Court Overturns Only Rule Requiring Secret Groups Disclose Donors

An appeals court overruled a ruling that would have shed light on secret political groups Tuesday.

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Campaign finance reformers' only recent victory, however small, was erased Tuesday when a judge overturned a ruling from earlier this year that required political groups to disclose their donors.

The appeals court ruling means political groups like Karl Rove's Crossroads GPS and the Koch Brothers' Americans for Prosperity will no longer disclose any donors, regardless of the type of ads they run. The overturned ruling had required such groups to disclose their donors when they ran issue ads.

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The case in question, Van Hollen vs. Federal Election Commission, was first decided in March. In that ruling, judge Amy Berman Jackson ruled that a provision of campaign finance law was being interpreted incorrectly by the FEC.

Up until Jackson's ruling, the FEC required groups disclose donors only if they specifically earmarked their donation for issue ads –writing "For Issue Ads" on the memo line of a check, for example. Because that rarely happened, if ever, groups avoided disclosing their donors.

Following her ruling, any time a group ran an issue ad, also known as an electioneering communication, it had to provide the FEC the names and addresses of all contributors who gave $1,000 or more, "regardless of their subjective purpose in contributing."

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But even after Jackson's ruling, these political nonprofits largely avoided disclosure, says Paul S. Ryan, senior counsel at the Campaign Legal Center, which was part of the legal team representing Maryland Rep. Chris Van Hollen.

"Outside spending corporations that would or could be affected by [the Van Hollen decision] have been bending over backwards to avoid disclosure and doing so successfully," Ryan says.

Instead of running issue ads that only suggest how viewers should vote – "Barack Obama has failed to fix America's problems" – they ran ads that explicitly told the viewer how to vote at the end – "Vote Barack Obama for president." This "express advocacy" meant the ads weren't electioneering communications but independent expenditures, which aren't covered by the Van Hollen ruling.

The U.S. Chamber of Commerce, for example, made it very clear it would tweak its ad strategy to avoid disclosure at a media breakfast following the ruling.

"It's full steam ahead," Bruce Josten, the Chamber's executive vice president for government affairs, told reporters when asked how the Chamber would respond to the ruling. "The only thing that may switch is you're forced to do express advocacy using the magic words 'vote for,' 'vote against' as opposed to highlighting a given member's legislative record."

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The Van Hollen case now goes back to the FEC, which will review this most recent ruling. From there it will likely remain in the courts, leaving the door open for continued secret political spending for well beyond this year's election, says Ryan.

Seth Cline is a reporter with U.S. News and World Report. Contact him at scline@usnews.com or follow him on Twitter.