, in terms of reciprocity,” DOJ lawyer Martin Totaro told a D.C. Circuit Court of Appeals panel hearing Qatar’s appeal seeking confidentiality for the records. Totaro said the U.S. “not infrequently” relies on contractors for embassy construction and security and the specter of foreigners getting access to those records in litigation overseas is alarming. … “There’s no way that a country could have an expectation of privacy when it turns over documents to FARA-registered agents,” Broidy attorney Daniel Benson said. “If the documents are open to inspection by the government at any time … how can they have an expectation of privacy in any of those documents?”

According to Politico’s report, both D.C. Circuit Chief Judge Sri Srinivasan and Judge Naomi Rao “signaled that they believed [Judge] Friedrich should instead have opted for a document-by-document approach to determine whether Qatar’s diplomatic mission had a confidentiality interest in specific communications.” But Broidy’s lawyer, Daniel Saunders, pointed out that “Qatar’s interest here is delay. We will have piecemeal prejudgment appeals that will be subject to tremendous delay and abuse. It’ll be five more years before anything happens in this case.”

Another “FARA-Related” Foreign Lobbying Case Fails On All Charges: Speaking of FARA, The Hill (channeling the New York Times) reports that Tom Barrack, billionaire head of REIT investment firm Colony Capital, was acquitted of all charges after a jury trial rejected the Department of Justice’s claims that he acted as an unpaid and unregistered foreign agent for the United Arab Emirates in violation of 18 U.S.C. § 951, which requires, as a practical matter, registration under FARA when someone acts “under the direction or control of a foreign government.” Lawfare has a good explanation of the difference between FARA and § 951. As we noted in September, this was a novel use of foreign lobbying laws for non-espionage, political activities, and threatened DoJ’s efforts to go after unpaid lobbying activities. In the wake of the acquittal, Politico repeated those points and added much detail, including quotes from Rob Kelner at Covington and other experts:

“There’s no question that this is a huge defeat for the Department of Justice,” said Rob Kelner, an attorney at Covington & Burling who advises clients on FARA. Paired with a judge’s recent dismissal of a DOJ attempt to force another prominent ally of former President Donald Trump to register as a foreign agent, Barrack’s acquittal “is going to force [DOJ] to go back to the drawing board and be dramatically more selective about the cases that they choose to prosecute,” Kelner predicted. … “These are flawed statutes, as I think juries are often recognizing, and I don’t think it’s gonna be viable for the government to continue its foreign influence fighting campaign using these statutes in the same way that it has over the last few years,” Kelner said.

Fifth Circuit Slows Discovery in States’ Suit Against Social Media Companies’ Alleged Censorship: Politico reports that the U.S. Court of Appeals for the Fifth Circuit has blocked depositions of three top federal officials ordered by the District Judge hearing a complaint filed by the states of Missouri and Louisiana “over alleged pressure on social-media companies to remove posts containing purported misinformation about the coronavirus, election security and other issues.” The panel’s per curiam opinion did not discuss the merits of the claims, but said that the lower court did not explore either the likelihood of success of the claim or the possibilities for obtaining the information without deposing the three government officials. “Because each of the officials is high ranking, ‘exceptional circumstances’ must exist before compelling testimony. … We do not find the district court’s order considered then rejected for each of the three officials whether the information sought could be obtained from alternative sources. …Further, with respect to Flaherty, it appears that the plaintiffs have not taken any written discovery at all. … Thus, before any of the depositions may go forward, the district court must analyze whether the information sought can be obtained through less intrusive, alternative means, such as further written discovery or depositions of lower-ranking officials.”

Will Hysteria Over Moore v. Harper Cause a “Constitutional Crisis?” And speaking of rushing things, Matthew Seligman, fellow at Stanford Law, has an op-ed in Politico of a different character on the pending Supreme Court’s arguments in Moore v. Harper, the “independent state legislature” case:

A rising tide of unfounded fearmongering on the left has mounted over a pending election law case at the Supreme Court. And it could blow up in liberals’ faces in 2024. … If the court rules as many expect, it could have dire consequences for state courts’ ability to ensure that federal elections are free and fair. But the baseless speculation that it would empower Trumpian state legislatures to execute a legal coup in 2024 by ignoring the results of the popular vote is worse than wrong. It’s dangerous. While sowing the seeds of panic about a conservative Supreme Court might make for good politics, it actually makes a constitutional crisis more likely in 2024. …

The battle for the minds of Americans who don’t know the details of arcane constitutional doctrine will be much harder to win if those who attempt to overturn the 2024 election can point to their political opponents’ uninformed hyperventilating from just two years prior and say: See, you already said we have this power. Those who believe in the rule of law have a grave responsibility to know what the law actually says. They should start living up to that responsibility.

Social Media Censorship May Backfire on Conservatives: And in further “unintended consequences” articles, the Atlantic has one by Conor Friedersdorf that says the push for social media censorship may backfire on conservatives like Florida Gov. Ron DeSantis: “Ron DeSantis’s Speech Policing Could Hurt the Right Too.” The article has an interesting exchange between U.S. District Judge Mark Walker and Florida’s private attorney, well-known litigator Chuck Cooper, including:

According to the transcript, the judge then asked Cooper whether, 15 years from now, after a change of government, “the State of Florida could prohibit the instruction on American exceptionalism because it alienates people of color … and other disadvantaged groups because it suggests that America doesn’t have a darker side that needs to be qualified.” “Yes,” Cooper said. He added that the state can dictate what will and won’t be taught in college classrooms 15 years from today as surely as today, even if its political profile changes completely.

Concise Reminder on the Relative Values of APA Vacatur vs. National Injunctions as Possible Remedies for Statutory Invalidity: Notre Dame Law Prof. Samuel Bray has a quick refresher (with dueling law review cites!) for those considering attacking or defending statutes on what to request as a remedy. “For those who have followed the debate over national injunctions, we now have a new entry in this genre: APA vacatur versus national injunction. … Despite its flourishing in the DC Circuit in recent decades, there is no traditional remedy of ‘vacatur.’ Scour the legal and equitable remedies and you won’t find it. Vacating is an action taken with respect to a judgment. It is not an action taken with respect to a legal norm like a statute or a rule.”

And lest you think this is a purely academic exercise, take a look at the 166-page transcript of the Supreme Court oral argument in United States v. Texas, No. 22-58 (Nov. 29, 2022), where the federal and state governments’ lawyers spent more than a hundred pages debating the terminology, scope and requirements of “APA vacatur” vs. “universal vacatur” vs. “national injunctions.” As in Prof. Bray’s article, there was discussion (and “laughter”) over whether there was a D.C. Circuit caucus on the Court, given that the Chief Justice pointed out that vacatur “with those of us who were on the D.C. Circuit, you know, five times before breakfast, that’s what you do in an APA case.” Trans., at 35.

The Affirmative Action Oral Arguments’ Most Important Line, Or Is CNN Hyping Roberts’ Rediscovered Impact? Once in a while, a single comment during oral argument turns the case in one direction or another. Recently, Chief Justice Roberts often participates in these game-changing exchanges. For example, in Citizens United v. FEC, Deputy Solicitor General Malcolm Stewart faced a series of questions about government using “electioneering communications” as a reason to ban books: Justices Alito (“The government’s position is that the First Amendment allows the banning of a book if it’s published by a corporation?”, P. 28), Kennedy (“suppose it were an advocacy organization that had a book”, id.) and Roberts (“you could ban it?”, P. 30).  After unsuccessfully attempting to narrow or evade the questions, Stewart finally said: “we could prohibit the publication of the book.” Id.

Could that happen in the Harvard admissions case? During oral arguments in the most recent affirmative action cases, the attorney for Harvard University was discussing “tips” which give special treatment to certain applicants for admission, and suggested that “oboe players” might qualify for a tip. Chief Justice Roberts then tersely said: “we didn’t fight a civil war over oboe players.” CNN has the exchange here. CNN also has a response to those who feel it’s no longer a Roberts Court.

NRSC and Other Republican Party Organizations Try Again, Using FEC v. Ted Cruz for Senate, to Find A Court That Will Declare That Limits on Party Coordinated Expenditures Violate the First Amendment: Citing, in part, the Supreme Court’s recent decision in FEC v Ted Cruz for Senate, 142 S. Ct. 1638 (2022), the NRSC, the NRCC and two Republican candidates from Ohio have filed suit against the FEC and some Commissioners to have several limits on party and coordinated expenditures declared violations of the First Amendment rights of the party organizations and candidates who would have received more funds without the limits. National Republican Senatorial Committee, et al. v. Fed. Election Comm’n, et al., No. 1:22-cv-00639, S.D. Ohio, filed Nov. 4, 2022. This would be an uphill battle, see, e.g., FEC v. Colo. Republican Fed. Campaign Comm., 533 U.S. 431, 465 (2001) (party’s coordinated expenditures can be limited because otherwise they could circumvent other campaign finance restrictions). But Colorado II was a 5-4 rejection of a facial constitutional challenge, a Justice Souter opinion with a Justice Thomas dissent. Now, the plaintiffs’ attorneys must believe that the changed composition of the Court suggests that the Court’s views have changed, citing FEC v. Cruz and McCutcheon v. FEC, 572 U.S. 185 (2014), the plurality opinion of which was reaffirmed by a 6-3 vote in Cruz, as fatally undercutting Colorado II.

It’s a bold swing for the fences by the Jones Day and Holtzman Vogel legal teams, and it will be interesting to see what the District Court does when faced with the question, if only to see which analyses of Cruz were correct: the dismissive “it’s only post-election contributions at stake” or the aggressive “this is a fundamental shift in favor of free expression and the consideration of indirect harm to those limited by campaign finance restrictions.” Unlike many such cases, there’s a pretty straightforward evidentiary record that will be made on these facts, and here one that can’t be easily explained by any intervening “Trump factor.” The addition of individual defendants J.D. Vance, who won his race, and Steve Chabot, who lost, but both arguably supported Trump or at least some of his positions, may make the difference if the court treats the case as an as-applied challenge in light of Colorado II, but a facial challenge on the broader interpretation of FEC v. Cruz is still an uphill battle.

Why AFPF/TMLC v. Bonta Was Not Enough: The U.S. Supreme Court’s 2021 decision in Americans for Prosperity Foundation/Thomas More Law Center v. Bonta, 594 U.S. __, 141 S. Ct. 2373 (July 1, 2021), protected donors from “dragnet” sweeps for information required to be kept confidential by law. But Tim Hoefer, head of the Empire Center in New York, uses recent actions by the Office of the New York Attorney General which ignore the ruling as the basis for an op-ed in the New York Daily News explaining that taxpayers are still at risk for illegal leaks (h/t IFS). “This breach of constitutional privacy should concern every single New Yorker — especially because it stems from the office of the state’s top legal official. On the official attorney general’s office website, the AG boasts that her office ‘is charged with the statutory and common law powers to protect,’ among others, charitable donors. Where does it leave us if the top legal officer can’t enforce or follow the law?”

Where Does the Federalist Society Go Now? Will Rogers, cowboy humorist and author, wrote: “I am not a member of any organized political party — I am a Democrat.” The same could be said of many political parties at times, and now the same is claimed about the Federalist Society. Politico, as often happens these days, leads the media charge:

One of the society’s most prolific members, South Texas College of Law professor Josh Blackman, noticed that of the dozens of panel discussions — on topics including cancel culture and “social activism and corporate leadership” — none addressed the elephant in the room: the [then-]pending challenge to abortion rights, and how that could reshape both society and the conservative legal movement. “You get your white whale and what do you do? What’s the next thing?” said Blackman in an interview a few weeks ago while on his way to Federalist Society talks at three Boston-area law schools. “The answer is: I don’t know.”

The more likely answer is “lots of things, most of them the same as before Dobbs,” just like similar organizations in similar situations. The Politico article admits that “After all, skepticism about the right to abortion was part of the impetus for the founding of the society, back in 1982.” (Emphasis added.) The article has a good, though substantially incomplete, outsider’s view of the Federalist Society’s history and philosophy, best illustrated, to Politico’s credit, by later quoting Prof. Blackman diluting the story’s abortion hook: “The Federalist Society is not an ‘it.’ You have thousands of people with different approaches. Are there political people? Absolutely there are. But most academics tend to be libertarians rather than social conservatives.”

And during its early days, the tables at the monthly meetings at a downtown Mongolian restaurant were pretty segregated into groups: government officials, academics, libertarians, conservatives. Those of us whose practices crossed many of these borders sometimes hopped tables. FedSoc was, and still is, primarily a networking opportunity for most of its participants.

STATES

New California Pay-to-Play Law Kicks In January 2023: Venable has a new reminder about California’s new P2P law prohibiting those seeking or holding government licenses, contracts or permits (and their affiliates, employees and agents) from contributing more than $250 to a  campaign for a local government official of the issuing agency. The new law expands the coverage and definitions of prior law.

FPPC Has No Bite, Says Los Angeles Times Editorial: California’s Fair Political Practices Commission is justly feared as a tenacious and aggressive speech regulator, willing to investigate and punish alleged campaign finance crimes on the flimsiest of rationales. But the FPPC has been too quiet lately, according to a Los Angeles Times editorial: “California political ethics watchdog is losing its bite.” The main complaint? “Lately, the commission has been taking so long to complete investigations that it’s losing power. It’s overloaded with old, unresolved cases and is not properly prioritizing those that need urgent attention. Elections come and go without answers. The watchdog has no bite.” FPPC staff say they are overworked, but the editorial dismisses mere administrative realities: “It shouldn’t be so hard for the commission and its staff to figure this out. The panel has existed since the 1970s, with effectiveness waxing and waning over time. Look back at what worked in the past and make it work again.” Meanwhile, Covington reports that the toothless FPPC has raised contribution and gift limits for 2023-24.

GENERAL

Hershey School Trust “Made” $1.8 Billion in 2022, Just By Holding On to Its Big Investment in Hershey Stock: With all the talk about billions passing from billionaires to charities and other tax-exempt organizations, it’s easy to overlook the good that’s come to some from simply holding on to their assets. The Milton Hershey School Trust, founded in 1909, is the biggest stockholder in the Hershey chocolate company, with $13 billion of stock, 28% of the total. Its wealth supports an orphanage and school for low-income children that have helped thousands of kids for over a century. Because the chocolate company has increased in value, as Investors’ Business Daily reports, so have the assets of the charity, up $1.8 billion in 2022.   

Nate Persily Puts His “Law of Democracy” Lectures on YouTube: Prof. Nate Persily has put his Stanford class on “U.S. Law of Democracy” up on YouTube. From the colonial past to Bush v. Gore, Persily explores the statutory, constitutional, and judicial history of the law of elections and voting rights divided into 19 lectures of from 9 to 55 minutes long (most are around 25 minutes). Should be accessible to nonlawyers, and overall, a broad introduction to many complicated subjects.

George Orwell’s Six Rules for Good Prose: Prof. David Post repeats the famous author’s good advice on how to improve your writing:

  1. Never use a metaphor, simile, or other figure of speech which you are used to seeing in print.
  2. Never use a long word where a short one will do.
  3. If it is possible to cut a word out, always cut it out.
  4. Never use the passive where you can use the active.
  5. Never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent.
  6. Break any of these rules sooner than say anything outright barbarous.
Public Policy Advocacy Highlights for October 2022

Public Policy Advocacy Highlights for October 2022

Characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not represent the views or positions of the Public Policy Legal Institute, the First Tuesday Lunch Group or their members and participants. Suggestions and corrections welcome.

D.C.

D.C. “P2P” Law Goes Into Effect November 9:  Covington has a quick reminder of the impending implementation of the Campaign Finance Reform Amendment Act of 2018 (“Pay to Play”), which bars certain contractors and their top officials from contributing to D.C. political campaigns. “This law does not apply to contracts sought, entered into, or executed prior to November 9, 2022.” Their earlier backgrounder is here.

FEC

FEC Commissioners Still Feuding Over Due Process In FEC Deliberations: One might have hoped that recent breakthroughs in disputes that have deadlocked the Federal Election Commission for years signaled smoother sailing for the agency. And, for a time, that was true, but now the dueling Statements of Reasons have returned, though in a much more rarified form (some of them anyway). Commissioner Ellen Weintraub issued a sixteen-page diatribe against her colleagues (some of them, anyway) for their recent “voting decisions.” A sample: “Several of my Commission colleagues even suggest that when I decline to flip my position to theirs and a dismissal motion fails, the matter is dismissed anyway because enforcement dismissals can just somehow kind of happen on their own.”

On the other hand, FEC Chair Allen Dickerson penned a “Policy Statement Regarding the Commission’s Use of Anonymous Sources Reported in the Press” which was actually much more interesting, from a legal point of view. Dickerson wrote “to address a longstanding practice (and a recent dispute) concerning the use of media reports to support [a Reason to Believe] finding [which begins an official investigation into alleged wrongdoing].”

We are not permitted to presume the truth of an anonymous source’s statements and set our enforcement process in motion simply because those statements were printed or reported by a media outlet. Nor may the Commission presume the credibility of such statements when reported by favored media sources based upon uncritical and ill-informed assumptions about those publications’ fact-checking processes. Such an approach is necessarily capricious. It is insufficiently rigorous to meet our statutory responsibility to independently determine RTB. And it gives short shrift to our unique status as an agency whose “sole purpose [is] the regulation of core constitutionally protected activity—‘the behavior of individuals and groups only insofar as they act, speak and associate for political purposes’”, quoting AFL-CIO v. FEC, 333 F.3d 168, 170 (D.C. Cir. 2003) (cleaned up).

Many of our colleagues in the FEC bar spend a considerable amount of time either preparing or defending against such media-based complaints. In fact, a few can predict with reasonable competence the amount of time and which complainants will file first whenever a media article appears with salacious allegations of campaign finance violations, no matter how far-fetched or poorly-reported the article may be or how technical or minor the violation. The FEC has long chosen not to rely solely on media reports to initiate enforcement, in large part because such reports are generally thought insufficient to support an FEC complaint that must be reviewed by a court. See, e.g., MUR 6279 (U.S. Dry Cleaning) (news article did not include fact that “reimbursement” for campaign contribution was actually unpaid earned wages).

Dickerson’s Policy Statement responds to a new argument offered in support of relying on anonymous media sources: the publisher of the article is a trustworthy major publisher or outlet like the New York Times or Wall Street Journal. Dickerson is not a fan of this approach: “We cannot, as a federal agency, take at face value every anonymous source cited by every publication—particularly in the constitutionally sensitive area we are charged with regulating. Efforts to distinguish among publications based upon our subjective sense of their ‘trustworthiness’ would fare no better, inevitably raising concerns that the Commission is acting capriciously. Neither the Commission as an institution nor its individual members have any special competence in evaluating the ‘trustworthiness’ of media sources.” Policy Statement, at 5. “Accordingly, in keeping with the Commission’s practice, I will not support RTB where the inculpatory information in the record before us consists solely of anonymously sourced press reports. Of course, reports that rely upon named sources and similarly reliable public information are another matter.”

Entirely coincidentally, the Washington Post published a Bloomberg analysis from Jonathan Bernstein of how this same problem plays out in political polling, itself supposedly based on numerical and reviewable data, but in recent practice, substantially unreliable. “I’m a big fan of forecasts made by meticulous outlets like FiveThirtyEight, but be very careful about mistaking mathematical expressions for real clarity. Polls can give us a general sense of where things stand, but they shouldn’t be interpreted as ironclad predictions. For that matter, expert analysis from places like Cook Political Report and Inside Elections is great, but also best used to give a general sense of where things stand rather than anything definitive.” See also note below (under General) on how pollsters themselves are trying new methodologies in recognition of their significant past errors.  

CREW Files FEC Complaint Against Florida Power & Light-related Organizations for Seeking to Minimize Public Reporting: CREW has filed a Complaint with the FEC (h/t IFS) alleging that “political consultants who appear to have controlled a network of nonprofit organizations pitched one or more clients on their ability to funnel money through nonprofits as part of a funding structure that could be used, among other things, to make federal campaign contributions while evading public reporting, in violation of these prohibitions on straw donations.”The CREW Complaint appears to be based on reporting from the Orlando Sentinel about “the so-called “ghost” candidate scandal in Florida, where the organization funded mailers promoting third party candidates who did little campaigning of their own and appear to have been encouraged to run in an effort to siphon votes from Democratic candidates in state Senate races.” See note above on how FEC Chair Allen Dickerson will no longer support investigations based on anonymous media reports because they do not provide sufficient protections under the Due Process Clause.

It’s unclear whether CREW intends to apply its form of analysis against highly-publicized Democratic efforts to intervene in Republican primaries in efforts to siphon votes from Republican centrist candidates to more extreme candidates. Separately, those efforts to encourage more extreme candidates may be backfiring, as predicted, as contests tighten.  

Going After Dara Lindenbaum For Voting Against Democratic Commissioners’ “Tricky Move:” The Daily Beast goes after new FEC Vice-Chair Dara Lindenbaum for closing off other Democratic Commissioners’ “tricky move:” “the new Democratic commissioner, Dara Lindenbaum, voted with the three Republicans to dismiss the cases and close the files, creating a majority and signaling the end of a years-long Democratic Hail Mary legal scheme to open a new path forward for deadlocked cases. … ‘When she was being vetted for this position, she stated that she would work on a bipartisan basis. This decision is probably an effort to achieve that goal,’” former Commissioner Ann Ravel said, although she thinks Lindenbaum will ultimately be disappointed by other Commissioners.  

IRS

Full D.C. Circuit Upholds Panel Opinion Finding Oversight Committee’s Rationale of Reviewing Presidential Audit System Requires Disclosure of Trump’s Tax Returns: As we noted a few months back, in August, a panel of the U.S. Court of Appeals for the D.C. Circuit upheld a subpoena for Donald Trump’s tax returns, citing the House Ways & Means Committee’s “legitimate legislative purpose” in reviewing the process for automatically auditing a President’s tax returns and discounting any review of possible improper Committee motives. Now the full D.C. Circuit has denied en banc review of that broad interpretation.

TIGTA Not Happy With 1023-EZ, Says IRS Doesn’t Deny Enough (or Even Fake) Applications: On October 3, the Treasury Inspector General for Tax Administration released a report on the Internal Revenue Service’s new Form 1023-EZ, a quick and easy (and inexpensive) application form for small charities. The 1023-EZ was a calculated experiment for the IRS that the level of risk of allowing small charities to apply for charitable status without extensive documentation was low enough that post-status reviews driven by computer analyses could maintain the integrity of the application system. The result of the TIGTA review? TIGTA is not happy with the 1023-EZ:

On July 1, 2014, the IRS released Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, a simplified electronic application for smaller organizations to request and obtain exemption from Federal income tax as an organization described in I.R.C. § 501(c)(3) tax-exempt status. Form 1023-EZ requires applicants to attest, rather than demonstrate, that they meet the requirements for I.R.C. § 501(c)(3) status. For example, Form 1023-EZ applicants are not required to submit their organizing documents to the IRS; they instead attest that they meet organizational requirements.

Based on our assessment of internal and external stakeholder opinions, States’ reporting requirements, comparison with the information required on the long application form, our testing of the application process, and limited examination compliance efforts, we determined that the information provided on the Form 1023-EZ is insufficient to make an informed determination about tax-exempt status and does not educate applicants about eligibility requirements for tax exemption. TIGTA obtained I.R.C. § 501(c)(3) status for four of five nonexistent organizations. The IRS correctly identified one of our fictitious applications as potentially ineligible and sent a request for additional documentation. Our undercover testing illustrates vulnerabilities in the IRS’s tax-exempt status determination process.

The IRS relies on a Form 1023-EZ examination strategy to detect noncompliance after organizations are approved; however, less than 1 percent of tax-exempt organizations are examined each year. In addition, online guidance for the Form 1023-EZ is inaccurate. The online web page used to apply for tax-exempt status includes educational links to assist Form 1023-EZ applicants. However, one of the educational links takes the applicant to a web page containing inaccurate information for applicants using the Form 1023-EZ.

TIGTA recommended that the IRS: 1) revise the activities description narrative on Form 1023-EZ, 2) assess the feasibility of requiring applicants to submit their organizing documents as an attachment to Form 1023-EZ, 3) notify applicants when additional time is needed to process their Form 1023-EZ applications, and 4) update online guidance with accurate information on the application process for Form 1023-EZ filers. IRS management agreed with the second and fourth recommendations. In addition, the IRS will consider notifying applicants when their submissions need additional time to process. However, the IRS believes that requiring detailed activity descriptions is unnecessary to make determination decisions.

In Light of Past Exploitation, Exemption for Tax-Exempt Organizations To Be Narrowly Interpreted in Corporate Transparency Act Rules Requiring Disclosure of Corporations’ Beneficial Owners Going Into Effect on January 1, 2024: (H/t Baker Hostetler, which has a nice explanation that doesn’t focus on tax-exempt organizations.) Enacted as part of the Anti-Money Laundering Act of 2020, the Corporate Transparency Act exempts domestic tax-exempt organizations and “entities that assist domestic tax-exempt entities” from reporting their beneficial ownership, but only if they report comparable information to other agencies. It is unclear if filing an Internal Revenue Service 1023 or 1024, or a Form 990 series return is sufficient to meet these regulations. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued implementing regulations on Sept. 29. You can find the portion covering tax-exempts on Pp. 59541-42; note the quotation of Sen. Sherrod Brown:

“The exemption provided to certain charitable and nonprofit entities also merits narrow construction and careful review in light of past evidence of wrongdoers misusing charities, trusts, foundations, and other nonprofit entities to launder funds and advance criminal and civil misconduct.” Treasury has also noted instances where criminals and terrorist groups have abused charitable organizations. FinCEN will monitor the application of these exemptions and assess the need for further guidance, notices, or FAQs accordingly.

The Act and regs appear to exempt tax-exempt entities (P. 59594) and those entities assisting them from coverage, which means that tax-exempt organizations will likely not have to disclose their beneficial ownership. The regulatory language is both optimistically broad (numbers of IRS grants and recognition of exemptions on P. 59567) and narrowly interpreted (quotation of Sen. Sherrod Brown saying exemption for TEs is to be narrowly interpreted and reiteration of history of abuse of charities and other TEs for terrorism and other bad acts on P. 59542).

So, for example, look at the comments section on P. 59553, which points out that some exempt organizations do not file for federal exemption. In its explanation of the new regulations, FinCEN said that it recognizes this; in other words, it appears to want to limit its coverage to only those TEs that get federal exemption. But this explanation is only for estimating the number of organizations required for calculating the cost of this regulation. It does not appear in the statutory or regulatory language of the substantive part of this regulation. So, the protection for these generally smaller non-federally-registered organizations depends entirely on the interpretation of the exclusion language under Section 508(a) (“An organization that is described in section 501(c) of the Internal Revenue Code of 1986 (Code) (determined without regard to section 508(a) of the Code) and exempt from tax under section 501(a) of the Code, …”). This language in various sections of the Code has quite a bit of gloss over the last half-century, under which it might be construed differently under a “narrow” or a broad interpretation.

Now They’re Going After Adams’ 2018 Campaign Lawyers’ Fees As Some Kind of Tax-Exempt Law Violation? In addition to serious charges being hurled in August by the Atlanta Journal-Constitution and the Georgia Ethics Commission against Nancy Abrams’ 2018 Georgia gubernatorial campaign and a followup lawsuit against the Georgia Ethics Commission by tax-exempt organizations involved, now Politico has taken up the chase, and, in typical D.C. insider style, is challenging the lawyers involved. “The voting rights organization founded by Stacey Abrams spent more than $25 million over two years on legal fees, mostly on a single case, with the largest amount going to the self-described boutique law firm of the candidate’s campaign chairwoman.” Lots of familiar names involved, of course, including Dara Lindenbaum, now Vice-Chair of the Federal Election Commission. The lead (and apparently well-paid) firm is a small Atlanta-based law firm, Lawrence & Bundy, whose newly-hired head of its political law group is D.C.-based Andrew Herman, a long-time participant in the First Tuesday Lunch Group. Not coincidentally, the firm just put out a brief, but well-written summary of Georgia’s “strict” campaign compliance rules.

Unfortunately, the Politico article has some seemingly-informed but probably wrong opinions by people who should know better but want to opine on sophisticated tax- and election-law questions. For example, Politico showed the always-quotable “expert” Craig Holman, from Public Citizen, some 990 form information with big legal fees listed, and reported that Holman said: “It is a very clear conflict of interest because with that kind of close link to the litigation and her friend that provides an opportunity where the friend gets particularly enriched from this litigation.” Is he suggesting some private benefit (a fundamental tax-exempt law violation)? Probably not, at least not on these facts, since the incidental benefit exception almost always comes into play when there is ongoing legitimate litigation. See, e.g., id., at 137. But perhaps that’s not what troubles Holman, who told Politico that the problem was “The outcome of that litigation can directly affect her campaign itself.” So, maybe more like an election-law reporting violation? But legal assistance has always been a special exception in federal election law. And avid readers of Vox PPLI (this publication) may recall that just last month we reported on the trouble that Washington State’s Public Disclosure Commission and Texas’ Ethics Commission got into trying to claim that pro bono legal assistance by tax-exempt organizations advancing their legitimate goals is actually a reportable political contribution. 

So, just like the Atlanta Journal-Constitution’s reporting on the Abrams’ campaign reporting issues, perhaps this is just more muddled tax-exempt law-related confusion. After all, litigation has long been considered a legitimate program expenditure for tax-exempt organizations.

Oh, and that lawsuit? U.S. District Judge Steve C. Jones handed down his decision on September 30. ““This is a voting rights case that resulted in wins and losses for all parties over the course of the litigation and culminated in what is believed to have been the longest voting rights bench trial in the history of the Northern District of Georgia,” which resulted in some settled claims, but in the end, the judge used 288 pages to rule against all three remaining claims being litigated. Or, about $87,000 per page in legal bills to the losing plaintiffs.  But the “law of charities” does not require litigation to be successful if it otherwise meets the usual criteria for tax exemption.  Id., at 9. Indeed, the whole purpose of charitable litigation is often to do things that the regular market for legal services would not adequately service: “the charitableness arose from the fact that representation is made available in cases of public importance where it would not usually be available from private sources.” Id., at 8.

ProPublica Again Uses Illegally-Leaked Tax Records to Attack Rich Conservative Donors: Like the Atlanta Journal-Constitution’s Abrams 2018 campaign story, ProPublica’s obtaining of illegally-leaked tax records continues to generate new stories. The latest is an attack on the biggest 2022 donor to Republican campaigns, the Uihlein family, funded by “that cardboard box in your home.” The story reads like a freshman journalism story, with weird and irrelevant asides like references to college activities that don’t quite connect with their subjects but are deemed acceptable enough to include as word-padding masquerading as evidence of … something bad. “In 1917, Dick’s grandfather was identified as a millionaire in a Chicago Tribune humor item about how the wealthy man had fired an unqualified chauffeur.” The shame is that the entire story is driven by the illegal tax leaks of private information about a private organization.

Likely this type of illegal leak will continue to be fodder for future stories. At least so long as the “public policy” doctrine is not enforced against the tax-exempt ProPublica or others who use the fruit of illegal leaks, even though the IRS opined in 1994:

Because benefit to the public is an underlying justification for charitable tax benefits, organizations which increase governmental burdens cannot justify tax exemption. Organizations engaged in illegal activity increase the governmental burden of law enforcement, while activities that are inconsistent with public policy obviously increase, rather than reduce, governmental costs and burdens, and are inconsistent with the basic requirement that exempt organizations serve a public purpose. The Supreme Court has said: “[I]t would be anomalous for the Executive, Legislative and Judicial Branches to reach conclusions that add up to a firm public policy …, and at the same time have the IRS blissfully ignore what all three branches of the Federal Government had declared.” Bob Jones University v. United States, 461 U.S. 574 (1983) at 598.

Id., at 3.

Protecting taxpayer privacy is one such “firm public policy:” “Congress has decided that, with respect to tax returns, confidentiality, not sunlight, is the proper aim. Tax returns contain highly personal information that many taxpayers might wish not to have broadcast. Moreover, without clear taxpayer understanding that the government takes the strongest precautions to keep tax information confidential, taxpayers’ confidence in the federal tax system might erode, with harmful consequences for a tax system that depends heavily on voluntary compliance.” Aronson v. I.R.S., 973 F.2d 962, 966 (1st Cir. 1992) (Breyer, C.J.). And as the Tax Court noted in Church of Scientology of California v. Commissioner, 83 T.C. 382, 506 (1984): “Were we to sustain petitioner’s exemption, we would in effect be sanctioning petitioner’s right to conspire to thwart the IRS at taxpayer’s expense. We think such paradoxes are best left to Gilbert and Sullivan.”

Separately, another billionaire has transferred his company to a trust, but in this case, under a higher power and under the media radar. USAToday reports that: “Hobby Lobby founder David Green announced through an Oct. 21 op-ed at Fox News that he’s giving up his company, and that he ‘chose God’ over wealth. Green credited his faith and higher power as the ‘true source’ of his success, noting that ‘God was the true owner of my business’ and felt that passing the company down to his children and grandchildren would’ve been the wrong move.”

Another Predictable Effect of the Illegally-Leaked Tax Records: A Predictable Debate About Arabella Advisors in Wall Street Journal: In the past, Arabella Advisors has generally been below the radar of most mainstream media attention; that may be changing. In recent Wall Street Journal editorials (“The left-wing counterpart to [Marble Freedom Trust, run by Leonard Leo] is Arabella Advisors, which funds among many other groups Demand Justice, which lobbies for Democrats to pack the Supreme Court.”), replies (“Arabella Advisors is a service provider that supports its nonprofit clients with operational services. We do not fund Demand Justice and we are not a donor, a partisan organization, a counterpart to Leonard Leo’s groups or a “dark money” organization.”), and letters to the editor ((including by the Capitol Research Center which wrote in its review of Arabella: “Why won’t Arabella proudly admit its success in building a multibillion-dollar empire that’s a pillar of the Democratic Party?”), the little-known, but influential and innovative organization is being forced into the news by a mainstream modern media giant. Exactly as predicted when confidential tax information about Marble Freedom Trust was illegally leaked, and Leo told the New York Times that it was “high time for the conservative movement to be among the ranks of George Soros, Hansjörg Wyss, Arabella Advisors and other left-wing philanthropists, going toe-to-toe in the fight to defend our constitution and its ideals.”

Arabella’s expressed position to the Wall Street Journal, well-grounded in tax-exempt and tax law, is that it “is a business dedicated to making philanthropic work more efficient, effective and equitable. We service hundreds of clients and provide outsourced operational support in the areas of nonprofit human resources, compliance and accounting. While it’s true that we work closely with a variety of nonprofit organizations, the reality is that we work for our clients, not the other way around.” Some for-profit support companies that help tax-exempt organizations are expanding rapidly, including, for example, Resilia, which provides advanced software and counseling and just raised $35 million in a second round of venture capital funding. The IRS has long recognized the ability of for-profit organizations to support tax-exempt organizations in areas even involving the sorts of strategic and tactical decisions decried by Arabella’s critics. For example, in a 1986 IRS CPE chapter, the IRS noted that “for-profit and nonprofit entities co-exist sometimes uneasily. The unrelated business income tax is one of the means by which the federal government attempts to provide a level playing field for the two without disturbing their unique features and traditional roles.”  

The IRS As Subcontractor: And speaking of vendors supporting the lessening of government burdens, remember all the stories that the IRS has insufficient resources to handle telephone calls, and so needed an infusion of $80 billion? It turns out, as Politico reported, that the IRS does offer boiler-room services to other federal agencies during certain emergencies, like the recent Hurricane Ian in Florida: “Because the agency boasts the largest call center in the federal government, it lends hundreds or thousands of customer service representatives to FEMA when hurricanes, wildfires, floods and other natural disasters hit. It’s a situation some find ironic given the IRS’s well-publicized struggles answering phone inquiries about taxes.”

Tax on University Endowments Doesn’t Pay Off: What? A new tax doesn’t produce the revenues predicted? Shocking!! Why just look at Internal Revenue Code § 4958, Intermediate Sanctions, which was passed only as a “revenue raiser” that would bring in more than $60 a year; that was a smashing suc… oh, … never mind. The Wall Street Journal reports that a tax on university endowments, passed in 2017 under the Tax Cuts and Jobs Act, not only isn’t bringing in the money, it’s hitting smaller institutions much harder than larger ones: “Internal Revenue Service figures show the actual impact of such a tax has so far been minimal: Last year, 33 schools paid a total of just $68 million, far short of the schools’ dire projections and the government’s official estimate, according to data recently published by the agency.” 

COURTS

Will Percoco v. United States Set Up A Tighter Definition of “Corruption” By Lobbyists? Buried by the avalanche of media stories on other Supreme Court decisions, on June 30, the Court granted cert in Percoco v. United States, No. 21-1158. The Question Presented in Percoco asks: “Does a private citizen who holds no elected office or government employment, but has informal political or other influence over governmental decisionmaking, owe a fiduciary duty to the general public such that he can be convicted of honest-services fraud?” In other words, is it corruption for a former top aide to former New York Governor Andrew Cuomo to become a lobbyist for hire based on his political past and potential future? Media lawyer Michael Linhorst, writing in The New Republic, (h/t ELB) has a much darker version: “It asks the court to decide whether it can be a crime for a public official to temporarily leave the government and, while still using his government office and phone and telling people he will be back in the government soon, accept money in exchange for pressing officials to do things.”

Unfortunately, Linhorst does not engage the arguments posed in briefs filed in the case against his position. For example, consider the effect of the government’s position on campaign donors; as Percoco’s opening brief on the merits points out:

campaign donors “may garner ‘influence over or access to’ elected officials or political parties” through their contributions. Id. at 208. That too is protected speech. See id. With Margiotta in hand, however, what would stop a prosecutor eager to “get money out of politics” from asking a jury to conclude that the donors have breached fiduciary duties to the public? After all, many Americans believe wealthy donors “dominate[] and control[] … governmental business” and are “relied on” by those “working in the government.” JA.511. Margiotta thus exposes “to prosecution not only conduct that has long been thought to be well within the law but also conduct that in a very real sense is unavoidable so long as election campaigns are financed by private contributions.” McCormick v. United States, 500 U.S. 257, 272 (1991).

This is the same type of difficult question repeatedly played out in the wake of Citizens United and McCutcheon v. FEC: how to balance what “might” be seen by one person as “corruption” but by another as an appropriate part of the democratic process protected by the First Amendment. This case is yet another of the “appearance of corruption” questions that periodically bubble up to the Court, as in FEC v. Cruz for Senate, that aren’t recognized as such, and which pose the more difficult First Amendment problems for the Court because of their reliance on public opinions about “money in politics” rather than the reality of the situation at hand. Here the issue is lobbying instead of campaign finance, but in First Amendment terms, it’s still the same question. Linhorst argues only one side of the debate as though it were simple, but it’s much more complicated than he portrays.

Ninth Circuit Ignores AFPF/TMLC v. Bonta Decision and Permits Congressional Committee to Obtain Arizona Republican Chair’s Cell Phone: When a Circuit Court Judge’s First Amendment dissent is essentially adopted 6-3 by the U.S. Supreme Court, you might expect that judge’s reasoning in another case presenting the same issue and relying on an interpretation of that Supreme Court decision to be considered by her panel colleagues. Judge Sandra Ikuta’s dissent in Americans for Prosperity Foundation v. Becerra, 919 F.3d 1177 (9th Cir. 2019), presaged the Supreme Court’s decision in AFPF/TMLC v. Bonta, 141 S.Ct. 2373 (2021). But a recent Ninth Circuit panel majority ignored a similar Ikuta dissent in a First Amendment compelled speech case. In Ward v. Thompson, No. 22-16473, (9th Cir., Oct. 22, 2022), the panel opinion said that the House January 6 Committee could subpoena the cell phone call records for Arizona Republican Party Chair Kelli Ward; the panel cited AFPF/TMLC for the proposition that they could use ‘exacting scrutiny” to decide the issue, slip op., at 3 (somewhat under-reading AFPF/TMLC, since the majority Justices actually split evenly between exacting and strict scrutiny), and then doubled down by requiring a prima facie showing that the compelled disclosure would result in harassment or injury. Slip op., at 3-4. That showing may have been required before AFPF/TMLC, but it is no longer.

Ikuta, in a biting and lengthy dissent, pointed out that what the highest Court actually said was that there is a presumption that compelled disclosure itself is a justiciable injury, and that was critical to the AFPF/TMLC decision. Her dissent begins:

“First Amendment freedoms need breathing space to survive.” Americans for Prosperity Found. v. Bonta (APF), [sic] 141 S. Ct. 2373, 2389 (2021) (citation and quotation marks omitted). Therefore, “[w]hen it comes to the freedom of association, the protections of the First Amendment are triggered not only by actual restrictions on an individual’s ability to join with others to further shared goals,” but also by the mere “risk of a chilling effect on association.” Id. Here, a House Select Committee (the Committee) is attempting to obtain the names of the Arizona Republican Party (the Party) members who spoke to Kelli Ward, the Party’s chair, during a period of contentious political upheaval. But the Committee has not provided any explanation as to why the phone records are relevant to its investigation. Because such government inquiries “discourage citizens from exercising rights protected by the Constitution,” id. at 2384 (citation and quotation marks omitted), the Wards’ challenge to the Committee’s subpoena raises at least “serious questions going to the merits” of their First Amendment claim, All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). The majority’s view to the contrary is in conflict with the Supreme Court’s recent landmark ruling, Americans for Prosperity Foundation, 141 S. Ct. at 2389. By denying the Wards’ motion for an injunction pending appeal, the majority likely prevents them from raising serious questions regarding Kelli Ward’s constitutional rights, because once T-Mobile produces her phone records, the Wards’ appeal may be moot. Therefore, I dissent.

Ward v. Thompson, slip op. at 8-9.

About That Supreme Court Amicus Brief Filed by the Onion …: As the Washington Post and many other mainstream media reported, the Onion is a parody media outlet with a long history, and it filed a …. different amicus brief in the pending Supreme Court consideration of a Petition for Cert over a Facebook parody page about a local police department. The Institute for Justice is supporting the amateur comic who posted the parody page. The amicus brief is really well-written, and plays into an eternal debate on how to address complex issues before the Court (or any court really):

The Sixth Circuit’s decision in this case would condition the First Amendment’s protection for parody upon a requirement that parodists explicitly say, up-front, that their work is nothing more than an elaborate fiction. But that would strip parody of the very thing that makes it function. That leverage of form—the mimicry of a particular idiom in order to heighten dissonance etween form and content—is what generates parody’s rhetorical power. Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 580-81 (1994) (“Parody needs to mimic an original to make its point.”). If parody did not deliver that advantage, then no one would use it. Everyone would simply draft straight, logical, uninspiring legal briefs instead. …Importantly, parody provides functionality and value to a writer or a social commentator that might not be possible by, say, simply stating a critique outright and avoiding all the confusion of readers mistaking it for the real deal. One of parody’s most powerful capacities is rhetorical: It gives people the ability to mimic the voice of a serious authority—whether that’s the dry news-speak of the Associated Press or the legalese of a court’s majority opinion—and thereby kneecap the authority from within.  

Ninth Circuit Says the First Amendment Does Not Make Door Knockers Independent Contractors: A Ninth Circuit panel rejected an Institute for Free Speech First Amendment challenge to California’s classification of political workers as employees rather than independent contractors. “A regulation of speech is facially content based under the First Amendment if it ‘target[s] speech based on its communicative content’—that is, if it ‘applies to particular speech because of the topic discussed or the idea or message expressed.’ City of Austin v. Reagan Nat’l Advert. of Austin, LLC, 142 S. Ct. 1464, 1471 (2022) (alteration in original) (quoting Reed, 576 U.S. at 163). However, ‘restrictions on protected expression are distinct from restrictions on economic activity or, more generally, on nonexpressive conduct.’ Sorrell v. IMS Health Inc., 564 U.S. 552, 567 (2011). Therefore, ‘the First Amendment does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech.’ Id.” Slip op., at 13. The Eighth Circuit similarly recently held that the religious beliefs behind giving bologna sandwiches to the unhoused do not shield the sandwich-giving against the City of St. Louis’s food laws.

RNC Sues Google Over “Intentional” Spam Filtering of Its Fundraising Mailings: The Republican National Committee, upset that Google would not work with it to resolve a months-long problem in which Gmail spam filters “intentionally” blocked nearly all Republican fundraising emails while passing Democratic emails through to recipients, has now filed suit arguing, in a very prolix Complaint, that Google’s actions are discriminatory and violate California’s fraud laws. Ars Technica has a lengthy analysis (h/t IFS); Ars commenters (usually a moderately erudite techie class) are blaming the victim (e.g., “If it is unsolicited it is spam. It’s really that simple, people.”). And, dear commenters, no, it’s not that simple.

New Article On Government Employees’ Speech Recasts Complex Doctrine As Application of More Familiar Nonpublic Fora Analyses: Government employees’ speech has been a contentious area of First Amendment law for decades. See, e.g., Arizonans for Official English v. Arizona, 520 U.S. 43 (1996) (challenge to state’s declaration of English as an official language was moot when plaintiff government employee left her job).  Notre Dame Law Professor Randy Kozel has written an article in the Journal of Free Speech Law (established by Eugene Volokh and others) trying to integrate and simplify the complicated area of speech by government employees. Excerpts:

Over the past six decades, the U.S. Supreme Court has developed a customized doctrinal framework for resolving disputes over the expressive liberty of government employees. In doing so, it has sought to accommodate two competing interests. On the one hand, the government needs some discretion to manage its workforce. On the other hand, the American constitutional tradition forbids the government from using the allure of professional opportunities to suppress disfavored perspectives. The difficulty is reconciling these considerations when they conflict, as they so often do. …The constitutional rules covering managerial responses to employee speech bear little resemblance to the general principles of expressive liberty that apply in other contexts. … Treating employee speech as exceptional may also contribute to a broader constitutional phenomenon: the acceptance of a fragmentary First Amendment whose various rules of expressive liberty can seem remote from, and even discordant with, one another. My hope in this Article is to recharacterize the law of employee speech as a particularized application of a general First Amendment device: the nonpublic forum.

More on Alito And First Amendment: The Washington Examiner discusses Justice Samuel Alito’s various positions on First Amendment cases, with comments from law professors Brad Smith (founder of the Institute for Free Speech) and Rick Hasen (founder of the Election Law Blog). “Supreme Court Justice Samuel Alito on [October 25] defended his position in the 2010 Citizens United v. Federal Election Commission case, arguing it was essential to preserve the free speech rights of media outlets and other corporations despite becoming a ‘lightning rod’ for attacks against campaign finance rules.”

Chicago Sun-Times on Justice Sotomayor: Chicago Sun-Times reports on Justice Sonia Sotomayor’s speech at Roosevelt University: “‘Laws can make it hard for us to see the legal system as fair,’ Sotomayor said. ‘What’s fair is really a judgment of how we as a society are going to help each other. And how to share resources that are limited in as fair a way as we can. Those choices aren’t mine to make as a judge, but those are made in the laws that are passed.’”

ABA Panel on AFPF/TMLC v. Bonta, One Year Later: An ABA panel taped a one-hour discussion of the “surprising” effect of the decision after one year, but you have to pay to hear it. “While ostensibly a straightforward case about nonprofits and the privacy interests of their donors, Bonta sent shockwaves around the campaign finance and election law community. In deciding the case, the Court established a new, higher standard of review for compelled disclosure laws than had previously existed, making campaign finance disclosures vulnerable to legal challenges.”  

CONGRESS

Next Ways & Means Chair, If Republicans Take Control, Will Hold Oversight Hearings on the IRS: Fox News reports that all three top candidates to become Chair of the House Ways & Means Committee have pledged to support oversight hearings for the IRS if Republicans take control of the House in November’s mid-term elections. For example, one of the top candidates, current ranking member on the House Budget Committee Jason Smith said: “Over the years, they’ve seen an IRS that has targeted conservatives. They’ve seen an IRS that has allowed taxpayer information to be leaked for political gain.”

Which Senator Said This? “Congress, the executive branch, and the American people deserve to know who’s influencing research and public policy in our country.” Senator Sheldon Whitehouse (D-Conspiracies R Us)? No. Sen. Elizabeth Warren? No.  Politico reported (misleadingly) that long-time conservative Senator Chuck Grassley did (he was referring to foreign money). Politico’s premise is: “For all the joy that conservative pols have taken at Brookings’ latest turn in the barrel, conversations with people around the industry reveal an irony: Any potential new wave of government-mandated disclosure rules, especially those that go beyond foreign money, would actually represent a bigger cultural change at right-wing organizations, some of which historically have tended to see donations as a form of free speech.”

DEPARTMENT OF JUSTICE

FBI Continues to Spark Concerns About Targeting Conservatives and Ignoring Similar Allegations Against Others: More bad news for the FBI: Rasmussen Research found that 46% of the country now view the FBI “unfavorably.” An op-ed by Kevin Brock, former deputy director of the FBI’s Counterterrorism Center in the Hill notes: “almost half the country now lacks trust in the FBI over concerns it is doing the bidding of one political party over another. That is a disaster for the bureau — unprecedented in magnitude — and could translate into an existential threat to one of the nation’s most important agencies as political fault lines shift. … When trust diminishes, the FBI loses access to cooperation it used to have. When cooperation is lost, fewer crimes are solved. Many agents are understandably upset with current trends. To be clear, the FBI does not have to cooperate with politically fraught DOJ agendas, no matter which party is in power — and it shouldn’t.” 

The Washington Times has an article about how the FBI is targeting pro-life activists: “In the last 10 days, a man who murdered an 18-year-old boy for being a ‘Republican extremist’ was initially charged with vehicular homicide and then released free on bond. Another who shot an 84-year-old pro-life volunteer in the back has not been charged with a crime. Yet a man accused of pushing a Planned Parenthood escort who verbally assaulted his son had 20 FBI agents arrest him in his home —in front of his seven young children. … The FBI’s raid on Mr. Houck’s home was no accident — it was a clear intimidation tactic, a warning to all pro-life advocates to stand down and shut up.” Probably a lot more going on here than is being reported.

FBI Reports “No Credible Threats” to Upcoming Election Domestically, But Continued Foreign Agitation: According to USA Today, on the other hand, the FBI recently reported “no credible threats” to the midterm elections: “Federal authorities have identified no credible threats to U.S. election systems despite persistent efforts by foreign adversaries, including Russia, to amplify disinformation about voter fraud and election integrity, senior FBI officials said Monday.” CNN highlighted the foreign angle instead: “Russian and Chinese government-affiliated operatives and organizations are promoting misinformation about the integrity of American elections that originated in the US ahead of November’s midterms, senior FBI officials said Monday.” In a related note, Reuters reports (h/t Stewart Baker) the International Telecommunications Union, the global tech standards agency of the United Nations, voted overwhelmingly to elect an American as its head: “A U.S. candidate decisively beat her Russian rival to become the next head of the main U.N. technology agency on Thursday in an election seen as a test of how many countries are still siding with Moscow after its invasion of Ukraine.”

STATES

California Disclosure Clarity Act Requires New, Larger Donor Disclosures on Ads: Concerned about people having to “run to the kitchen for their reading glasses,” California legislators have passed and Governor Gavin Newsom signed SB 1360, the Disclosure Clarity Act, requiring new and larger disclosures of top donors to organizations that run political advertisements. (h/t IFS)

California Attorney General Proposes Regulations Dealing with Reporting the Disposal of Charitable Assets: Draft and supporting documents are here. (H/t Robert Tigner.) For example, the proposed regulations define “substantially all” reportable assets as being 75% of the assets the charity held during the past six months. Comments are due DECEMBER 6, 2022.

Washington State Judge Finds Facebook/Meta “Intentionally” Violated State Political Advertising Laws 822 Times, Subject to Treble Damages: But, of course, “intentionally” means something else in the wonderful, wacky world of Washington State political regulation. Remember the Grocery Manufacturer’s Association $9 million fine for “intentionally” violating the Washington laws? Part of that settlement was GMA dropping its First Amendment lawsuit against the Washington law. Now, King County (i.e., Seattle) Superior Court Judge Douglass North granted the Washington Attorney General’s Motion for Summary Judgment against Meta because, in 2018, it had agreed to abide by Washington’s very strict “Political Advertising” rules (which can be enforced by anyone), said it would stop running political ads in Washington (as did Google), and then didn’t provide “all of the required information” to three citizens’ requests for detailed information about who placed and paid for ads which continued to run. Meta redacted, for example, address information more specific than “Washington state” in some of its responses. What made Meta’s violations “intentional” was: Meta’s “pattern of knowing and repeated violations,” its “extensive experience with campaign finance law” and “substantial resources … for compliance with such requirements”, and its “lack of good faith and failure to acknowledge and take responsibility for its violations.” Id., § 7, P. 6. Judge North did not apply a penalty of $10,000 per ad violation the Attorney General’s proposed Order requested, which could have been trebled, but said that the AG could file a separate proposed penalty. The Seattle Times has comments: “That opens Meta up to a possible fine of nearly $25 million. Meta, one of the world’s highest-valued companies, reported revenue of nearly $29 billion in the second quarter of this year, and a quarterly profit of $6.69 billion.”

David Brock Offers Democratic “Pink Slime” Journalism as “Independent” Local News Outlets: In keeping with breathless media “exclusives,” Axios reports that (the Washington Post and the Independent echo) longtime purveyor of Democratic “oppo” talking points David Brock is now peddling ostensible “local” news as “The American Independent,” which actually are Democratic talking points. In the commercial world, this is called “brand extension,” but in politics, it’s old news. The Washington Post editorializes against what it calls “pink slime” journalism (apparently a different “pink slime” from what got ABC News in trouble a while back), and a recent Post article on how a radio station specializes in “right-wing misinformation” seems to be a different issue to the Post because the station was responding to specific requests for more local news from listeners.

And This Is How Concerns About Election Fraud Are Stoked: Two early October media reports on the same subject had vastly different takes and implications: First, on Oct. 3, the New York Times used a “secret conference” of “election deniers” to illustrate how a “conspiracy theory” started circulating that Konnech Corporation of Michigan, a “tiny” manufacturer of software used by election authorities including Los Angeles County, stole personal information about poll workers and illegally stored it in China. The “secret conference” was held last August in Arizona. Then, the next day, the Los Angeles County District Attorney’s Office issued a media release that confirmed that the head of an election worker software company, with a $3 million contract with LA County, has been arrested as part of an ongoing investigation of theft of “the personal identifying information of election workers.” The LADA noted that “in this case, the alleged conduct had no impact on the tabulation of votes and did not alter election results.” The arrest was apparently because Konnech illegally stored the personal information in China.

GENERAL

Judge Laurence Silberman Dartmouth Constitution Day Speech on “Free Speech:” Judge Silberman died October 2; two weeks earlier he gave a Constitution Day speech at Dartmouth, his alma mater.

the First Amendment’s guarantee of free speech is not just a legal doctrine.  It represents the most fundamental value in American democracy.  A national commitment to uninhibited political speech is a crucial aspect of our country’s culture.  It is the penumbra around the First Amendment, which, by itself, only prohibits government control of speech.  Unless all American institutions are committed to free political speech, I fear the strain on the First Amendment’s guarantees will become unbearable.

Those seeking to suppress free speech sometimes think that provocative, even extreme and obnoxious, political speech is dangerously divisive.  It should be suppressed.  I think that is profoundly wrong.  I think it is the very opposite.  Toleration of all versions of political speech is the crucial unifying factor in our country.

The history of the First Amendment is fascinating.  The phrase “freedom of speech” first appeared in the Anglo-American tradition in the English Bill of Rights written in 1689.

It only protected the expression of members of Parliament.  This was so because, in the English tradition, Parliament, not the general population, was the source of sovereignty.  Our Founders extended that right to all citizens, because here the People rule as sovereign.

… Indeed, now some political speech is attacked as if it were blasphemy drawn from the colonial period when witches were burned at the stake.  Threats against political speakers are not simply levied by unscrupulous politicians, they come also from young people influenced by academics—ironically the prime targets of the McCarthy era.  Certain controversial subjects are placed out of bounds.

Are Big Banks “Chasing Away Religious Organizations?” Former Senator Sam Brownback thinks so (h/t Steve Hoersting). “However, three weeks after opening our nonprofit business checking account, we received a letter notifying us that Chase had decided to “end their relationship” with the National Committee for Religious Freedom and that our account would be closed. The bank actually closed our account before we received the letter. … What shocked and surprised me the most was when someone from Chase eventually reached out to our executive director and informed him that it would be willing to reconsider doing business with the NCRF if we would provide our donor list, a list of political candidates we intended to support, and a full explanation of the criteria by which we would endorse and support those candidates.”

Polling Firms Try to Learn From Recent Mistakes: Speaking of the Wall Street Journal, now it reports what we all know: public opinion polling produces lousy information on many political contests, far different from final election results. They still don’t know why, but are trying to figure out the many problems and implement new methodologies before the midterms this year.

What If the SEC Decides to Regulate Corporations’ Political and Tax-Exempt Organization Spending? Covington reports that the CPA-Zicklin Index of Corporate Political Disclosure and Accountability, a joint project of advocacy group Center for Political Accountability and the University of Pennsylvania’s Wharton School of Business (Donald Trump was a graduate), has now expanded to cover smaller corporations, which will likely increase advocacy groups’ pressure on smaller businesses to disclose their support of tax-exempt and political organizations and expand the need for sophisticated tax and political counsel for these smaller businesses and tax-exempt organizations.

Buried within a media release from the Wharton School’s Center for Governance and Business Ethics is this interesting introductory remark to the 2022 edition of the CPA-Zicklin Index of Corporate Political Disclosure and Accountability: “‘[C]orporations continue to pour billions of dollars into political coffers around the country, with little transparency, and thus little accountability, for the political spending decisions made in the twelve years since the Supreme Court’s ruling in Citizen’s United opened the spigot on corporate political spending,’ former Securities and Exchange Commission Acting Chair and Commissioner Allison Herren Lee wrote in the Index foreword. ‘The trend lines in the CPA-Zicklin Index over the past decade show some laudable increases in transparency, but the analyses also show that non-transparency around corporate influence in the political process remains a significant issue.’” Lee, who has advocated previously in favor of regulating corporations’ political and tax-exempt organizations contributions, was appointed by President Trump to a Democratic seat on the SEC, left in March 2022, and is now a research fellow at New York University Law School. The SEC is currently prohibited from regulating corporations’ political contributions or contributions to tax-exempt organizations or associations, but only by an appropriations rider (See, e.g., Consolidated Appropriations Act, 2021, H.R. 133, Pub. Law No. 116-260, Sec. 631 (“None of the funds made available by this Act shall be used by the Securities and Exchange Commission to finalize, issue, or implement any rule, regulation, or order regarding the disclosure of political contributions, contributions to tax exempt organizations, or dues paid to trade associations.”).).

And the Daily Caller reported that the Cato Institute has released documents indicating that a federal advisory group that assists the federal Maritime Administration recommended charging all past and present members of two libertarian think tanks with treason. No, really (or at least according to Cato). “Almost at the end of the 41‐​page document is what appears to be a set of recommendations related to a March 2020 meeting of the Marine Transportation System National Advisory Committee (MTSNAC)’s International Shipping Subcommittee. Among them: ‘Charge all past and present members of the Cato and Mercatus Institutes with treason.’”

NPR Projects That About 11% of Senate Election Spending This Cycle Will Be From Outside Organizations: They don’t actually say it that way. Quoting Open Secrets and a media advertising firm, NPR reports that “nearly $1 billion so far” has been spent to support GOP Senate candidates, out of a projected $9 billion in expenditures. “The concentrated ad spending is reflective of just how narrow the fight for control of the Senate is. … So the campaigns and outside groups are pouring in tens, if not hundreds, of millions of dollars in each state to sway the ever-shrinking percentage of persuadable voters.”

Former Head of Davidson College Explains Why We Should “All Care” About Precision In Discussing Free Speech: The Hill (h/t IFS) has an op-ed by Carol Quillen, the former head of Davidson College, discussing ways to speak productively about free speech questions: “Thoughtful people will come to varied points of view. … precise language matters, especially in times of division and polarization, when finding even a sliver of common ground is challenging. Precision makes conversations less fraught and less overdetermined. It also makes it harder to dress up a partisan stance — protecting speech we like while condemning speech we don’t — as a principled one.”

Public Policy Advocacy Highlights for September 2022

Public Policy Advocacy Highlights for September 2022

Characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not represent the views or positions of the Public Policy Legal Institute, the First Tuesday Lunch Group or their members and participants. Suggestions and corrections welcome.

Why We Protect Public Policy Advocacy Kerfuffles: St. Louis Post-Dispatch columnist Tony Messenger writes: “Toni Chritton Johnson heard a kerfuffle in front of the Howell County Courthouse and decided to take a look.”

There were several phones taking video that day, Sept. 7, in front of the courthouse. A group of First Amendment advocates and citizen journalists had gathered on the public sidewalk to protest an order signed by Presiding Circuit Court Judge Steven Privette. The order, issued by Privette in May, prohibited the recording of anybody entering or exiting the courthouse, even from public property, like the sidewalk or street. … Howell County[, Missouri] has had a proliferation of citizen journalists live-streaming interactions with law enforcement and other officials — not much different than what happens in the St. Louis region. Those folks didn’t take too kindly to being told they couldn’t stand on a public sidewalk taking video outside a public building. The First Amendment advocates were told by Howell County sheriff’s deputies that if they didn’t stop recording, they’d be hauled before Privette on contempt charges. “You can’t do that,” said Randle Daily, who posts videos on YouTube under the name Show Me State News. “If we’re on a public sidewalk, that’s our First Amendment right.” …

[I]n a rural area like Howell County, residents often feel helpless when they confront a judge, sheriff or other powerful local official. To take on such battles, they often turn to outside sources for help, like attorneys or journalists from out of town. In the courtroom, [Judge] Privette told the folks hauled into court that his powers extended beyond the courthouse steps. “You could use a telescope and take (photos or videos) from a mile away and you would be in contempt of this court’s order,” the judge said …

After leaving the courtroom, they went to talk to “the law” — Sheriff Brent Campbell — and suggested he shouldn’t let his deputies be used by Privette in an unconstitutional ploy. They created a community and social media stink. … Campbell, apparently, agreed. On Sept. 16, the sheriff issued a statement on Facebook saying that he was taking over courthouse security. That day, Privette rescinded his order. …

The citizen protesters stood their ground and won. “We got change done,” Daily says. “We the people helped make the change. It was voices, man. It was voices.”

FEC

More Unanimity by FEC, This Time In Rejecting Claims That Zuckerberg/Chan Grants to Election Administrators Violated FECA: In Matters Under Review 7854 and 7946, the Federal Election Commission unanimously rejected several complaints that grants from Facebook founder Mark Zuckerberg and his wife Priscilla Chan had violated federal campaign finance rules by giving hundreds of millions of dollars to support election administrators in state and local governments because there was no Reason to Believe that the Federal Election Campaign Act had been violated. The FEC closed the files on those MURs. The Washington Post has background and comment.

Is This The First Tag-Team Statement of Reasons from Commissioners Dickerson and Lindenbaum? Both FEC Chair Allen Dickerson and Vice-Chair Dara Lindenbaum are experienced campaign finance and constitutional practitioners, and the Statement of Reasons issued by the two FEC officials in MUR 7774 (Atone for Congress) reads like it was written by experienced practitioners:

Disclosing an acronym instead of a payee’s full name is, technically, a reporting violation; however, neither the F&LA nor the FGCR cite a prior matter in which the Commission has pursued an enforcement matter on such a theory. Instead, they discuss matters where the Commission pursued a payee reporting violation because a committee used an intermediary as a conduit with the intent to conceal the true provider of services.  Implicit in such enforcement theories is that the payee in the disclosure report is incorrect. … By contrast, here, the Committee disclosed the correct payee, albeit in a way that provided little information to the public. … While we are sympathetic that the disclosure of the acronym WCPA, as opposed to the entity’s full name, prevented the public from identifying the company, we believe this type of reporting violation is more appropriately handled outside of the enforcement context.

“Show Me The Money!” Lest one think that the usual descriptions of FEC Commissioners as “Republican” or “Democratic” actually mean that Commissioners represent solely those partisan interests, MUR 7904 (Hansjorg Wyss, et al.) is a pleasant reminder that the designation is often only a description of which party nominated that Commissioner. The complaint in this MUR alleged that truly massive Democratic organizations which do engage in some election-related activities, including the Sixteen Thirty Fund, a 501(c)(4) tax-exempt organization whose 2020 Form 990 reported more than $410 million in spending that year, and the New Venture Fund, a 501(c)(3) charity whose 2020 Form 990 showed revenue of $965 million, should have been designated as political committees. Both organizations are part of the progressive Arabella Advisors network, often compared to the much smaller libertarian Koch network. But, as the Statement from the “Republican” Commissioners showed, of that more than $1 billion, much less than 20% was spent on political activities (including in years between 2015 and 2019, when the highest annual percentage was 8%), and the test for showing that an organization is a political committee is basically “show me the money” (at least the money spent on political activities as a percentage of all spending).

The FEC’s Office of General Counsel wanted to press ahead with investigations based on the activities of STF’s and NVF’s grantees and media coverage, but the Republican Commissioners said no:

Too often, the Office of the General Counsel’s approach to enforcement resembles the infamous command of the Queen of Hearts: “Sentence first – Verdict afterwards.” … This practice undermines the most fundamental precepts of due process and fair notice by threatening to enforce the Act under legal theories of which the public has no notice. That we cannot abide.

FEC Dismisses Case Involving Trump Fundraising Because of Impending Statute of Limitations: In MURs 7581 and 7614 (Yang/Gong), the FEC dismissed the complaint and closed the file despite the complaint’s serious allegations of illegal conduit contributions and illegal foreign national activity by various Republican organizations, including the Trump Victory Fund PAC. A Statement of Reasons by three Commissioners (Dickerson, Cooksey and Trainor) said, inter alia:

A combination of factors, however, including our inability to build a record in time to avoid an impending statute of limitations, led us to conclude that attempting enforcement in these Matters would not be a prudent use of agency resources. … Given the press of the statute of limitations, no time remained in which the Commission could find reason-to-believe (“RTB”) and conduct an investigation. Accordingly, OGC suggested that we engage in pre-probable cause conciliation with Ms. Gong. In other words, OGC’s enforcement strategy relied upon Ms. Gong conceding a violation despite insufficient information to find probable cause, which the Commission is required to do before filing suit, and no prospect of supplementing the record.

Three Commissioners Say “The Time Has Come” For the FEC to Consider A “Structural Defect” in Its Disclosing Requests for Additional Information: Three Commissioners (Dickerson, Cooksey and Trainor) issued a Statement of Reasons in MUR 7879, with a Footnote 8, raising a legal question about whether making Requests For Additional Information (a discovery-like process of, quite simply, requesting more information from a respondent) fall within FECA’s provision for confidentiality during an enforcement process: “the structural defect in the Commission’s processes of making RFAI’s public when they are issued … leaves entities vulnerable to overzealous would-be complainants scouring the FEC’s website for RFAI’s to weaponize against their political opponents.”  

FEC OGC Files Opposite View From Last Month’s Assertion on Ending A Case and Closing Files: Remember last month when the FEC’s Office of General Counsel filed an Opposition to Summary Judgment in the FOIA portion of the long-running and complicated 45 Committee case arguing that a decision to end a case requires four votes? The FEC often has numerous cases going simultaneously, so perhaps it was just a regular “one hand doesn’t know what the other is doing” situation, or perhaps something has changed (or this analysis could just be looking too hard) when OGC filed a Reply Memo in another long-running complaint by Free Speech for People saying what looks like the opposite.

[P]laintiffs also argue that because the motion to dismiss the Trump Campaign failed to garner a majority of four votes, the Commissioners that voted in favor of moving forward with enforcement are actually the controlling group, even if there were only three of them. This is not the law. Long-standing Circuit precedent makes clear that the controlling group in a challenge to an FEC dismissal like this one is the group of Commissioners that declined to move forward with enforcement against the respondent named in the administrative complaint. That standard is properly applied to the group that voted to dismiss the Trump Campaign as an exercise of prosecutorial discretion. And under New Models and Commission on Hope, that forecloses judicial review, as recognized in recent decisions of this Court, including one that rejected the same argument plaintiffs make here that a majority of Commissioner votes is required to exercise prosecutorial discretion.

Id., at 2 (cleaned up).

Google Begins New Spam Filtering Test Program Approved by the FEC Last Month: Axios reports (h/t IFS) that the Gmail “pilot program” approved last month in AO 2022-14 has already begun ramping up.

“We expect to begin the pilot with a small number of campaigns from both parties and will test whether these changes improve the user experience, and provide more certainty for senders during this election period,” José Castañeda, a Google spokesperson, told Axios. “We will continue to listen and respond to feedback as the pilot progresses.” “During the pilot, users will be in control through a more prominent unsubscribe button,” he said. … Once political campaigns are enrolled in Google’s pilot program, they will no longer be affected by Gmail’s standard forms of spam detection, though Gmail will keep scanning messages for phishing and malware. Users will see a banner on the first email from participants in the program, asking if they want to keep seeing the messages, unsubscribe or report as spam.

Candidate Who Starred in a Movie by Clint Eastwood Did Not Use Tax-Exempt Organization to Violate Federal Campaign Finance Rules: A Eugene, Oregon, television station has an extensive story about how the Federal Election Commission dismissed a complaint filed against a congressional candidate accused of misusing a tax-exempt organization he started. Alex “Skarlatos was a member of the Oregon National Guard when he gained a measure of fame in 2015, helping to disrupt an attack on a train bound for Paris by a heavily armed man who was a follower of the Islamic State group. Hailed as a hero, he [Skarlatos, not the “heavily-armed man”] appeared on ‘Dancing with the Stars,’ visited the White House and was granted dual French citizenship. It also led to a role starring as himself in the Clint Eastwood movie ‘15:17 to Paris.’” But after an AP story questioned his use of campaign funds, End Citizens United filed an FEC complaint. The FEC found that he had not “improperly funded his campaign with money from a nonprofit he also controlled.”

IRS

IRS “Inadvertently” Published 990-T Data for 120,000 Taxpayers: The Wall Street Journal and National Review both covered a Sept. 2 letter in which the Department of the Treasury notified Congress, as required by the Federal Information Security Modernization Act, that a “major incident” had affected TEOS (the IRS’s Tax Exempt Online Search that replaced Pub. 78). The “incident” was a leak of machine-readable data from 990-T returns from exempt organizations, government entities, and retirement accounts, which is used to calculate taxable unrelated business income. The IRS routinely publishes this information for 501(c)(3)s, but the leak was of data from non-charitable organizations, apparently mainly individuals. Treasury noted:

The agency removed the errant files from IRS.gov, and the IRS will replace them with updated files in next few weeks. The IRS also will be working with groups that routinely use the files to update remove the erroneous files and replace them with the correct versions as they become available. The IRS will contact all impacted filers in the coming weeks. … However, the data did not include Social Security numbers, individual income information, detailed financial account data, or other sensitive information that could impact a taxpayer’s credit. In some instances, the data did include individual names or business contact information.

TIGTA Agrees to Review Again How Many IRS Employees Are Not Paying Their Own Taxes: The Treasury Inspector General for Tax Administration has agreed to Sen. Joni Ernst’s request that the Internal Revenue Service “conduct updated reviews of the IRS’s employment practices to determine how many agency employees are not currently fully compliant on their tax debts and how many rehires on the IRS payroll were previously separated for performance issues, including failure to fully pay their taxes, and what actions the agency is taking, if any, to remedy these compliance issues.” No deadline was mentioned. Ernst told the Iowa Capitol Dispatch that: “If even IRS agents can’t figure out how to properly file their taxes, she said, simplifying the tax code should take priority over enforcement.”

Kim Strassel Notes That c3s’ Ability to Register Voters Without Engaging in Political Activity Lends Itself to Abuse: We’ve all heard this issue raised many times. But Wall Street Journal columnist Kim Strassel calls out The New York Times for an article in which Democratic organizations complained that donors are not giving enough to “democracy-related programs” this election cycle: “confirming a longstanding scheme by which foundations and private donors funneling tax-exempt dollars into ‘charities’ that microtarget and register Democractic voters.”

CPEs Live On! New Technical Guide on c6s Cites CPEs Back to 1979: There has always been little IRS material dealing with 501(c)(6) organizations, which include trade and professional organizations, associations, and civic groups. Probably why 90% of the citations in the brand-new IRS Pub. 5710 (9-2022), Technical Guide 6: IRC 501(c)(6) Business Leagues are TwenCen, and almost all of the 21st Century cites are to ABA Retirement Fund v. U.S., 759 F.3d 718 (7th Cir. 2014), aff’g 2013-1 U.S. Dist. LEXIS 60086 (N.D. Ill. 2013). Now the IRS Technical Guide project combines the old Audit Technical Guides with other outside materials to produce the same result  as the old Continuing Professional Education training guides in a newer format (using mostly the same language, including the usual “this is not citable precedent” boilerplate). The newest TG is the 42-page Pub. 5710 (9-2022), TG 6 IRC 501(c)(6) Business Leagues. Pub. 5710 adds specific audit material and is organized differently. Even nicer, it is publicly available and doesn’t require filing a FOIA request to see the IRS training material, which has replaced the annual publication of the CPEs for the last twenty years or so.

You can find a nice list of the older c6-related CPEs on pp. 41-42 of Pub. 5710, and then quickly search the still-active (but unpublicized) CPE list. Pub. 5710 does warn, however: “Note: Although the precedent cited in these CPE texts was current at the time they were published, some of the references may now be outdated.” In the c6 context, however, the risk may be lower.

New IRS EO Issue Update on Private Foundation Self-Dealing: For a look at an actual IRS Exempt Organizations Issue Update with more current material than Pub. 5710, check out the new and delightfully-named Private Foundations: Incidental and Tenuous Exception to Self-Dealing Under Treas. Reg. 53.4941(d)-2(f)(2). Who actually names a regulation “Incidental and Tenuous”? Isn’t that kind of waving a red cape before a reviewing judge who may be up-to-date on the latest Supreme Court decisions imposing the “turn square corners” doctrine on, inter alia, the IRS? But see CCA_2020111814425340; of course, this being tax, that may just be the Service on autopilot, rather than considering “New Thinking About Jurisdictional Time Periods in the Tax Code,” 73 The Tax Lawyer 1 (2019). Possibly why the “incidental and tenuous benefits doctrine” arises from 1983. Anyway, the “new thinking” IRS explanation relaxes the “highest fiduciary standard” for self-dealing: “However, the fact that a disqualified person receives an incidental or tenuous benefit from the use by a foundation of its income or assets will not, by itself, make such use an act of self-dealing. Thus, the public recognition a person may receive, arising from the charitable activities of a private foundation to which such person is a substantial contributor, does not by itself result in an act of self-dealing since generally the benefit is incidental and tenuous.”

Patagonia Founder Gives Billions in Stock to His Own 501(c)(4), Hailed for Philanthropy: In contrast to the New York Times’ coverage of last month’s Marble Freedom Trust “dark money” kerfuffle, when the newspaper covered clothing billionaire Yvon Choinard (h/t John Pomeranz) doing the almost the same thing, with stock in a company worth about twice as much, but retaining control, it praised him for his “philanthropy.” As the Post article noted: “Chouinard has also supported groups that work directly on elections, such as the League of Conservation Voters”, though the FEC records show recent direct contributions appear very small. At least Forbes noted that this wasn’t the first time a billionaire did this: “While this approach may seem novel in the United States, it has been deployed for decades in Scandinavia. It’s demonstrated that billionaires can give away their companies and continue to generate considerable profits, while also contributing substantially to social and environmental causes.”  

Sec’y Yellen Wants U.S. Tax Filing to Become More Like Sweden’s: Speaking of Scandinavian best practices, the Hill reports from a speech to IRS employees that Treasury Secretary Janet Yellen has high praise for Swedish tax filing by text: “I recently came across a statistic that it takes an average American 13 hours to file a tax return. Compare that with Sweden. There, some taxpayers can file simply by replying to a text message. We can and must do better.”

Judicial Watch Releases More Lois Lerner and Holly Paz Deposition Transcripts, Says They “Knew Most Tea Party Organizations Were Legally Entitled to Tax-Exempt Status:” In 2017, Judge Michael Barrett sealed the depositions of Lois Lerner, head of the IRS Exempt Organizations Division during the “BOLO/TAG” Tea Party-targeting scandal that now bears her name, and her deputy Holly Paz, citing credible evidence of threats to the two officials. The depositions are gradually becoming unsealed, and Judicial Watch is releasing them in batches as it receives them, along with extensive commentary.

The September 8 release includes specific testimony about whether Lerner and Paz “knew” that the targeted organizations were qualified for IRS approval or recognition of status:

The unsealed Lerner and Paz deposition transcripts reveal through sworn testimony the bureaucratic tangle created by the Obama IRS to single out, delay and deny the processing of conservative, especially Tea Party non-profit groups’ applications for tax-exempt status and to disclose their donors’ names. At the same time, Paz admits under questioning that she knew from the beginning there was not sufficient legal basis to deny most of the targeted groups tax exempt status:

Q: [T]he organizations had filed applications representing …what they were organized for and what they have done and also their intended activities, and you thought that … for the majority of those applications that that would warrant the recognition of exemption?

***

The Witness [Paz]: My recollection is that at the time, my thinking was that the majority of the (c)(4) applications, while they may have indicated some amount of political activity, that we would not have enough basis to make a determination that that would be their primary activity and deny them exempt status.

Q: And, therefore, they would receive an approval or recognition of exemption?

A: Correct.

What It’s Really Like to Be One of Those Gun-toting IRS Agents: Robert Mazur, a former gold badge holder as an IRS special agent criminal investigator, describes his history in the Tampa Bay Times:

In 1971, the criminal division of the IRS went after the biggest drug traffickers, organized crime members, corrupt politicians and corporate tax cheats in the world. Our cases were front-page stories that set a bar for the American public. Those headlines created an atmosphere of voluntary compliance nationwide. Americans recognized that, if the IRS can get those mega-criminals, they can get anyone. We didn’t harass the average American, but our work sent the message that it made more sense to pay your fair share than to run the risk of prosecution. In 1971, the IRS criminal investigation division had a staff of 2,500 agents that dealt with the corrupt portion of a nation that at the time had 400,000 millionaires.*

It’s unfortunate that the last sentence can be read as there being 400,000 millionaires in “the corrupt portion of a nation.” But, in Mazur’s description, there’s a big portion of “go after the rich for being bad people.” The very next sentence after the quote above does it again: “Today, more than 50 years later, the IRS criminal investigation division has 2,200 special agents who battle with the dishonest portion of the more than 20 million millionaires who now actively evade income taxes.” Are there really 20 million millionaires who “evade,” not just avoid, income taxes?

COURTS

 Judge Dismisses Trump’s 2016 Election Suit Against Hilary Clinton: Southern District of Florida Judge Donald Middlebrooks dismissed Donald Trump’s massive Complaint against 2016 opponent Hilary Clinton and 30 other defendants on September 8 because Trump “is seeking to flaunt a two-hundred-page political manifesto outlining his grievances against those that have opposed him, and this Court is not the appropriate forum.” Middlebrooks’ opinion savaged the Complaint and those who drafted it, for offenses such as making up fictitious defendants, misstating citations and sources, and many others. “It is not simply that I find the

Amended Complaint ‘inadequate in any respect’; it is inadequate in nearly every respect.” Id., at 63. Middlebrooks dismissed the case against the individual defendants with prejudice under Fed.R.Civ.Pro 12(b)(3) and against the U.S. without prejudice under 12(b)(1).

DC DC Rejects End Citizens United Cases Against Sen. Rick Scott and A Supporting PAC: U.S. District Judge Richard Leon of the District of Columbia rejected two complaints from End Citizens United (h/t Jason Torchinsky) that Sen. Rick Scott and the New Republican PAC violated coordination and other campaign finance rules. The FEC had dismissed the complaint about Scott failing to register as a candidate on prosecutorial discretion with a reasonable explanation, and Leon noted that such dismissals remove jurisdiction from the court. Slip op., 11-14. The second complaint, about coordinated activity, was rejected because ECU had failed to provide evidence to support its claims. Slip op., 14-17.

Fifth Circuit Rejects Texas Law Forbidding Large Social Media Companies From Discriminating on the Basis of Viewpoint, Setting Up Possible Supreme Court Review: “Today we reject the idea that corporations have a freewheeling First Amendment right to censor what people say.” So says a Fifth Circuit panel opinion by Judge Andrew Oldham in NetChoice v. Paxton, No. 21-51178 (5th Cir. Sept. 16, 2022), slip op. at 2.

We begin with the First Amendment overbreadth doctrine. It (1) offers a facial constitutional remedy that protects speech. It (2) does not apply here because if Section 7 chills anything, it chills censorship. And the Platforms’ parade of whataboutisms proves their real complaint is a purely speculative one about how HB 20 will be enforced. The Platforms are therefore not entitled to pre-enforcement facial relief against Section 7.

Slip op., at 8. Cue much gnashing of teeth.

In May, the 11th Circuit ruled the other way, in another case brought by NetChoice against Florida’s similar social media content-related law. Florida filed a Petition for Certiorari in the Supreme Court of the U.S. on Sept. 21, citing the conflict with the Fifth Circuit decision and a quote from Packingham v. North  Carolina, 137 S. Ct. 1730, 1737 (2017): “Social  media  has  become  ‘the  modern  public square.’” The Petition also says: “Under the Eleventh Circuit’s reasoning, social-media behemoths have a First Amendment right to cut any person out of the modern town square, for any reason, even when they do not follow their own rules or otherwise act in bad faith. That ruling strips States of their historic power to protect their citizens’ access to information, implicating questions of nationwide importance.” Id., at 3.

Would You Expect to See the Major Questions Doctrine in D.C. Bar Ethics Adjudications? Well, now it’s in the D.C. Bar’s complaint against former U.S. Dept. of Justice Acting Assistant Attorney General for the Civil Division Jeffrey Clark for writing a letter falsely asserting that DoJ had “‘identified significant concerns that may have impacted the outcome of the election in multiple States, including the State of Georgia.’ This statement was false. The Department was aware of no allegations of election fraud in Georgia that would have affected the results of the presidential election.” Office of Disciplinary Counsel, D.C. Bar, Specification of Charges, at 4, ¶ 15. The Specification of Charges also similarly cited several specific statements about Georgia’s 2020 election conduct, which the ODC asserted were false. Id., at 4-5, ¶¶ 16-19. The letter with the false statements was never sent. Id., at 8, ¶ 30. ODC said that Clark’s conduct violated D.C. RPC “8.4(a) and (c), in that Respondent attempted to engage in conduct involving dishonesty, by sending the Proof of Concept letter containing false statements” to the President and other federal officials and “8.4(a) and (d), in that Respondent attempted to engage in conduct that would seriously interfere with the administration of justice.” Id., at 9, ¶ 31.

Clark filed a response to the ODC charges with the D.C. Court of Appeals Board on Professional Responsibility, listing 54 defenses to the charges. At least 24 of the defenses challenge in some fashion the Board’s jurisdiction over a federal official engaged in the conduct of his office. In addition, Defense 18 raises the Major Questions Doctrine: “The D.C. Bar lacks jurisdiction over the conduct of the Respondent referred to in the Charges because 28 U.S.C. § 530B does not clearly delegate to the Department of Justice the power to confer on the District of Columbia authority to regulate lawyers serving in the Department of Justice, especially not those interacting with the President to deliberate and decide on questions that reach the President for resolution. See, e.g., West Virginia v. EPA, 142 S. Ct. 2587 (2022); Hickman v. Train, 426 U.S. 167 (1976).”

Law Prof. Jonathan Adler noted the Major Questions Doctrine claim (though pointing out that he has “some major questions about this claim”): “As a consequence of the West Virginia [v. EPA] decision, litigants challenging governmental actions have found major questions lurking in all manner of regulatory disputes. In some cases, invocation of the major questions doctrine makes sense (see, e.g., concerns about the SEC climate disclosure rule or the student-debt forgiveness plan). In other cases, not so much.”

Is A Political Question Lurking in Moore v. Harper, the Independent Legislature Theory Case? As mentioned last month, there is a possible “Political Question Doctrine” bar to court jurisdiction in the challenge pending in the U.S. Supreme Court in Moore v. Harper, No. 21-1271, the North Carolina redistricting case involving the power of state courts to review their legislatures’ redistricting (sometimes called the independent state legislature doctrine). The political question inherent in judicial review of redistricting decisions was discussed at some length in Rucho v. Common Cause, 588 U.S. —, 139 S. Ct. 2484, 2498-99, 2506-07 (2019). Now law Prof. Derek Muller has a nice analysis in ELB that there’s a PQD issue lurking in the case, and notes that “one concept has received essentially zero examination: the political question doctrine.” Also in ELB, Prof. Rick Pildes has a discussion of what the Independent State Legislature Doctrine does NOT do.

Is the Supreme Court “Barricading Precedent?” Stanford Law Prof. Jeffrey Fisher opines in Politico: “it is critical to understand that the aggressive conservative supermajority has also embraced a new, quieter way of annulling other long-established legal rules — a tactic I call barricading precedent. Any assessment of the court’s fidelity to past judicial decisions should include a tally not just of decisions the court overrules but also those it walls off from any future extensions.” Fisher cites Justice Kavanaugh’s statement in an oral argument as a summary of his new “barricading precedent” theory: “Accept it, but don’t extend it.”

But some might point out that historically the Court has always decided cases on as narrow a basis as it felt appropriate, and Fisher doesn’t actually engage with that concept, other than to argue: “A core feature of the rule of law is that judicial decisions must be worth more than their resolutions of specific controversies in the past.” These two visions would seem compatible, not in conflict; just depends on issue definition and tailoring.

CONGRESS

Disclose Act Again Fails to Pass; Doctoral Student Suggests Tax Reform Act of 1969 As a Model Promoting Both Passage and Transparency: Yet again, the “Disclose Act,” a proposed restructuring and removal of donor protections, failed to pass Congress. In the wake of its failure, Bo Blew, “a PhD candidate in history at Purdue University, his research explores the influence of private foundations in modern American political history,” writes an op-ed in the Washington Post (h/t IFS) promoting “a solution” to “the dark money problem” based on the lengthy process of creating modern private foundation regulation in the Tax Reform Act of 1969. “In 1969, President Richard M. Nixon signed legislation that set rules to bring transparency and order to private giving in the name of safeguarding the public interest. The bill was more than a half-century in the making and showed that legislators in both parties could come together to ensure that the tax code encouraged charity without allowing for chicanery that starved the public of critical tax dollars. … At the core of the debate that produced the 1969 bill was the question of the proper level of influence for the wealthy in public affairs. By working together, presidents and legislators from both parties, along with federal agencies, created institutions with greater oversight that garnered greater public acceptance.”

DNC Resolution Opposing “Dark Money” Passes, but DNC Resolution Opposing “Dark Money” in Democratic Primaries Fails: Not to keep quoting Sen. Sheldon Whitehouse’s unrelenting opposition to organizations which do not disclose their donors, but his rationale has always been: “Yes, progressive groups receive anonymous donations, because Democrats have to play by the rules Republicans set, or else we unilaterally disarm. We came late to the game, but now we’re there. The difference is this: Democrats want to clean up this god-awful dark-money mess; Republicans created it and protect it.” But the Democratic National Committee just considered two resolutions condemning “this god-awful dark-money mess”, but only passed the ”toothless” one supporting Sen. Whitehouse’s proposed legislation and rejected the one calling for the DNC to “establish procedures for possible disciplinary action” for the use of “dark money” in Democratic primaries. Progressives supporting both resolutions were “outraged.” The Washington Post’s Katrina vanden Heuvel wrote: “The real worry about partial campaign finance reforms — that no candidate or party can ‘unilaterally disarm’ — doesn’t apply here. The DNC would be reforming contests among competing Democrats — and any dark-money ban would surely help curb the interference of Republican interests in those elections.”  Meanwhile, the Wall Street Journal notes that at least some Democratic organizations have already spent $40 million promoting Trump-related candidates in Republican primaries; the Washington Post says the total’s more like $53 million.

Senate Finance Report Urges Revitalized IRS Whistleblower Program, Which Has Withered in Recent Years: The Hill reports that the IRS Whistleblower program has an enviable 6-to-1 return on rewards paid to those who report tax cheats, targets the wealthiest taxpayers (which is a good thing in some circles), is favored by Members from both parties and may help reduce the “tax gap” in money owed, but not paid, to the government each year. Yet the Whistleblower program has been starved of funds for several years, and: “‘It is extremely frustrating for whistleblowers who come forward because it’s a process that takes on average about eight years from start to finish — if the IRS even collects money at the end of the day,’ Jeffrey Neiman, an attorney and a former prosecutor with the Department of Justice’s tax fraud division, said in an interview.” It is unclear whether the recent influx of money to the IRS will spin off some additional funds to ramp up this program.

“My Youth Is A Strength;” Gen Z In Congress? CNN points out that this is the first election year that members of Generation Z are eligible to serve in Congress, and profiles Karoline Leavitt, 24, who won her primary for New Hampshire’s 1st Congressional District. As she claimed her party’s nomination, Leavitt told the crowd: “As many of you know, my youth is one of the many reasons that I felt compelled to run for Congress in the first place. Because it’s my generation of Americans – your children, your grandchildren – who are not being served well by the current state of our education system, our media and our entire culture.”

DEPARTMENT OF JUSTICE

Can Suggestions for Campaign Speeches Violate FARA Registration Rules? Politico notes that the Department of Justice is prosecuting businessman Tom Barrack for not registering under FARA: “Prosecutors plan to argue that from 2016 to 2018, Barrack and Grimes sought to influence public opinion by suggesting Trump’s campaign singled out the UAE for praise in a campaign speech on energy issues. Barrack, meanwhile, would talk the UAE up as an important ally in media interviews, incorporating feedback and talking points from UAE officials and at times providing real-time updates.” FARA practitioners warn the prosecution is a particularly aggressive approach to FARA enforcement: “‘The difference here is that the case is being used in a non-espionage context, which is a relatively rare way to use this particular law,’ Robert Kelner, an attorney at Covington & Burling who advises clients on the Foreign Agents Registration Act, said ahead of the trial. … ‘I think it will affect the posture of the department and going after unpaid influence activities,” said Matthew Sanderson, a partner at Caplin & Drysdale who co-chairs the American Bar Association’s FARA Task Force.”

How Far Will DoJ Investigation of Jan. 6 Participants Reach? CNN is running a series of stories about new subpoenas issued to up to 30 former Trump campaign aides and officials seeking documents and testimony about the “Stop The Steal” effort surrounding congressional certification of the Electoral College results. “The flurry of subpoenas in recent days came just ahead of a 60-day quiet period that the DOJ generally seeks to avoid the appearance of influencing elections with politically sensitive investigations.” The investigation touches on tax-exempt organizations that may have been involved in conducting or funding allegedly illegal activities and their lawyers. “While those around Trump have brushed off the congressional investigation into the riot on January 6 as political, there is a palpable shift in demeanor when it comes to the Department of Justice probe, as allies and advisers recognize the significance of being looped into a federal investigation, according to multiple people in Trump’s orbit.”

Is the FBI, Using Facebook, Engaging in the Same Type of “Dragnet” the Supreme Court Found Unconstitutional in AFPF/TMLC v. Bonta? In addition to the State Attorneys General lawsuit against Facebook and other social media companies (see below), New York Post columnist Miranda Devine reports that the FBI is now coordinating with Facebook over algorithmic screening of vast numbers of private messages and posts, apparently in hopes of sifting out a few Americans who might be engaging in January 6-type acts of civic violence:

Under the FBI collaboration operation, somebody at Facebook red-flagged these supposedly subversive private messages over the past 19 months and transmitted them in redacted form to the domestic terrorism operational unit at FBI headquarters in Washington, DC, without a subpoena. … These private messages then have been farmed out as “leads” to FBI field offices around the country, which subsequently requested subpoenas from the partner US Attorney’s Office in their district to officially obtain the private conversations that Facebook already had shown them.

Before you shrug off the story as hyperbole from a right-wing media outlet (albeit one that proved correct about the authenticity of Hunter Biden’s laptop), consider the reaction that goes far beyond the NY Post’s column from Stewart Baker, well-known national security lawyer and expert at Steptoe (note that Baker doesn’t necessarily agree that these allegations are true):

The Post article offers some compelling details. My favorite is the agents’ complaint that the project produced a very large volume of data about people who weren’t really threats, thus wasting investigative resources. If you want to inspire FBI agents to discover their inner civil libertarian and blow the whistle on a surveillance program, nothing does the job better than giving them lots of intrusive but unproductive make-work. But as the story is written, it has one big problem. The conduct it describes would violate the law in a way that neither the FBI nor Facebook would likely be comfortable doing. Federal law mostly prohibits electronic service providers from voluntarily supplying customer data to the government.

Then consider what the U.S. Supreme Court said in AFPF/TMLC v. Bonta, 594 U.S. __ (2021): “The upshot is that California casts a dragnet for sensitive donor information from tens of thousands of charities each year, even though that information will become relevant in only a small number of cases involving filed complaints. … Our cases have said that disclosure requirements can chill association ‘[e]ven if there [is] no disclosure to the general public.’” As mentioned last month in connection with the FEC’s recent Advisory Opinion 2022-14 (Google), the legal issue occurs when the Federal government can do indirectly through coordination with private persons what it cannot do directly. “It is also axiomatic that a state may not induce, encourage or promote private persons to accomplish what it is constitutionally forbidden to accomplish. … But good intentions as to one valid objective do not serve to negate the State’s involvement in violation of a constitutional duty. ‘The existence of a permissible purpose cannot sustain an action that has an impermissible effect.’” Norwood v. Harrison, 413 U.S. 455, 465, 467 (1973) (cleaned up).

As Baker points out,

And, as with content moderation, no one would be surprised if mass Silicon Valley criminal referrals were biased against conservatives. (That bias would be built in if Justice is using an existing grand jury tied to January 6 to generate the subpoenas.) So, assuming I’m right, it’s fair to ask how any such effort was designed, how aggressively conservative complaints were turned into emergency threats to life and limb, who’s overseeing the process to prevent overbroad seizures of legitimate speech, and whether the same thing could be done to Black Lives Matter, environmental groups, animal rights campaigners, and any other movement whose more extreme followers have sometimes lapsed into violence.

FBI Persecution of “Whistleblower” Who Allegedly Tried to Protect Citizens’ First Amendment Rights: And, again according to the New York Post, the FBI has in-house protest issues as well. New York Post columnist Miranda Devine writes on “FBI Hero” whistleblower who refused to participate in investigations he felt violated the First Amendment. Sen. Chuck Grassley apparently believes this whistleblower and dozens of others: “In a letter to FBI Director Christopher Wray on Aug. 11, Grassley alleged that a committee of FBI field agents had been to see Wray to express the concerns of agents in all 56 field offices across the country that ‘the FBI has become too politicized in its decision-making.’ Grassley further alleges ‘those concerns were removed from this year’s final report’ of the FBI’s Special Agents Advisory Committee. Wray ignored Grassley’s letter along with a dozen other letters from the dogged Iowa senator alleging gross malfeasance at the bureau.”

And Devine followed up with a column on support from 30 ex-FBI officials: “Thirty former FBI agents, including a retired deputy assistant director, head of counterterrorism and five SWAT team members, have spoken out publicly in support of suspended FBI whistleblower Stephen Friend. … In his whistleblower complaint to the Department of Justice inspector general, Friend alleged that the FBI has been manipulating case-file management in order to falsely inflate the threat of domestic terrorism, and using unconstitutional excessive force against political dissenters. … Terry Turchie, former deputy assistant director of the FBI’s Counterterrorism Division, describes Friend as ‘a model example of what FBI agents nationwide should be.’”

STATES

New York State Financial Superintendent Protected by Qualified Immunity For Official Acts Which Might Suppress Speech: Illegality is not protected by the First Amendment, nor is advocacy of illegal actions in some circumstances. Brandenburg v. Ohio, 395 U.S. 444 (1969). But what about advocating the purchase of insurance that might cover violations of state law? 

In another case involving the question of what government may do indirectly through influence over private businesses and tax-exempt organizations (see prior note under DoJ on the FBI and Facebook), the Second Circuit just issued a decision (h/t Institute for Justice’s Short Circuit) reversing a District Court dismissal of a First Amendment challenge to the New York State Superintendent of Financial Service’s attempt to dissuade insurers from participating in a tax-exempt organization’s offering insurance coverage that would cover intentional violations of state law. Maria Vullo, the Superintendent, issued a press release stating that “business can lead the way and bring about the kind of positive social change needed” and demanded that insurers stop offering coverage through the tax-exempt organization. Slip op. at 11. This scenario becomes more believable when you know that the exempt organization is the National Rifle Association, and the insurance coverage “provided coverage for losses caused by licensed firearm use, including criminal defense costs resulting from using a firearm with excessive force to protect persons or property, even if the insured was found to have acted with criminal intent. In other words, it insured New York residents for intentional, reckless, and criminally negligent acts with a firearm that injured or killed another person.” Slip op. at 6-7.

At least some in the financial press were concerned about the First Amendment aspects of Vullo’s threats. As Brian Knight of FinRegRag noted: “Is New York using bank regulation to suppress speech? … The argument is that the NRA’s positions are so dangerous that they are harmful to the community and pose a risk to the reputation of any [financial institution] that works with them. This could fairly be seen as an attempt to restrict the NRA’s ability to operate in the political arena and marketplace of ideals.” The District Court agreed and held that the NRA had properly plead a First Amendment claim.

The Second Circuit reversed and remanded, saying “the First Amendment does not impose a viewpoint-neutrality requirement on the government’s own speech; a government official has the right to speak for herself (and her agency) and to select the views she wishes to express. Pleasant Grove City v. Summum, 555 U.S. 460, 467-68 (2009) ... Under the government speech doctrine, public officials are generally free to favor certain views over others when they speak. Walker v. Tex. Div., Sons of Confederate Veterans, Inc., 576 U.S. 200, 207-08 (2015).” Nevertheless, “although government officials are free to advocate for (or against) certain viewpoints, they may not encourage suppression of protected speech in a manner that ‘can reasonably be interpreted as intimating that some form of punishment or adverse regulatory action will follow the failure to accede to the official’s request.’” Slip op. at 26.

The Second Circuit decided that the official documents, including Vullo’s press release, were government speech but not facial threats, and could be construed as attempts to protect financial institutions whose health she oversaw. Slip op. at 31, 33. That was enough to support qualified immunity against First Amendment claims.

“Texas Goes After Pro-Bono Legal Help:” In 2015, a Washington State Court struck down a Washington Public Disclosure Commission attempt to block the Institute for Justice, a 501(c)(3) tax-exempt organization which, inter alia, attempted to protect citizens’ First Amendment rights, from providing pro bono legal assistance to a small organization promoting the recall of a County official. The state campaign finance regulation agency believed that providing legal assistance, though free to the neighborhood organization, was a thing of value worth $307,000 to the committee, but not reported as a contribution. Judge Katherine Stolz of the Superior Court of Washington for Pierce County rejected the agency’s claim because “Defendants’ treatment of free legal assistance to a political committee in a federal civil rights lawsuit as a ‘contribution’ … is unconstitutional under the U.S. Constitution.” Id., at 3. (Disclosure: Barnaby Zall, author of this Public Policy Legal Institute Vox PPLI blog post, personally was an expert witness for the plaintiff in this case, but PPLI was not involved.)

Now, the Wall Street Journal in a September 29 editorial notes (h/t IFS) that the Texas Ethics Commission is attempting to apply a similar rule against the Institute for Free Speech, another (c)(3) organization, from providing pro bono legal aid to a candidate: “Under the commission’s draft advisory opinion, a public-interest firm that provides free legal services to a candidate would be making an in-kind campaign contribution. Legal billing adds up quickly, so any firm that offered pro-bono help would also risk a change in its tax-exempt status and disclosure of its donors.”

More on Stacey Abrams’ Fight Against Georgia Ethics Commission’s Charges of Campaign Finance Violations: Last month, the Atlanta Journal-Constitution broke a story about the Georgia Ethics Commission charging two organizations associated with gubernatorial candidate Stacey Abrams with failing to report millions of dollars in campaign-related activity. Now the organizations – the New Georgia Project (a c3) and the New Georgia Project Action Fund (a c4) – have sued the Commission, charging that its definition of a regulated “campaign committee” is unconstitutionally broad. The AJC story repeats, with more detail, the organizations’ attorney’s defense that:

The groups’ lawyer, Aria C. Branch, told the commission last month that the nonprofits’ donations were not earmarked for political activity and were used for operating expenses. Political canvassing that the groups did was done as a subcontractor for another pro-Abrams political committee and not subject to disclosure by the New Georgia Project Action Fund. Those expenditures were disclosed by the political committee that hired the New Georgia Project Action Fund.

It’s unclear what the AJC was using to calculate its reported figures. The NGP’s 2018 990 for the year covered by the Commission’s complaint does not show any Schedule R showing a related organization and lists no political expenditures.  The 2018 990 for New Georgia Project Action Fund has an incomplete Schedule R which describes sharing of facilities and employees with related organizations, but doesn’t identify the organizations. None of the 2018 expenditures appear to match what the AJC reported. Nevertheless, the “subcontractor” defense seems under-supported by the tax filings. 

Zuckerberg Interview About FBI Warning to Meta Fuels State Attorneys General’s Lawsuit About Censorship: And as long as we’re mentioning Norwood v. Harrison “indirectly” issues (see above under DoJ for more on FBI and Facebook),  Facebook founder Mark Zuckerberg told podcast host Joe Rogan that “his organization was warned in 2020 of ‘some kind of dump’ before the New York Post published its initial story about Hunter Biden’s laptop.” That interview (which wasn’t the first time Zuckerberg had revealed the FBI’s comments) added fuel to a lawsuit filed by the Attorneys General of Missouri and Louisiana alleging that dozens of Administration officials have similarly coordinated private social media coverage. The Wall Street Journal editorialized (paywall) about “One nagging question in the social-media age is how online platforms like Facebook and Twitter choose to “moderate” speech—and why, and whether the government is leaning on them to step it up. Hundreds of pages of emails between federal officials and the big social sites were recently dropped in court, and they make for instructive, if not definitive, reading.” The New York Times offered a “what-aboutism” editorial involving banning books in schools.

A Contentious Year for Ballot Initiatives: Bolt looks at battles about ballot initiatives: “Ballot measures have come under assault nationwide, as Republican leaders have made parallel moves in many states to trip up voter-initiated referendums. The Ballot Initiative Strategy Center has tracked the introduction of dozens of bills in recent years, many of which have become law. Some of the more onerous restrictions imposed new geographic distribution requirements for petition-gathering, which tends to reduce the power of cities, or they made petition gathering far more impractical.” (Not really a new topic.)

There ARE Laws Against Lying In Elections But You Have to Look At The State Level, Say UNC Researchers: North Carolina schools have been active recently in producing interesting research on election-related issues, probably the most famous at the moment being North Carolina State scholars research that sparked claims that Gmail’s spam filters discriminate against Republicans, resulting in the FEC’s AO 2022-14, approving Google’s new “pilot program” for spam filtering mentioned above. Now UNC Chapel Hill law professors David Ardia and Evan Ringel have written a law review article they say demonstrates that: “Given the ubiquity of this speech, especially online, one might assume that there are no laws against lying in politics. It turns out that the opposite is true. Although the federal government has largely stayed out of regulating the content of election-related speech, the states have been surprisingly active in passing laws that prohibit false statements associated with elections.”

Democracy Capacity Project Expands Practical Guidance Series on Nonprofit Voter Assistance to 12 States: Sue Zachman (who, AFAIK, may be the only electrical engineer/lawyer in the First Tuesday Lunch Group) adds to her report at the last First Tuesday Lunch Group luncheon about the Democracy Capacity Project’s FAQs outlining state law compliance issues for nonprofits in their civic engagement, democracy support, and GOTV work in the states. “We’re now live with the first 12 states … These resources are free to all and are published under a Creative Commons license that allows wide dissemination and use in the current format. … Seven more states should be posted” in the last week of September.

GENERAL

English Police Arrests of Protestors at Queen’s Remembrance Events Highlight 2022 Changes in English Free Speech Law: The Washington Post noted that English police were cracking down on protestors who disrupt or hold signs at events marking the death of Queen Elizabeth II. “People have been picked up by police as they shouted against the crown, heckled royals marching by and carried anti-monarchists signs — and in one case, a blank sheet of paper. The police crackdown on such protests has raised questions about freedom of speech during this fraught period for the United Kingdom.” The Wall Street Journal followed up with “God Save Our Fundamental Freedoms,” a critique of Scotland’s “cracking down” on free speech “for some time.”

English law on free speech is different from U.S. law but had been moving much closer in the last twenty years. Traditionally, English law, based on common law which did not even mention a free speech right, had no First Amendment-like statutory protection for free speech. That changed under the Human Rights Act of 1998 to something like the First Amendment, described by Lord Steyn in the House of Lords’ decision in Reynolds v. Times Newspapers Ltd., [2001] 2 A.C. 127 (H.L.), ¶ 207, as “a constitutional right to freedom of expression in England.”

In 2022, however, English law changed markedly in the other direction. The new Police, Crime, Sentencing and Courts Act 2022, which received Royal Assent on April 28, 2022, includes a new Part Three, covering, inter alia, protests and protestors. For example, Section 78 of the new law widens previous “public nuisance” law by creating new conditions and penalties for “intentionally or recklessly causing public nuisance,” and Section 79 grants police sweeping powers to block or condition “one-person protests.”

In comparison, the U.S. Supreme Court said in Snyder v. Phelps, 562 U.S. 443, 457-58 (2011), peaceful, though hurtful and odious, protest at funeral is fully protected by the First Amendment:

The record confirms that any distress occasioned by Westboro’s picketing turned on the content and viewpoint of the message conveyed, rather than any interference with the funeral itself. A group of parishioners standing at the very spot where Westboro stood, holding signs that said “God Bless America” and “God Loves You,” would not have been subjected to liability. It was what Westboro said that exposed it to tort damages.

Given that Westboro’s speech was at a public place on a matter of public concern, that speech is entitled to “special protection” under the First Amendment. Such speech cannot be restricted simply because it is upsetting or arouses contempt. “If there is a bedrock principle underlying the First Amendment, it is that the government may not prohibit the expression of an idea simply because society finds the idea itself offensive or disagreeable.” Texas v. Johnson, 491 U. S. 397, 414 (1989). Indeed, “the point of all speech protection … is to shield just those choices of content that in someone’s eyes are misguided, or even hurtful.” Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston, Inc., 515 U. S. 557, 574 (1995).

And England is not alone. Germany is also “cracking down” on protests in the absence of a version of the First Amendment, notes Jacob Sullum in Reason, citing a New York Times article: “Americans who are alarmed by online ‘hate speech’ and ‘misinformation’ tend to resent the limits that the First Amendment imposes on government intervention against objectionable content. But German authorities do not suffer from such constraints, and the consequences should give pause to critics who are sympathetic to the idea that freedom of speech sweeps too broadly in the United States.”  

Politico’s New Owner Has A “Contrarian” Approach: The Washington Post profiles new head of the company that bought Politico for $1 billion last year:

A newcomer to the community of billionaire media moguls, [Mathias] Döpfner is given to bold pronouncements and visionary prescriptions. He’s concerned that the American press has become too polarized — legacy brands like the New York Times and The Washington Post drifting to the left, in his view, while conservative media falls under the sway of Trumpian “alternative facts.” So in Politico, the fast-growing Beltway political journal, he sees a grand opportunity. “We want to prove that being nonpartisan is actually the more successful positioning,” he said in an interview with The Washington Post. He called it his “biggest and most contrarian bet.”

Many Different Types of Memes: More than you wanted to know about different types of memes, a view on the origins of “Stop the Steal,” and much more in an Atlantic column from three researchers who wrote Meme Wars: The Untold Story of the Online Battles Upending Democracy in America, “Leading media expert Joan Donovan, PhD, veteran tech journalist Emily Dreyfuss, and cultural ethnographer Brian Friedberg pull back the curtain on the digital war rooms in which a vast collection of antiestablishmentarians [my spell-checker reports this is not a word, as it appears pretty much only in this book and its promotional efforts] bond over hatred of liberal government and media.”

Public Policy Advocacy Highlights For August 2022

Public Policy Advocacy Highlights For August 2022

In most years, August is a quiet month for public policy advocacy, but not in 2022; lots and lots of newsworthy items this month. Characterizations, editorial comments, abbreviations and shorthand references are solely PPA Highlights author Barnaby Zall’s, and do not represent the views or positions of the Public Policy Legal Institute, the First Tuesday Lunch Group or their members and participants. Suggestions and corrections welcome. (Author’s note: why is a mastiff adorning this month’s Highlights? There’s a question about mastiffs and public policy advocacy which might come before federal campaign finance regulators, as shown in the last item in this month’s FEC section.)

FEC

An Era Ends, Another Begins – Steven Walther Retires From FEC; Dara Lindenbaum Joins: From a Federal Election Commission release:  “Walther’s FEC legacy includes a dedication to improving due process and procedural fairness, a commitment to increasing public disclosure and transparency concerning agency actions, and a devotion to promoting democratic institutions worldwide.” He was a recess appointment to the Commission on Jan. 10, 2006, and confirmed in 2008. His last day was July 31, 2022. On August 4, Walther issued a farewell Statement, commending the Democratic Commissioners and wishing all Commissioners “well as they move forward with the task of enforcing the law.

Dara Lindenbaum, confirmed by the Senate in May, was sworn in on August 2 to replace Walther as a Democratic Commissioner. She will also take Walther’s place as Vice-Chair of the FEC for the remainder of 2022, which may set her up as the FEC Chair in the near future. Soon after joining the Commission, when considering a controversial Advisory Opinion Request from Google to pilot test allowing registered political committees to have their emails screened only by user responses rather than Google’s regular three-part algorithmic review process (as noted in more detail below), new Commissioner Dara Lindenbaum announced that she would vote to approve, even though she didn’t “want to, for the same reasons as the commenters [presumably, concern that political spam would increase in their mailboxes], but the law, the regs and the FEC’s precedents permit this. … I don’t want to hamstring innovation and pilot programs, but I hope Google will reduce, not increase, spam, and will increase best practices for bulk senders.” A ray of hope for the FEC’s future?

FEC Votes 4-1 To Adopt Draft Advisory Opinion on Google’s Request to Relax Spam Filtering for Registered Candidates: Google, faced with complaints about Republican emails being rejected by its Gmail spam filters at vastly higher rates than Democratic emails (especially as elections approached), asked the Federal Election Commission to approve a pilot program which would test an alternative spam testing mechanism driven almost entirely by user responses (e.g., “this message is spam”) rather than its usual three-step algorithmic test (is the material harmful, individual recipient feedback, and aggregate trends in recipient feedback). The proposal, AOR 2022-14, generated thousands of public comments, a record number, of which the vast majority were negative (mostly concerns about increasing political spam) and much media coverage, including some in the Washington Post Tech 202 column. The FEC Office of General Counsel produced, as is often the case, two draft Advisory Opinions, one approving the request, the other (filed by a late request from Commissioners Weintraub and Broussard) would have rejected the request as permitting a prohibited in-kind contribution. 

At its August 11 meeting, the FEC voted 4-1 (Weintraub) -1 (Broussard, abstaining) to approve the Google pilot project as AO 2022-14 (Google). The major question was whether the Google proposal met the statutory definition of an in-kind contribution: is the provision of free or lower-cost services driven by an electoral purpose or commercial purpose? In other words, is the company providing a prohibited thing of value to political committees? 

Google’s counsel, Claire Rajan of Allen & Overy, pointed out that Google was testing user response to improve its user experience. That was a big point of contention, as with Chairman Dickerson’s question of “this is a pilot program for what?” Commissioner Weintraub noted that “anytime I see something that everyone would like, but we’re only offering it to political committees, that raises all sorts of alarm bells because that sounds like the classic definition of an in-kind contribution.” Rajan countered that the “ultimate purpose is not electoral.” The reason for piloting on political committees was that it would be “an efficient way to test how users view the product” and Google would have a large enough but defined group of similar entities, whose eligibility could be verified by the FEC’s records and who were likely to send large amounts of bulk emails in a relatively short time. In June, the Post’s Tech 202 column noted that Google CEO Sundar Pichai used the project  to “assuage” Republicans that it was working on the bias problem, but Democrats were opposing the proposal. 

There is a deeper question raised by the Google proposal and the FEC’s consideration: Google is going to filter spam based on popularity of the content of the messages sent (which it is entitled to do as a private entity), but the FEC’s approval of its user appeal-driven program raises First Amendment questions because of an apparent willingness to approve the selective use of the popularity of content as a basis for silencing political speech. This is the same problem that has arisen in the context of “an appearance of corruption,” one of only two government interests sufficient to block political speech, and one in which lower courts have used public opinion polls as evidence of an “appearance of corruption.” See, e.g.FEC v. Ted Cruz for Senate596 U.S. , 142 S.Ct. 1638 (May 16, 2022) (FEC’s drafting of a flawed public opinion poll was not sufficient to support limit on candidate loan repayment).

In other words, can a government agency, in effect, block unpopular speech indirectly by approving a private company’s “crowd sourcing” its censorship decisions in a manner that simple statistics indicate is biased? There have been many criticisms of indirect agency action substituting for actions not within the agency’s power, including the Regulatory Transparency Project’s 2017 Regulating in the Shadows report. In Cummings v. Missouri, 71 U.S. 277, 325 (1883), the Supreme Court noted that “what cannot be done directly cannot be done indirectly. The Constitution deals with substance, not shadows. Its inhibition was leveled at the thing, not the name. It intended that the rights of the citizen should be secure against deprivation for past conduct by legislative enactment under any form, however disguised. If the inhibition can be evaded by the form of the enactment, its insertion in the fundamental law was a vain and futile proceeding.” See, also, Denezpi v. U.S., No. 20-7622, June 13, 2022, (Gorsuch, J., dissenting), slip op., at 10; In re Tiburcio Parrott, 1 F. 481, 515 (9th Cir. 1880).

Nevertheless, there is also substantial evidence that spam is a problem for both users and Google. Google’s spam filters block 10,000,000 spam messages every minute, and spam is a major concern for both users and platforms. That is something that prior FEC precedents take into account. See, e.g. AO 2018-11 (Microsoft), where a company was able to provide “election-sensitive customers” with free cybersecurity services not only because it would help customers, but because the company would “protect its brand reputation and allow it to obtain valuable data on security threats” for its own use, “based on commercial and not political considerations, in the ordinary course of its business and not merely for promotional consideration or to generate goodwill”. Id, at 5. See, also, AO 2018-05 (CaringCent), at 5 (corporation “may charge different fees to political committee clients than it charges to non-political clients,” as long as it charges “a commercially reasonable fee at the ‘ordinary and usual charge’” and “any variation in fees will be based on business considerations and will not be based on political considerations”); AO 2012-31 (AT&T), at 4 (approving a rate structure for processing text message contributions to political committees that charged less than what AT&T charged for commercial content providers but more than it charged for donations to charities as long as the rate structure “reflects commercial considerations and does not reflect considerations outside of a business relationship”).

Balancing those two considerations suggests that Google’s “pilot project” may not be the end of this discussion, on constitutional grounds if not others. Much may depend on the next steps. The Commissioners’ discussions, particularly Commissioner Lindenbaum’s comments, pointed to this as a continuing focus. Google did not get a “hall pass” using its commercial interests, mainly because it positioned the project as a “pilot” leading to some additional steps. But if it had not done so, it might not have gotten approval, and still would be stuck trying to figure out how to deflect partisan complaints. Google’s lawyer Claire Rajan appeared well aware of that concern when, answering Commissioner Broussard’s questions, she tried to get ahead of the curve by asserting: “Google long ago made a commercial decision to apply its spam filters in a non-biased manner.” But the partisan criticism indicates that, at least in appearance, Google failed. 

FEC OGC Recommends Allowing Rouda to Repay Loans With Post-Election Funds: Remember Harley Rouda’s Sandler Reiff-drafted AOR 2022-15, based on FEC v. Cruz, 142 S. Ct. 1638 (2022), holding that the previous FEC regulation was unconstitutional as discriminating against challengers and new candidates? The FEC Office of General Counsel has drafted a proposed Advisory Opinion finding that the repayment was fine under FEC v. Cruz.

Still a “Procedural Mess.” Dueling Briefs Argue Whether the FEC’s Refusal To Begin Enforcement Proceedings Actually Triggers Statutory Jurisdiction and Freedom Of Information Act Exceptions? Remember when the byzantine labyrinth of cases involving closing FEC files drove U.S. District Judge Tim Kelly to write: “What a procedural mess.”? Id., at 2. The saga continues in federal court. The FEC itself, through its General Counsel, filed an Opposition to Summary Judgment in a FOIA case, part of the ongoing 45Committee litigation. One of the reasons why an agency can withhold releasing internal documents is that they are protected by the “deliberative privilege,” which applies to “predecisional documents.” The OGC’s Opposition argues that the documents sought by 45Committee are predecisional because “there has been no vote closing the file.” Id., at 4. This is exactly the opposite of the legal analysis by the three Commissioners (Dickerson, Cooksey and Trainor) who have issued a Statement Regarding Concluded Enforcement Matters, and in support of Commissioner Weintraub’s July 7 Statement of Reasons for MUR 7516 (Heritage Action). The OGC Opposition even openly criticizes the three Commissioners’ Statement. Opp., at 6 n. 4. Very curious for an agency position in litigation. In fact, it appears to demonstrate the exact opposite of the position it asserts, especially if the Commission did not vote to adopt that specific assertion in the OGC’s filing.

To make things worse, this is only one part of the 45Committee litigation. And the distinction matters. In the private enforcement suit brought by the Campaign Legal Center, a 45Committee defense team from Jones Day headed by Brett Schumate filed an Opposition to Campaign Legal Center’s Motion For Summary Affirmance And Dismissal in the D.C. Circuit’s consideration of Campaign Legal Center v. FEC (45 Committee), which contains a lengthy explanation of why the District Court did not have jurisdiction over CLC’s case at all when the agency actually voted not to begin enforcement. The 45 Committee’s filing points out that newly-released documents from the FEC “which had never appeared in the case, revealed that the Commission had acted on the administrative complaint in June 2020, thereby rendering authorization of the citizen suit improper.” Opposition, at 1. And in a different case, the group End Citizens United filed a brief in a different D.C. Circuit appeal arguing exactly the opposite position and that the District Court did have jurisdiction.

They’re Not All Stalemates: In AO 2022-07 (Swalwell), Commissioners Dickerson and Broussard teamed up on a Statement pointing out that the AO did not go far enough in holding that payments for overnight childcare are lawful because they would not exist irrespective of [the] campaign: “in our view, the use of campaign funds to pay for childcare while Congressman Swalwell is traveling overnight for his campaign is permissible without regard to whether his spouse is available to care for their children. The question of whether a candidate’s spouse is technically available to provide childcare is an inherently subjective inquiry and determining whether the spouse’s work or other commitments render them unable to provide childcare is well outside the Commission’s purview.”

Having participated in that bipartisan accord, however, Commissioner Dickerson also issued a solo Statement in AO 2022-10 (Sprinkle) which, though agreeing with what the other Commissioners voted on to approve the AO, chided his colleagues: “that Sprinkle’s proposed use of Commission data to supplement its services to contributors is clearly prohibited by the Act and our regulations. As I have said in the past, our governing statute is clear: 52 U.S.C. § 30111(a)(4) states that information copied from disclosure reports ‘may not be sold or used by any person for the purpose of soliciting contributions or for commercial purposes, other than using the name and address of any political committee to solicit contributions from such committee.’” IOW, aggregated data is still a commercial use. But, see Minn. Campaign Finance and Public Disclosure Board Advisory Opinion 418 (2011), pp. 4-5 (some uses of disclosure report data by nonprofit organizations are not commercial use, including solicitation of memberships).

The First Thing We Do Is Sue All The Celebrities: In MUR 7915 (When We All Vote), the Respondents include: Selena Gomez, Tom Hanks, Erin Hannigan, Faith Hill, Valerie Jarrett, Liza Koshy, Kyle Lierman, Laura Miller, Lin-Manuel Miranda, Janelle Monáe, Michelle Obama, Chris Paul, Megan Rapinoe, Shonda Rhimes, Tracee Ellis Ross, Pete Rouse, Tina Tchen, Kerry Washington, Rita Wilson, Stephanie Young, and a couple of c3s. The somewhat incoherent 440-page (with exhibits) Complaint basically said that Michelle Obama and eight close aides used a c3 to covertly direct political activity in support of the Biden Presidential campaign. Despite the opportunity for publicity and selfies with the stars, the Commission dismissed the case because no c3 actually made $1,000 in expenditures or contributions.

Insider View of Democratic Support for Republican Candidates Against Anti-Trump Republicans; Former Dem Leaders Say “STOP:” Cong. Peter Meijer writes in a first-person in-depth Common Sense story about the praise he got for being a Republican who stood up to Trump, only to find the DCCC funding his primary opponent. “My predecessor, libertarian Justin Amash, warned of the ‘death spiral of partisanship’ days after he left the Republican Party on July 4, 2019, after impeaching former President Trump. It is one thing to read and reflect on his warning, and another to live it in real time. If successful, Republican voters will be blamed if any of these candidates are ultimately elected, but there is no doubt Democrats’ fingerprints will be on the weapon.” Spoiler: Meijer lost. Apparently, a backlash is building, among former Democratic Party leaders among others. Politico: “About three dozen former Democratic House and Senate members have signed on to an open letter blistering national Democrats for their meddling in this year’s Republican primaries, often to the benefit of pro-Donald Trump hard-liners. The letter, shared first with POLITICO, is the latest in growing backlash against the controversial practice, in which Democrats have been elevating far-right Republicans they believe will be easier to defeat in the fall.” The Issue One letter referred to by Politico, says, inter alia: “it is risky and unethical to promote any candidate whose campaign is based on eroding trust in our elections. We must stop this practice, and stop today.”

CLC Offers Plan to Remedy FEC Inaction, Explains Why It Sues the Agency, Ignores Commissioners’ Recent Statements of Explanation: As the previous note suggests, the Campaign Legal Center is part of the current stalemate at the Federal Election Commission, suing the agency as an intentional strategy to force judicial resolution when it can’t get enough Commissioners’ votes to begin enforcement of its complaints. As shown by several recent extensive and thoughtful Statements from Commissioners on both sides of the stalemate, the FEC is hamstrung by differences in opinion over basic Constitutional principles, which are now being hammered out in judicial proceedings, many of which involve CLC attempting to get default judgments so that its singular worldview can prevail without hearing from the agency itself. Now five CLC employees, all formerly with the FEC, explain their worldview and rationale. Sadly, not much here beyond conclusory statements about positions and insults about Commissioners (which is odd, given that CLC can produce decent legal work).

“Pet Project:” Is Paying $40K For A Big Family Dog To Provide “Alertness and Protection” A Legitimate PAC Expenditure? The Washington Free Beacon reports that Grassroots Law PAC paid $40,650 to a show dog company for contractor services. The money went to pay for a mastiff named Marz, declared to be a “new member of the King family” by Shaun King, a former Bernie Sanders surrogate who founded the PAC. “Grassroots Law PAC, which aims to ‘elect candidates who are committed to reducing mass incarceration and police violence,’ has spent nearly as much on King’s pet as it has on political candidates.” Sadly, apparently Marz “had a little too much energy to be a family dog” and was returned to the company, which is kind of odd considering that most mastiffs are calm and kid-friendly.

Griswold, the sweetest 125-lb dog in the world (RIP)

IRS

$80 Billion in Increased Funding For IRS Sparks Controversy: The Internal Revenue Service has been chronically underfunded for many years, including the Exempt Organizations Division. The recently signed Inflation Reduction Act, Pub. L. 117-169, authorizes $80 billion in additional funding over ten years for the IRS. There are also a few provisions in the new law that apply specifically to tax-exempt entities, including one on energy efficiency tax and depreciation benefits for buildings owned by tax-exempt organizations and governments being transferred “to the person primarily responsible for designing the property in lieu of the owner of such property,” (Sect. 13303, amending re-designated IRC § 179D(d)(3)(A)) (presumably to encourage architects to design energy-efficient commercial buildings by giving them a tax benefit that otherwise would accrue to the tax-exempt organization), and another making “clean” vehicles owned by tax-exempts eligible for tax benefits.

But much of the current buzz around the law involves the $80 billion funding boost for the Service. The Commish pleads: “We’re going after tax evaders, not honest Americans.” Citing an earlier version of the legislation, Republicans complain that the money will be used to audit more Americans; Democrats deny that, saying that the money will go to answering phone calls and reducing the agency’s crushing backlogs of cases. Treasury asserted that no audits would be increased on taxpayers with less than $400,000 in annual income; Heritage “fact-checked” the claim, and predictably found that the numbers didn’t add up to what the legislative history had claimed would happen.

The Wall Street Journal came down somewhere in the middle: “The Inflation Reduction Act won’t bring 87,000 new IRS agents with guns to your front door, but it has important changes for taxpayers.” So did Glenn Kessler, the Washington Post’s long-time fact-checker (who was the first journalist to actually figure out what was going on during the Lois Lerner-era BOGO-TAG scandal; see also, “New TIGTA Report on ‘Inappropriate’ Criteria for Evaluating Exemption Applications“), who penned a lengthy historical review of IRS staffing and likely hiring under the new bill. Former Assistant Treasury Secretary for Management (2018-2021) David Eisner writes in The Hill: “Given its history, as well as hiring difficulties being experienced across the public and private sectors today, the IRS is unlikely to be able to prudently hire the number of skilled employees or procure the other resources authorized by the bill. However, in the lead-up to last week’s enactment, there were claims made about the funding from both sides of the aisle that are patently false and misleading — and, often, dangerous.”

And Speaking of Money for Tax-Exempt Organizations: The New York Times reports (h/t ELB) that a new Utah-based 501(c)(4), the Marble Freedom Trust, received a contribution of $1.6 Billion from a single donor. Cue complaints about “dark money” (including explanations of the tax mechanisms involved by several participants in the First Tuesday Lunch Group), even though everyone was able to find out both the donor and the source of the funds, as well as much other information from publicly-available filings (and apparently circulation of the information to progressive media such as The Lever and ProPublica, who admitted that “The donation does not appear to violate any laws.”). The donor’s actual offense was that he “has spent most of his 90 years painstakingly guarding his privacy.” Why? Probably to avoid the inevitable results of “The Lever and ProPublica piec[ing] together the details of his life and his motivations for his extensive donations through interviews, court records and other documents obtained through public-records requests.” A link, not highlighted, in the organizations’ history of this private donor showed that some of these “public-records” documents came from ProPublica’s publication of illegally-leaked tax records, part of ProPublica’s dedication to “Journalism That Holds Power to Account.”

Not mentioned in the Times’ or the Lever/ProPublica’s history is that the donor had a similar unwelcome experience in 2010 with a donation to a college. “It is hardly a novel perception that compelled disclosure of affiliation with groups engaged in advocacy may constitute as effective a restraint on freedom of association as [other] forms of governmental action.” NAACP v. Alabama ex rel. Patterson, 357 U. S. 449, 462 (1958); AFPF/TMLC v. Bonta, 594 U.S. ___, slip op., at 17, n. * (“Here the State’s assurances of confidentiality are not worth much. The dissent acknowledges that the Foundation and Law Center ‘have unquestionably provided evidence that their donors face a reasonable probability of threats, harassment, and reprisals if their affiliations are made public’.”); Id., slip op., at 4 (Sotomayor, J., dissenting) (“Publicizing individuals’ association with particular groups might expose members to harassment, threats, and reprisals by opponents of those organizations. Individuals may choose to disassociate themselves from a group altogether rather than face such backlash.”).

The contribution was structured as a stock donation, made just before the company was bought out by Eaton Corp., an Irish multinational conglomerate, the proceeds of which were paid to the tax-exempt organization, which is borne out by the Trust’s 2020 Form 990, on which the boxes for Part IV, Lines 29 and 32 are checked. (For those keeping score, on Part V, Line 14a, the Trust said that it did not receive any payments for indoor tanning services in that tax year.) The Trustee and Chairman of the Trust is Leonard Leo, who was paid $350,000 per year by the Trust, listed on the 990 as spending an average of 35 hours per week on the business of the Trust and its related organizations. Law firms for the Trust include Sullivan & Cromwell, Kirton McConkie, and Holtzman Vogel. In a statement to the Times and repeated by Fox News, Leo said: “It’s high time for the conservative movement to be among the ranks of George Soros, Hansjörg Wyss, Arabella Advisors, and other left-wing philanthropists, going toe-to-toe in the fight to defend our constitution and its ideals.”

Citing, in part, AFPF/TMLC v. Bonta, D.C. Circuit Rules House Ways & Means Committee Can Get Trump’s Tax Returns: In a deceptively simple-looking decision with likely long-term consequences, on August 9, a panel of the D.C. Circuit held that the House Ways & Means Committee could obtain former President Donald Trump’s personal tax returns. CBS News noted: “Citing a renewed request for the tax information in 2021 from Rep. Richard Neal, chairman of the Ways and Means panel, after the change in presidential administrations, Senior Circuit Judge David Sentelle wrote in a 33-page ruling that the request ‘was made in furtherance of a subject upon which legislation could be had,’ and rejected claims from the former president that Democrats’ request for his tax information was unconstitutional.”

IRC § 6103 has protected taxpayers’ tax information for decades, with significant tightening after President Nixon’s “enemies list” scandal and impeachment article based on Nixon’s misusing tax information. As former IRS Commissioner Larry Gibbs, an architect of the § 6103 revisions, noted in a later article, “if politicians are able to obtain and make public the president’s tax returns and tax information, they are likely to do the same thing to anyone else they choose to target in the future, including but likely not limited to political donors or other supporters of any public figure in any political party.”

There are, however, exceptions to the tax privacy protections, including IRC § 6104, which makes tax-exempt organizations’ tax returns generally disclosable, except for information that personally identifies donors. Another exception, not used as often, is IRC § 6103(f), which permits the IRS to respond to requests from certain members of the congressional tax committees, including the House Ways & Means Committee. IRC § 6103(f)(1). There is an exception that “any return or return information which can be associated with, or otherwise identify, directly or indirectly, a particular taxpayer shall be furnished to such committee only when sitting in closed executive session unless such taxpayer otherwise consents in writing to such disclosure.” Id.

In April 2019, House Ways & Means Chair Richard Neal requested the tax returns of Donald Trump and a variety of his businesses, saying that the Committee was “considering legislative proposals and conducting oversight related to our Federal tax laws, including, but not limited to, the extent to which the IRS audits and enforces the Federal tax laws against a President.” Treasury refused to comply with the request, relying on an OLC opinion that the rationale was pretextual. The Committee sued to obtain the records. When the Biden Administration came into power, it reversed the refusal and revised the rationale; the Committee voluntarily dismissed its Complaint. Trump and his companies intervened, asserting the request’s invalid legislative purpose and facial unconstitutionality under the First Amendment. After the District Court rejected Trump’s defenses, the case was appealed to the D.C. Circuit.

On August 9, 2022, a divided panel of the D.C. Circuit upheld the Committee’s request for the records. The panel was unanimous upholding the request, but not on the underlying analysis. The panel first held that “A Congressional request for information ‘is valid only if it is related to, and in furtherance of, a legitimate task of Congress.” Slip op., at 8, quoting Trump v. Mazars USA, LLP, 140 S. Ct. 2019, 2031 (2020) (cleaned up). ““[T]here is no congressional power to expose for the sake of exposure.” Watkins v. United States, 354 U.S. 178, 200 (1957). “No inquiry is an end in itself; it must be related to, and in furtherance of, a legitimate task of the Congress. Investigations conducted solely for the personal aggrandizement of the investigators or to ‘punish’ those investigated are indefensible.” Id., 354 U.S. at 187.

But, “The Speech or Debate Clause, U.S. Const. Art. 1, § 6, cl. 1, protects against inquiry into the motives behind the regular course of the legislative process, Eastland, 421 U.S. at 508. It is not our function to ‘test[] the motives of committee members for this purpose.’” Watkins, 354 U.S. at 200. “Their motives alone would not vitiate an investigation which had been instituted by a House of Congress if that assembly’s legislative purpose is being served.” Slip op., at 10. Citing the IRS’s failure to adequately audit President Nixon’s taxes, the panel noted that “The Chairman states that the Committee is exploring the need for legislation that would provide further protection to the IRS employees conducting the audit and legislation ensuring that they have sufficient resources to conduct the audit even when the returns in question are ‘inordinately large and complex.’” Slip op., at 12. That was enough to justify the request. Citing AFPF v. Bonta, the panel rejected the Trump defenses, even outside the First Amendment context. Slip op., at 25-26. According to CBS News, the defendants vowed to request Supreme Court review.

After Only 11 Years, IRS Issues Regulations on Disclosure of Tax Records to State and Local Authorities: As long as we’re talking about disclosure of tax records and AFPF/TMLC v. Bonta, the IRS EO Division issued revised regulations on how the Service can disclose tax records to State and local authorities (like the California Attorney General in AFPF/TMLC v. Bonta). The NPRM was issued in March 2011, to implement changes in IRC § 6104(c) made by the Pension Protection Act of 2006 (16 years ago, but who’s counting?). These provisions basically allow the IRS to notify certain state and local officials about applications for and revocation of charitable status under IRC § 501(c)(3), and the PPA expanded the notice and coverage provided (for example, notice can now be provided even before final determinations).

Some observers might find that the new regulations were driven in part by the AFPF/TMLC decision, where the California Attorney General had access to IRS information through information-sharing agreements, but decided those taxpayer privacy rules were too restrictive, and issued her own rules with disastrous results. One of the more sweeping provisions in the PPA, for example, was to apply taxpayer privacy requirements under IRC § 6103(c) and (p) to § 6104. See, e.g., Fed. Reg. 50242 (Aug. 16, 2022, daily ed.) (“The PPA also amended section 6103 to make section 6104(c), in its entirety, subject to its confidentiality and disclosure provisions. … See § 301.6103(p)(4)–1 and IRS Publication 1075, “Tax Information Security Guidelines for Federal, State and Local Agencies.”). One commenter on the proposed regulations predicted that the net effect would be to decrease disclosure to State and local authorities because the IRS privacy rules were too onerous. The Treasury and IRS responded that all 50 States have appropriate information sharing agreements, so imposing those rules on Attorneys General would not cut back on information-sharing that meets statutory minima of privacy protections. Fed. Reg. 50242-50244 (Aug. 16, 2022, daily ed.).

New York Attorney General’s Office Copy of c4’s Schedule B Leaked to Media: And speaking of leaks of donor’s tax records to the media after being filed in a state Attorney General’s office, exactly as condemned by the U.S. Supreme Court in AFPF/TMLC v. Bonta, Politico reports that it obtained a leaked copy of a 2019 Schedule B, complete with stamp from the New York Attorney General’s office, filed by Stand for America, a 501(c)(4) organization set up by former South Carolina Governor and UN Ambassador Nikki Haley as a prelude to an anticipated 2024 presidential run. Politico gushed “The disclosures provide the clearest picture yet of how a prospective 2024 presidential candidate is cultivating a secret network of high-dollar contributors as she builds a political apparatus. And the names of her donors demonstrate the deep connections Haley has formed at the top levels of the Republican Party, with some of the GOP’s biggest super PAC donors among those who gave money to fund the launch of her organization after she left the Trump administration.” Haley has now requested that the U.S. Department of Justice look at the New York Attorney General’s office in light of other leaks of protected information, and pledges to sue the NYAG’s office over the leak.

Newly-Released Lois Lerner Deposition Testimony Shows Her Concern About Citizens United and Tea Party Groups: The Washington Times reported on the release of a 2017 deposition (paywall; h/t IFS) of Lois Lerner, who directed the IRS Exempt Organizations Division and its inappropriate scrutiny of Tea Party and other conservative organizations:

At one point, Ms. Lerner labeled the tea party cases “very dangerous.” She speculated that if a case reached the Supreme Court it could result in the 2010 Citizens United ruling, which extended political speech protections to groups that filed as political committees with the Federal Election Commission, being extended to tax-exempt organizations too.

In one email to someone whose name is redacted from the deposition transcript Ms. Lerner, a former FEC employee, called Citizens United “by far the worst thing that has ever happened to this country.” She also said “We are witnessing the end of America” because of the influence of money. In the deposition she characterized those kinds of comments as jokes and characterized her support of stricter political speech disclosure requirements as a matter of cutting her workload.

New Sign-in Requirements for Form 990-N Filers: Remember ID.me, the company the Internal Revenue Service hired to require facial recognition sign-ins and other biometric verification? The strict requirement for selfies was then reversed, but, effective right now, there’s a new login procedure, still through ID.me, for filers of the online-only Form 990-N annual return for small organizations. This new procedure does not affect regular and EZ versions of the 990. Yet. … Supposedly, all this is a prelude to an eventual government-wide login rewrite.

Congressional Letter Asks IRS to Review Conservative Groups Asking to be Reclassified as Churches: Following up on a ProPublica report, discussed at the First Tuesday Lunch Group’s August meeting, the Religion News Service, reprinted by the Washington Post, reports that forty Democratic lawmakers have asked the IRS to “review the tax-exempt status of a prominent conservative advocacy group recently reclassified as a church, arguing the organization may be exploiting the designation to avoid scrutiny.” The congressional letter says, in part, “Tax-exempt organizations should not be exploiting tax laws applicable to churches to avoid public accountability and the IRS’s examination of their activities.”

COURTS

California to Pay Quinn Emanuel $8 Million to Settle AFPF Attorneys’ Fee Claims After Losing At Supreme Court: AFPF/TMLC v. Bonta was a long, difficult case, with extensive fact-finding and lots of lawyer involvement in the successful challenge to the California Attorney General’s “dragnet” vacuuming up of nonprofits’ Form 990 Schedule B lists of major donors. Quinn Emanuel’s Derek Shaffer, who led the Americans for Prosperity Foundation’s challenge, was one of the lead lawyers and argued the case before the Supreme Court. Now California Gov. Gavin Newsome has signed legislation to pay $8 million in fees and costs to Quinn Emanuel for the case, which works out to about $1 million a year after the case was filed in 2014.

Ninth Circuit Strikes Down Montana Prohibition on Out-of-State Initiative Petition Circulators, But Upholds Pay-per-signature Ban: Last month, the First Circuit, in We the People PAC v. Bellows, rejected Maine’s prohibition on out-of-state initiative signature gatherers. Now, in Pierce v. Jacobsen, the Ninth Circuit agreed. Both these decisions applied strict scrutiny to the residency requirement for signature circulators and found that diminishing the pool of circulators (who actually engage in face-to-face speech with voters) is a severe burden on political expression. Both also relied on Meyer v. Grant, 486 U.S. 414, 422 (1988) (petition circulation is “core political speech” involving “interactive communication concerning political change”). “While it is one thing to limit carrying out the functions of self-government to residents, limiting core political speech to residents even on matters of state elections is a far broader restriction, and that restriction is not narrowly tailored here.” Pierce, slip op., at 16. The Ninth Circuit, however, rejected a challenge to Montana’s ban on paying circulators based on the number of signatures obtained, mainly because of a lack of sufficient evidence that the compensation scheme imposed a severe burden. “The record provides little more than conclusory assertions about the burden, not actual evidence. We agree with the district court that the factual evidence Plaintiffs have provided is insufficient to demonstrate the existence of a severe burden.” Slip op., at 17. The panel noted that there were other forms of calculating compensation available in Montana. Slip op., at 21-22. There are decisions from other Circuits that conflict with both the Ninth Circuit’s conclusions, so this case may go higher.

Seventh Circuit Ending 50 Years of Federal Court Supervision of Illinois Governors’ Employment Decisions: As Seventh Circuit Judge Michael Scudder wrote in Shakman v. Pritzker, No. 21-1739 (7th Cir., Aug. 5, 2022): “In no way are we saying that the risk of unlawful political patronage no longer exists within Illinois. Of course it does: nobody is naïve to the state’s embarrassing history.” Slip op., at 12. Fifty years ago, the “Shakman decrees” (yes, the same Shakman who brought the latest case) were negotiated to help limit unlawful political patronage corruption. Id., at 1-3. Among other things, the decrees bound the Illinois Governor to federal court oversight of employment-related practices for fifty years. Apparently, these reforms helped reduce the problem: “Indeed, in some two dozen reports by the special master over the past seven years, we see no findings of patronage practices harming individual employees or applicants. … the Governor has instituted or otherwise supported several remedial measures in recent years (under the special master’s and district court’s supervision, to be sure) to minimize the risk of political patronage in employment practices.” Slip op., at 10.

But Judge Scudder’s recent opinion says that, at least for the Governor, fifty years is enough:

The Governor remains subject to the original 1972 decree to this day—50 years later—despite having demonstrated substantial compliance with its terms and objectives in recent years. Principles of federalism do not permit a federal court to oversee the Governor’s employment practices for decades on end in circumstances like this. The power to hire, fire, and establish accompanying policies needs to return to the people of Illinois and the Governor they elected. The federal courts will remain open to decide individual cases of alleged constitutional violations should they arise. But no longer shall the Governor’s employment practices and policies have to win the approval of a United States court. … Be careful not to misread our conclusion. The district court is not closing. … while today’s decision relieves the Governor of complying with the Shakman decree, the First Amendment remains alive and well.

D.C. Circuit Rejects Claim of Judicial Branch to Limit Its Employees’ Off-Duty Political Activity Because Administrative Office Simply Speculated, Not Proved, Harm: The Supreme Court has long upheld the rights of federal employees to engage in political expression while not performing their official duties, so long as there is no suggestion that the government itself is involved. U.S. v. NTEU, 513 U.S. 454, 465-66 (1995). The test balances the government’s interest as an employer and sovereign against the employees’ freedom of expression. Pickering v. Board of Education, 391 U.S. 563, 571 (1968). But what about the special burden placed on the Administrative Office of the U.S. Courts, which has a higher need for the appearance of neutrality than the political branches? Since 2018, the AO has banned involvement in partisan elections even while away from work.

The D.C. Circuit just took up that question in Guffey v. Mauskopf, No. 20-5183, (August 16, 2022), (h/t the eagle-eyed Chip Watkins) and said that the AO’s policy was unconstitutional. The difference was that neutrality of judges and courts can’t be imputed to AO employees to the same degree: “AO employees do not decide cases — only judges do that. Nor do they make recommendations about the outcomes of individual cases, as law clerks and other legal advisors inside a courthouse often do.” Slip op., at 3.

And more importantly, the D.C. Circuit panel, like the Ninth Circuit panel in the Montana case summarized above, used the more stringent First Amendment standard of evidence the Supreme Court has been imposing in recent years:

That threat must be “real, not merely conjectural” — “mere speculation” is not enough. … To see the difference between “mere speculation” and a “real” threat, compare United States v. National Treasury Employees to Williams-Yulee v. Florida Bar. In National Treasury Employees, the Supreme Court addressed Congress’s novel concern that employees accepting honoraria for writing or speaking would lead them to “misuse or appear to misuse power.” 513 U.S. at 472. Because that risk was far from self-evident, Congress needed to provide evidence. Id. at 473. It didn’t. Id. at 472. So the Court decided that Congress’s concern could not justify the ban on honoraria. Id. at 477. In Williams-Yulee, on the other hand, the Court addressed the “regrettable but unavoidable appearance that judges who personally ask for money may diminish their integrity.” 575 U.S. at 447 (emphasis added). That concern was neither novel nor implausible, so “proof by documentary record” was unnecessary. Id.

Slip op., at 8. See, also, FEC v. Ted Cruz for Senate, 596 U.S. , 142 S.Ct. 1638 (May 16, 2022).

As in the political corruption cases, the concern over the appearance of judges’ neutrality distills to cover only financial quid pro quo: “To credit the AO’s concern for the perception of judicial impartiality, we would have to assume that the public is aware of the AO. There is nothing in the record to suggest that it is. … Even with eight decades of AO history to draw from, the AO has excavated no instance of off-duty political conduct by an AO employee that has injured the Judiciary’s reputation. That silent record is strong evidence that AO employees can speak on matters of public concern without tarnishing the reputation of the Judiciary.” Slip op., at 10 (cleaned up). Once again, a government agency, even one where its appearance of neutrality is a “state interest of the highest order,” slip op., at 9, cannot just speculate about harm; it must prove it. Slip op., at 9-15, 17. 

So why, inquiring minds want to know, doesn’t the Supreme Court review its “appearance of corruption” cases under the same standard (and the Institute for Free Speech just released a report on the appearance of corruption cases)? The Court may have taken a step in that direction in FEC v. Cruz, when it rejected a public opinion poll crafted by the FEC as evidence of a government interest in limiting candidate loan repayments, but it didn’t go very far into that specific question.

Federal Circuit: “Oops. Never Mind. We Won’t Disclose Your Confidential Filings After All.” The U.S. Court of Appeals for the Federal Circuit is (Warning: triskaidekaphobia trigger) the thirteenth Circuit Court, and has a limited jurisdiction, including appeals of some claims against the federal government, patents and trademarks, and several others whose claims are usually document-heavy. So, when it announced on August 17 that, as part of its transition to a more electronic case filing system, it would start unsealing its old files of sealed cases containing confidential paper records unless the parties showed cause why they should remain sealed, few people noticed. But apparently enough did that the Federal Circuit rescinded its new disclosure regime six days later, because “the court finds it impracticable at this time to continue to proceed with the proposed unsealing of previously-identified cases. Specifically, the court finds that there will be insufficient time and considerable, unanticipated administrative difficulty to both the court and to counsel in providing an opportunity for counsel and parties in the previously-identified cases to permit a physical review of the identified cases by the National Archives and Records Administration’s December 31, 2022 deadline for the court to complete the accessioning of its remaining paper case records.”

North Carolina Files First Merits Brief Filed in Independent State Legislature Case at U.S. Supreme Court: One of the more interesting pending constitutional arguments in the U.S. Supreme Court is over federalism and the interpretation of the Elections Clause, U.S. CONST. art. I, § 4, cl. 1, which provides that “The Times, Places and Manner of holding Elections for Senators and Representatives, shall be prescribed in each State by the Legislature thereof”. The “Independent State Legislature” Question boils down to whether and which courts have the power to change the legislature’s redistricting decisions. North Carolina has filed its first merits brief in the case (h/t ELB), inter alia relying on a passage from a recent Supreme Court decision: “‘The Framers were aware of electoral districting problems and considered what to do about them. They settled on a characteristic approach, assigning the issue to the state legislatures, expressly checked and balanced by the Federal Congress.’ Rucho v. Common Cause, 588 U.S. —, 139 S. Ct. 2484, 2496 (2019). Their approach did not assign any role in this policymaking process to state judges”. The opening NC brief is a deep dive into history and federalism’s structure. Traditionally, attempts to get courts to crimp their own power have been unavailing, but this Court has been more receptive to some curtailing. “Judicial review of partisan gerrymandering” under constitutional provisions not expressly and concretely addressing the subject depends on questions that are “political, not legal,” rendering the entire enterprise a quintessentially legislative one.” Rucho, 139 S. Ct. at 2500, 2507 (cleaned up).

Whittington Updates His Index of Supreme Court Decisions Finding Acts of Congress Unconstitutional: Princeton Law Prof. Keith Whittington puts out a useful compilation of “Acts Of Congress Held Unconstitutional In Whole Or In Part By The Supreme Court Of The United States” for the entire history of the Court. He has just published an update through the most recent term, and, of course, many of the listed decisions are familiar to First Tuesday Lunch Group participants, including the last on the list: #353. Federal Election Commission v. Cruz, 142 S.Ct. 1638 (2022), Act of March 27, 2002 (116 Stat. 81). Provision of the Bipartisan Campaign Reform Act that limits the amount of post-election contributions that may be used to repay a candidate who lends money to his own campaign is in conflict with the protection for freedom of speech in the First Amendment. Dissent: Kagan, Breyer, Sotomayor.”

Is Filing An Amicus Brief Reportable Lobbying of a Court? Politico published an article by Will Van Sant, “a staff writer for The Trace, a nonprofit newsroom covering gun violence in America,” which channels Sen. Sheldon Whitehouse’s long-term campaign to equate filing an amicus brief with lobbying. In an October 2021“essay” in the Yale Law Journal, for example, Sen. Whitehouse complained about a recent case of particular interest to the participants in the First Tuesday Lunch Group, devoting an entire section to “The Amicus Machine in Action: Americans for Prosperity Foundation v. Bonta.” Sen. Whitehouse wrote: “Americans for Prosperity Foundation v. Bonta provides a recent and extreme example of the ‘flotilla’ phenomenon.”

Why would all those organizations file amicus briefs seeking to protect donors? Sen. Whitehouse accurately points out the First Amendment ramifications of the case: “Indeed, the issue in AFPF was an existential one for the amicus machine: in deciding nonprofit donors’ alleged right to anonymity, the Court would directly impact the ability of dark-money donors to continue shaping judicial outcomes. In effect, the amicus briefs argued for a constitutional right to anonymous dark-money spending in our democracy.” Yes, indeed they did, expressly and often, citing specific Supreme Court precedents outlining that right and real-world examples of harassment and hardship the right protected against. Even the dissent in AFPF agreed with the need for that protection. “Publicizing individuals’ association with particular groups might expose members to harassment, threats, and reprisals by opponents of those organizations. Individuals may choose to disassociate themselves from a group altogether rather than face such backlash.” AFPF/TMLC v. Bonta, Sotomayor, J., dissenting, slip op. at 4.

Of course, Sen. Whitehouse himself also filed a brief in AFPF/TMLC v. Bonta. His amicus brief included the following:

Not only has California’s mandate elicited a facial constitutional challenge by Petitioner; it has drawn rebuke from a veritable flotilla of industry-aligned nonprofits and “think tanks” acting as amici curiae — a number of whose funding sources overlap with Petitioner’s and/or one another’s. It is among the largest such assemblages ever presented to the Court. Their number and their arguments suggest a much bigger game is afoot. Amici Senators submit that this appeal is just the latest move in the steady and methodical campaign pursued by powerful interests to both cement and obscure their influence over the public sphere since this Court’s decision in Citizens United v. Fed. Elec. Comm’n. The effect of these efforts has been to deprive the citizenry of information and make our democracy less representative.

Id., at 4.

Both Sen. Whitehouse and those supporting donor privacy have a First Amendment right to petition the government for redress of grievances. Sen. Whitehouse’s long campaign is undoubtedly sincere and heartfelt; sometimes he literally shakes with intensity while speaking of his feelings of urgency about transparency. But how would Whitehouse’s proposed “flotilla of industry-aligned nonprofits and ‘think tanks … in the steady and methodical campaign … to both cement and obscure their influence over the public sphere” standard work? Would Senators filing an amicus brief require every donor to the Senators’ campaigns and all donors to organizations directly or independently supporting the Senators or their proposals, to be disclosed whenever the Senators file an amicus brief? (Disclosure: the Public Policy Legal Institute, host of this Vox PPLI blog, also filed an amicus brief in AFPF/TMLC v. Bonta, although it is neither “industry-aligned” nor, by any standard, a “powerful interest;” the brief was joined by the National Taxpayers Union Foundation, which might be either or both.)

Infighting Challenges Attempt to Revise Constitution to Reverse Citizens United: Despite agreeing on opposition to the Supreme Court’s decision in Citizens United v. FEC, Insider reports that various progressive organizations are fighting over HOW to do that. Wolf PAC and former Young Turks founder Cenk Uygar, for example, want to host a convention to rewrite the entire Constitution: “‘All of the establishment Democrats like the corruption, it is what gave them power in the first place,’ Uygur told Insider, railing against what he views as a coordinated effort to sink Wolf PAC’s convention push.” Part of that is true, since other progressive groups such as Common Cause and many others fear the outcome of a Con con. “Calling a new constitutional convention under Article V of the U.S. Constitution is a threat to every American’s constitutional rights and civil liberties.”

NPR(!!) Profiles Justice Sam Alito: Much opprobrium is being cast at Justice Sam Alito after the recent abortion decision in Dobbs. Now, however, Nina Totenberg, long-time legal affairs correspondent for NPR, has written a profile of Justice Sam Alito, “a workhorse on the Supreme Court.” He certainly is a workhorse, especially as one of the two Justices who actually reads every one of the 7,000 petitions for certiorari (Supreme Court review of a case) filed each year, rather than participating in the clerk-run “cert pool” that assigns petitions to be read only by one clerk, who then writes a memo for other Justices.

Unlike most media coverage of Alito, Totenberg actually understands why, beyond the recent abortion decision, Alito is worth writing about: “Alito, unlike Marshall, Taney and Warren, is not chief justice, and he may be little known to the public generally. But he has played a key role on the court, often leading the conservative charge not just on abortion, but for expanded religious rights, against LGBTQ rights, against expanded voting rights, against labor unions, for the death penalty, and more. Indeed, within a short time of replacing the more moderate Justice Sandra Day O’Connor in 2006, he became something of the workhorse of the right.” She is not alone among liberal commentators in respecting Alito’s impact: “Liberal Yale law professor Akhil Amar defends Alito too, maintaining that the justice succeeds by staying within the lines and not overreaching. ‘He’s quiet. He’s able to succeed,’ says Amar.”

Less prominent in these profiles, however, is Alito’s attention to the First Amendment, which is significant. In Justice Breyer’s last First Amendment decision, Shertliff v. Boston, for example, Justice Alito’s concurrence challenged Breyer’s freewheeling “holistic” approach to First Amendment questions:

This approach allows governments to exploit public expectations to mask censorship. … And like any factorized analysis, this approach cannot provide a principled way of deciding cases. The Court’s analysis here proves the point. The Court concludes that two of the three factors—history and public perception—favor the City. But it nonetheless holds that the flag displays did not constitute government speech. Why these factors drop out of the analysis—or even do not justify a contrary conclusion—is left unsaid. This cannot be the right way to determine when governmental action is exempt from the First Amendment.

And in Matal v. Tam, Justice Alito rejected the Justice Department’s attempt to argue that a person’s acceptance of government “subsidies” (including trademark protection or even the standard tax deduction) constitutes a waiver of First Amendment protections (as discussed in a different context at the August 3 First Tuesday Lunch). Slip op. at 18-19.

Why Dissent? To “Appeal to the Brooding Spirit of the Law:” The Hill offers a column by John Kruzel discussing how the liberal Supreme Court Justices are writing pointed dissents (as if biting dissents were anything new), which includes some interesting history, including: “perhaps the most famous utterance on the transformative power of dissent came from former Chief Justice Charles Evans Hughes, a nominee of President Herbert Hoover. According to Hughes, a dissenting opinion is ‘an appeal to the brooding spirit of the law, to the intelligence of a future day, when a later decision may possibly correct the error into which the dissenting judge believes the court to have been betrayed.’”

CONGRESS

Can Congress Make Donald Trump Ineligible for Federal Office? Congress has enacted several laws that purport to make former President Donald Trump ineligible to hold federal office, but, as Prof. Ned Foley pointed out last October, Congress cannot override the Constitution, which sets qualifications for President and other federal offices. U.S. Term Limits 514 U.S. 779, 787-98 (1995) (qualifications for office are “fixed” in the Constitution and neither Congress nor states may add to them); Powell v. McCormack, 395 U. S. 486, 540 (1969) (Congress cannot alter or add to list of qualifications). Prof. Rick Hasen continued that discussion on Aug. 9 in the aftermath of claims by Marc Elias and others that Trump would be barred from office if he was convicted of misuse of federal documents. “Consider the basic point here the electoral equivalent of the familiar wedding refrain: ‘Speak now or forever hold your peace.’ Simply put, the time for disqualifying Trump from being on the ballot in 2024 is before those ballots are cast, not after he’s won the election.” Ben Horton from Free Speech for People, founded to fight Citizens United, responds in a guest post on ELB that Foley’s and Hasen’s reliance on In re Griffin 11 F. Cas. 7, 26 (C.C.D. Va. 1869) is misplaced, and “state election officials have the constitutional authority and duty to … exclude oath-violating insurrectionists from the ballot, with or without Congressional action.”

DEPARTMENT OF JUSTICE

California Man Pleads Guilty to Running Scam-PACs That Collected $3.5 Million But Spent Only $19 on Political Activities: The First Tuesday Lunch Group has long discussed the recurring problem of “Scam-PACs” whose main purpose is to enrich their operators by taking money under false pretenses. What’s a Scam-PAC? How about raising $3.5 million promising donors to support candidates, but then spending only $19 (nineteen dollars!) on political causes? Now the U.S. Department of Justice has gotten a guilty plea from one particularly-egregious Scam-PAC operator who did just that. DoJ says:

Robert Reyes … operated two political action committees—Liberty Action Group PAC and Progressive Priorities PAC—which solicited contributions from the public via robocalls and television, radio, and internet advertisements. The two PACs represented that the contributions would be used to support dueling presidential nominees of the two major political parties, respectively. Instead, Reyes and his co-conspirators used the funds to enrich themselves and to fund additional fraudulent solicitations. Specifically, Reyes admitted that the two PACs raised approximately $3.5 million in contributions during the 2016 election cycle and subsequent months, of which Reyes received approximately $714,000. Of the approximately $3.5 million raised, the two PACs contributed approximately $19 to legitimate political causes.

Reyes pled guilty to one count of conspiracy to commit wire fraud and to cause false statements to the Federal Election Commission and one count of money laundering. He could receive up to 20 years in prison, and has agreed to forfeit $809,920.40 that he received for his participation in the scam-PACs during the scheme.

STATES

Meta Blasts Washington State Political Ad Disclosure Law: Those who wrestle with California’s or New York’s campaign finance rules find them difficult, but Washington is worse. Facebook’s parent says in a fiesty memo in Washington’s court case for violating the state’s campaign advertising disclosure law: “However well-intentioned Washington’s disclosure rules may be, the First Amendment ‘prohibits such attempts to tamper with the “right of citizens to choose who shall govern them.”’ FEC v. Cruz, 142 S.Ct. 1638, 1652 (2022) (citations omitted). Because the disclosure regime singles out political speech for disfavored treatment (and compels speech to boot), it is presumptively unconstitutional.” It’s a pretty interesting P. 2, explaining how and why none of the big three providers will permit political ads in Washington state. The State Attorney General returns fire by press release (as he is wont to do): “Washington’s state campaign finance law was recently ranked best in the nation by the Coalition for Integrity, a Washington, D.C., nonprofit that promotes transparency and accountability. Despite repeatedly stating publicly that it is committed to ‘providing transparency during elections,’ Meta is attempting to escape accountability and strike down a crucial provision of Washington’s gold-standard law.” Geek Wire has a good play-by-play (h/t IFS).

After Misleading Texts in Kansas, Iowa Considers Whether Political Texts Will Be Subject to State “Attribution” Laws: Following up on recent First Tuesday Lunch Group discussions of 10DLC and other forms of political campaigning by text, the Iowa blog Bleeding Heartland reports that the Iowa Ethics and Campaign Finance Board may soon decide “when text messages are ‘electronic general public political advertising’ subject to Iowa’s law requiring disclosure of who is responsible for express campaign advocacy.” (h/t IFS) In 2000, 2006 and 2016, the Iowa Board held that such statements were required for emails. With upcoming battles likely on controversial ballot initiatives on gun control and abortion, the Board may take up the “attribution” question at its September meeting.

The move comes after thousands of text messages were sent to voters in the recent rejection of a Kansas ballot initiative about abortion. The texts said that voting YES on the initiative would “give women a choice” and “protect women’s health,” instead of explaining that a yes vote would have enabled the legislature to ban abortion, while a no vote would have upheld a Kansas Supreme Court ruling that the state constitution protects abortion rights. The question is not whether misleading or lying is illegal in political material, since, as Bleeding Heartland notes in quoting a 2020 blog post by Alex Boiocco from the Institute for Free Speech, the First Amendment protects false campaign speech. But disclosure rules under Iowa law require a “paid for by” attribution statement on “published material designed to expressly advocate the … passage or defeat of a ballot issue shall include on the published material an attribution statement disclosing who is responsible for the published material.” So, the question is whether texts on ballot initiatives, like campaign emails, are “electronic general public political advertising” subject to Iowa’s “paid for by” attribution requirement.

Georgia Ethics Commission Finds Reason To Believe Allied c3 and c4 Spent Millions to Help Gubernatorial Candidate Stacey Abrams: The Atlanta Journal-Constitution (paywall) and other media outlets report on the Georgia Government Transparency & Campaign Finance Commission vote to move forward with an investigation of two allied tax-exempt organizations – the New Georgia Project and its sister c4 the New Georgia Project Action Fund – for electioneering but not registering and reporting under Georgia’s campaign finance laws. Axios Atlanta: “The hearing is the latest episode in a longstanding fight between the New Georgia Project and the Republican-led state government, including the ethics commission and the Secretary of State’s office, which Abrams and her allies have decried as politically motivated.” AJC: “The state ethics commission on Monday decided there’s probable cause to believe nonprofits raised and spent possibly millions of dollars to back Stacey Abrams’ unsuccessful 2018 gubernatorial bid without disclosing it. … The commission staff says the groups hired canvassers, passed out literature, promoted Abrams’ candidacy — and the candidacy of other candidates — and solicited contributions.” A separate ethics investigation of the 2018 Abrams campaign has been pending since 2019. Curiously, according to Axios Atlanta, the c3’s lawyers responded to the 2019 Complaint that: “the [c4] Action Fund was legally paid as a commercial canvassing vendor by other groups and, therefore, was not an ‘independent committee’ receiving donations” (emphasis added). Odd statement raising all sorts of exemption issues. Unclear whether the IRS will get involved in its current “hunkered-down” state.

Which States Offer More Protection to First Amendment Rights, and Which Don’t – 2022 Edition: The Institute for Free Speech has published a big study rating states on ten different areas of speech regulation, including political committees, grassroots activity, and electioneering communications. IFS published this ranking because its legal defense of various Americans across the country who wanted to exercise their rights to free expression exposed how much regulation was throttling unsuspecting citizens simply trying to practice what their civics education had preached. “The Free Speech Index shines a light on the states so that everyone can see how their laws harm First Amendment rights. Hopefully, it also shows a path forward. Armed with this knowledge, the people can work to fix their laws and ensure that every American is truly free to speak.”

An interactive map shows that the rankings cut across geography, partisanship, and size: Only one state (Wisconsin) scores than 80% of the possible ratings points, and only three (Wisconsin, Michigan and Iowa) score higher than 70%. Thirty-five states rank below 50% and eight (Florida, California, Delaware, Maryland, Hawaii, Washington, Connecticut, and New York) score below 30%. New York, the bottom of the barrel, achieved only a 15% score.

Scott Blackburn, author of the IFS report, writes: “speech about government is stringently restricted across the country.” In particular, “Across the country, states are regulating too much speech by broadly defining what kind of groups are regulated and how much of and what types of activity must be regulated. Most states are simply not considering the First Amendment impacts in these areas.”

Ten Years After Citizens United, Corporations Did Not Affect State Tax Policy: The National Bureau of Economic Research released Working Paper 30352 that looked at one common attack on Citizens United v. FEC, 558 U.S. 310 (2010): the claim that corporations would use their new ability to make political independent expenditures to affect state tax policy. The conclusion? “Ten years after the ruling and for a wide range of outcomes, we are not able to identify economically or statistically significant effects of corporate independent expenditures on state tax policy, including tax rates, discretionary tax breaks, and tax revenues.” The paper’s authors posted a more user-friendly (and hedged) explanation in the Harvard Law School Forum on Corporate Governance. The Wall Street Journal editorialized: “Citizens United Bought … Nothing? … If billionaires were able to buy elections to lower state taxes, you’d think they would have done it by now.”

GENERAL

Want to Make A Lot of Money? Start a Politics-Oriented Media Site Like Politico or Axios: Axios has announced that it will be acquired by Cox Enterprises, its most recent lead investor for $525 million. Axios was started in 2016 by three refugees from Politico: Mike Allen, Jim VandeHei (formerly CEO of Politico) and Roy Schwartz. Vox notes that “Money from Meta — and the rest of Big Tech — is pouring into Washington publications.” The Washington Post said “Cox, a 124-year-old media company, had already been a minority investor in Axios before the sale, which is the second major transaction involving a Beltway digital news company in the past year. In October, German publisher Axel Springer purchased Arlington-based Politico for $1 billion after discussing a bid to buy Axios.” What’s driving the tech purchases? Increasing governmental attention to tech and (at least by tech industry standards) rock-bottom prices; that $500 million is a drop in the bucket for multi-billion dollar Meta/Facebook. Not mentioned in the Post article was the purchase of the Post by Jeff Bezos which may have sparked the idea. 

What’s Wrong With Democrats AND Republicans? Crazy Ideas At The Top: As with so much in today’s politics, both sides of the political spectrum describe the same bottom-line using different words: those at the top are tone deaf. From the Left, Time says a “massive voter survey” finds that: “Progressives are losing on the top issue of the coming election: the economy. … The data suggests Democrats need a messaging framework that centers the conversation on working-class voters, the elusive reservoir of voters who have supported Republicans for years. …The research finds summoning villains does not work for Democrats. … The remedy? Democrats just need to realize progressive Twitter isn’t real life.” From the Right, the Wall Street Journal’s Gerard Baker writes about too many celebrity candidates:

One of the more intriguing themes in this fall’s midterm elections pits the appeal of outsider candidates against that of professional politicians. … And while it’s true that running for office can get easier with experience, how do you square that with Mr. Biden’s recurrent foot-in-mouth disease or Hillary Clinton’s apparently inexhaustible capacity to lose? The problem isn’t inexperience itself. This year’s crop of leading outsiders owe their difficulty less to being new faces than to the things they say – and purport to believe – and to their inescapable proximity to Mr. Trump and his various toxicities. It would be frustrating if their defeat gave the people who have demonstrated so much experience in screwing things up a chance to do even more damage.

Wall Street Journal Profiles Former ACLU Head Nadine Strossen’s Call For the Left to “Re-Embrace the First Amendment:” Not to be outdone by NPR profiling a conservative (see above), the Wall Street Journal offers a profile of long-time liberal icon Nadine Strossen, who headed the American Civil Liberties Union for many years. Excerpt:

I continue to re-examine my longstanding belief about the mutually reinforcing relationship between free speech and equality, and I continue to be completely convinced that these are two mutually reinforcing values. … we can’t have meaningful liberty, in a meaningful sense, unless it’s equally available to everybody. … Every single one of us should have an equal right to choose how we express ourselves, how we communicate to somebody else, what we choose to listen to. … I see what I call illiberalism in the classic sense on both sides of the political spectrum, and I never want either one to get off the hook.

Can Silicon Valley’s Congressman Woo Rust Belt Voters? Politico puff piece on Ro Khanna’s attempt to sell “new economic patriotism” in Wisconsin, Indiana and Iowa: “’Make more stuff here,’ he said. ‘Build our productive capacity,’ he said. ‘Buy American,’ he said.”

Facebook’s Woes Build, As Academics Build Online Database of Ad Targeting: In the wake of last month’s complaints that both Google and Facebook have limited Republican emails and ads, now Facebook faces Ivory Tower attacks on its basic revenue stream: targeted ads. Politico reports: “At stake is how transparent Facebook should be about how people are targeted with partisan messages and how much data it should give to outside researchers. That standoff is heating up ahead of the midterms. On [Aug. 4], the NYU researchers launched a searchable database of Facebook digital political ads they’ve managed to pull together despite the ban, putting them right back in the company’s crosshairs. ‘I’m scared of getting sued. But what I’m more scared of is another Jan. 6,’ said Laura Edelson, one of the academics behind the project and co-lead at NYU’s Cybersecurity for Democracy project.” This is a harbinger of bigger fights during the mid-terms and the 2024 elections.

Katie Harbath, former National Republican Senatorial Committee and congressional staffer, was brought on by Facebook to help work with Republicans as director for global elections before leaving “disillusioned” last year. Harbath told Politico that partisan concerns over digital ad targeting were likely to get worse: “It’s been very hard to get a sense of what is happening. There are a lot of new vectors that are popping up that are going to remain really tricky for the [online] platforms to deal with.” That’s not new, but may get worse.

Stirewalt, Reporting From Inside Fox News Election-Night Coverage: Chris Stirewalt, now at AEI but formerly Political Editor of Fox News Channel, is renowned for calling Arizona for Biden in the Fox 2020 presidential election coverage, and being dumped because of it. Now he pens a tell-all in Politico: “The number, of course, was how many seats I forecast Republicans to win that night. ‘Our best guess is 64 seats, sir.’ Ailes, mouth set like a bulldog and eyes staring through the back of my head, said, ‘Dick Morris says it could be one hundred. Why is yours so low?’ I figured Ailes, a smart man, knew that Morris, a network contributor at the time, was a joke.” As much a critique of recent media style as political revenge, Stirewalt sums up: “There are lots of books and articles that talk about how the news media is hurting select groups: Republicans or Democrats or populists or minority groups or the family or whatever suits you. But that kind of blame-casting just alienates us further, replicating the core defect of the news media that critics are attacking. There is no trophy for being more harmed by our lazy, alienating press. We’re all losers in this one.”