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.”
Vox PPLI 