SCHUMER FLOOR STATEMENT ON THE DISCLOSE ACT
Floor Statement of Senator Charles E. Schumer on S. 3295, the DISCLOSE Act
May 3, 2010
Mr. President, last Friday, I introduced S. 3295, the DISCLOSE Act, because Democracy Is Strengthened by Casting Light on Spending in Elections. I am joined by 40 of my Senate colleagues as cosponsors.
Decades ago, Justice Louis Brandeis boldly said, “Sunlight is said to be the best of disinfectants.” That’s exactly what this bill will do – shine a light on the flood of spending unleashed by the Citizens United decision.
The DISCLOSE Act will drill down and give the public the information they have a right to know. No longer will groups be able to live and spend in the shadows.
The Court spoke in the Citizens United decision. And while there is disagreement with its ruling, there is room to maneuver. This legislation does not circumvent the Court by reimposing a backdoor ban on corporate spending. Instead, the DISCLOSE Act closes certain loopholes and relies on enhanced disclosure, an idea endorsed by the Court. This legislation meets the test of constitutionality.
The aim of the DISCLOSE Act is simply to level the political playing field so that special interests do not drown out the voice of the average voter. It applies to corporations and advocacy organizations the same rules that candidates already have to abide by. And it applies these rules equally across the board. It covers corporations and labor unions alike, as well as 527s, social welfare organizations, and trade associations.
The DISCLOSE Act will do the following:
First, new disclaimers on all television advertisements funded by special interests will be required in order to uncover who is really behind the ad. If a corporation is running the ad, the CEO will have to appear to at the end to say that he or she approved the message, just like a candidate must do today. If an advocacy organization is running the ad, both the head of the organization running the ad, and the top outside funder of the ad, will have to appear on camera. Additionally, a list of the Top Five Funders to that organization will be displayed on the screen. This will stop the funneling of big money through shadow groups in order to fund ads that are virtually anonymous. For the first time, the money can be followed back to its origin and the source of the money will be public.
Second, an unprecedented level of disclosure is mandated, not only of an organization’s spending, but also of its donors. In disclosing their donors, organizations will have a choice – they can either disclose all of their donors that have given in excess $1,000, or they can disclose only those donors who contribute to the group’s Campaign-Related Activity Account, if they solely use that account for their spending. All spending intended to influence an election – be it on television, radio, print, mailers, robocalls, and billboards – would flow through this account. And every donor who contributes more than $1,000 would have to be disclosed. Organizations must not only disclose these donors to the FEC, but also to the public on their websites and to their shareholders and members through their annual and quarterly reports.
Third, loopholes created by the Court’s decision are closed. The first loophole is closed by preventing foreign-controlled entities from spending unlimited sums in our elections through their U.S.-based subsidiaries. This was a loophole specifically mentioned by Justice Stevens in his dissent. Foreign leaders who don’t have American interests in mind shouldn’t have the ability to influence our elections. The second loophole is closed by banning companies with government contracts in excess of $50,000 from making unlimited expenditures. The third loophole is closed by banning expenditures by companies that receive government assistance such as TARP. Taxpayer money should not be used to help corporations influence elections.
Finally, in an attempt to allow all candidates and parties to respond to ads funded by special interests, the current law granting lowest unit rate to candidates is expanded by giving those same rights to the parties on a limited geographic basis.
I ask my colleagues to join me in sponsoring and passing the DISCLOSE Act.
The following is a section by section analysis of the DISCLOSE Act.
TITLE I – REGULATION OF CERTAIN POLITICAL SPENDING
Sec. 101. BAN PAY-TO-PLAY
• Prevent Government Contractors from Spending Money on Elections. Government contractors would be barred from making campaign-related expenditures, defined to include independent expenditures and electioneering communications. This is an extension of an existing ban on contributions made by government contractors. Before Citizens United, corporations could not make such campaign-related expenditures. A $50,000 contract threshold will be included to exempt small government contractors.
• Prevent Corporate Beneficiaries of TARP from Spending Money on Elections. Corporations that received bailout funding from the federal government should not be permitted to use taxpayer money to influence elections. This section would prohibit bailout beneficiaries from making campaign-related expenditures. Once that money is repaid, however, the restrictions would be lifted.
Sec. 102. PREVENT FOREIGN INFLUENCE IN U.S. ELECTIONS
• While foreign nationals, including foreign corporations (those incorporated overseas), are banned from making contributions or expenditures to influence U.S. elections, the opinion in Citizens United created a loophole for spending by domestic corporations controlled by foreign nationals. To close the loophole, the legislation extends the existing prohibition on contributions and expenditures by foreign nationals to include domestic corporations under the following circumstances:
1. If a foreign national owns 20% or more of voting shares in the corporation, which is modeled after the control test in many states, including Delaware;
2. If a majority of the board of directors are foreign nationals;
3. If one or more foreign nationals have the power to direct, dictate, or control the decision-making of the U.S. subsidiary; or
4. If one or more foreign nationals have the power to direct, dictate, or control the activities with respect to federal, state or local elections.
Sec. 103. PREVENT ORGANIZATIONS FROM COORDINATING THEIR ACTIVITIES
WITH CANDIDATES AND PARTIES
• The legislation ensures that corporations and unions are not allowed to coordinate campaign-related expenditures with candidates and parties in violation of rules that require these expenditures to be independent.
• Current FEC rules bar corporations and unions from coordinating with congressional candidates and parties about ads that refer to the candidate and are distributed within 90 days of a primary election or within 90 days of the general election. For Presidential contests, current FEC rules prohibit coordination on ads that reference a presidential candidate in the period beginning 120 days before a state's Presidential primary election and continuing in that state through the general election.
This legislation would do the following:
• For House and Senate races, the legislation would ban coordination between a corporation or union and the candidate on ads referencing a Congressional candidate in the time period starting 90 days before the primary and continuing through the general election. For presidential campaigns, the legislation would ban coordination between a corporation or union and the candidate on ads referencing a Presidential or Vice Presidential candidate in the time period starting 120 days before the first presidential primary and continuing through the general election.
Sec. 104. POLITICAL PARTY COMMUNICATIONS
• The legislation provides that any payment by a political party committee for the direct costs of an ad or other communication made on behalf of a candidate affiliated with the party is treated as a contribution to the candidate only if the communication is directed or controlled by the candidate.
• Party-paid communications that are not directed or controlled by the candidate are not subject to limits on the party’s contributions or expenditures.
TITLE II – PROMOTING EFFECTIVE DISCLOSURE OF CAMPAIGN-RELATED ACTIVITY
The legislation ensures that the public will have full and timely disclosure of campaign-related expenditures (both electioneering communications and public independent expenditures) made by covered organizations (corporations, unions, section 501(c)(4), (5), and (6) organizations and section 527 organizations).
The legislation imposes disclosure requirements that will mitigate the ability of spenders to mask their campaign-related activities through the use of intermediaries.
It also requires disclosure of both disbursements made by the covered organization and also the source of funds used for those disbursements.
SUBTITLE A – REPORTING IMPROVEMENTS TO THE FEC
Sec. 201. INDEPENDENT EXPENDITURES
The definition of an “independent expenditure” is expanded to include both express advocacy and the functional equivalent of express advocacy, consistent with Supreme Court precedent. Additionally, the section imposes a 24-hour reporting requirement for expenditures of $10,000 or more made more than 20 days before an election, and expenditures of $1,000 or more made within 20 days before an election.
Sec. 202. ELECTIONEERING COMMUNICATIONS
This section expands the definition of “electioneering communications” to include all broadcast ads that refer to a candidate within the period beginning 90 days before a primary election, until the date of the general election. Any such “electioneering communication” is subject to the disclosure requirements in the bill. The section also expands the reporting requirements for electioneering communications to include a statement as to whether the communication is intended to support or oppose a candidate, and if so, which candidate.
SUBTITLE B – EXPANDED REQUIREMENTS FOR DISCLOSURE
Sec. 211. IMPROVED DISBURSEMENT REPORTING REQUIREMENTS
The legislation would require corporations, labor unions, and section 501(c)(4), (5), or (6) organizations—as well as section 527 organizations—to report all donors who have given $1,000 or more to the organization during a 12-month period if the organization makes independent expenditures or electioneering communications in excess of $10,000.
If an organization makes a transfer of funds to another person for the purpose of making an independent expenditure or electioneering communication, the organization shall be treated as making an independent expenditure or electioneering communication. A person shall be deemed to have transferred funds for the purpose of making campaign-related expenditures if there have been substantial discussions about such expenditures between the person making the transfer and the person receiving the funds, if the person making the transfer or the person receiving the transfer knows (or should have known) of the intent to make campaign-related expenditures by the person making the transfer or if making the transfer or the person receiving the funds made a campaign-related expenditure in the last election cycle or the current cycle.
Sec. 212. DISCLOSURE OF GENERAL TREASURY FUNDS
If a donor to a covered organization specifies that his donation may not be used for campaign-related activity, the organization is restricted from using the donation for that purpose, and may not then disclose the identity of the donor. The organization’s CEO must certify to the donor within 7 days that such funds will not be used for campaign-related activity.
If a covered organization makes a disbursement for campaign-related activity, the CEO must file a statement with the FEC certifying that the expenditure was not made in coordination with a candidate, that funds designated by the donor not to be used for campaign-related activity have not been used for any campaign-related activity, and that the spending has been fully disclosed and made in compliance with law.
Sec. 213. CREATION OF SEPARATE CAMPAIGN-RELATED ACTIVITY ACCOUNT
An organization can establish a separate “Campaign-Related Activity” account to receive and disburse political expenditures. If an organization makes campaign-related expenditures exclusively from its separate account, then it is only required to disclose only donors who have contributed $10,000 or more for unrestricted use or donors who have contributed $1,000 or more specifically for campaign-related activity.
Sec. 214. ENHANCE DISCLAIMERS TO IDENTIFY SPONSORS OF ADS
• Require Leaders of Corporations, Unions, and Organizations to Identify that they are Behind Political Ads. If any covered organization (corporation, union, section 501(c)(4),(5), or (6) organization, or section 527 organization) spends on a political ad, the CEO or highest ranking official of that organization will be required to appear on camera to say that he or she “approves this message,” just like candidates have to do now.
• In order to prevent “Shadow Groups”, Require Top Donors To Appear in Political Ads They Funded. In order to prevent individuals and entities from funneling money through shell groups in order to mask their activities, the legislation will include the following requirements:
• The top funder of the advertisement must also record a stand-by-your-ad disclaimer.
• The top five donors of non-restricted funds to an organization that purchases campaign-related TV advertising will be listed on the screen at the end of the advertisement. This has been used very successfully in Washington State and is the model for this section in the legislation.
SUBTITLE C – REPORTING REQUIREMENTS FOR REGISTERED LOBBYISTS
Sec. 221. REQUIRING REGISTRANTS TO REPORT INFORMATION ON INDEPENDENT EXPENDITURES AND ELECTIONEERING COMMUNICATIONS
In an effort to add to the transparency of lobbying activities, all registrants under the Lobbying Disclosure Act must disclose the following information on their semiannual reports: the date and amount of each independent expenditure or electioneering communication of $1,000 or more, and the name of each candidate referred to or supported or opposed.
SUBTITLE D – FILING BY SENATE CANDIDATES WITH THE FEDERAL ELECTION COMMISSION
Sec. 231. FILING BY SENATE CANDIDATES WITH THE COMMISSION
In addition to the increased disclosure and transparency placed on outside organizations, the legislation will incorporate language from the bipartisan S. 1858, which requires Senators to electronically file their campaign finance reports directly to the FEC.
TITLE III – DISCLOSURE OF CAMPAIGN-RELATED ACTIVITY TO MEMBERS & SHAREHOLDERS
Sec. 301. ENHANCE REQUIREMENTS FOR DISCLOSURE OF POLITICAL EXPENDITURES TO SHAREHOLDERS AND MEMBERS OF COVERED ORGANIZATIONS
All campaign-related expenditures made by a corporation, union, section 501(c)(4), (5), or (6) organization, or section 527 organization must be disclosed on the organization’s website with a clear link on the homepage within 24 hours of reporting such expenditures to the FEC. Additionally, all campaign-related expenditures made by a corporation, union, section 501(c)(4), (5), or (6) organization, or section 527 organization must be disclosed to shareholders and members of the organization in any financial reports provided on a periodic and/or annual basis to its shareholders or members.
TITLE IV – TELEVISION MEDIA RATES
Sec. 401. PROVIDE LOWEST UNIT RATE FOR CANDIDATES AND PARTIES
Current law allows for candidates to receive the lowest unit rate for airtime in order to get their message out over the airwaves.
If a covered organization (which includes corporations, unions, section 501(c)(4), (5), and (6) organizations, and section 527 organizations) spends $50,000 on airtime to run ads on broadcast, cable, or satellite television that support or oppose a candidate, then that candidate or political party committee is allowed to receive the lowest unit rate for that media market.
The broadcaster must also ensure that the candidate or political entity has “reasonable access” during nonpreemptible airtime.
TITLE V – OTHER PROVISIONS
This Title contains the judicial review, severability, and effective date sections.
Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.
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