New proposed corporate disclosure rules, 501(c)(4) limits

Right on the heels of my analysis of how attorneys at major law firms contributed to political candidates comes a new proposal on disclosure.

InsidePoliticalLaw notes that twenty Democrats in the House have introduced legislation to amend campaign finance laws. Two of the provisions are significant.

The first would require corporate disclosure:

A corporation which submits regular, periodic reports to its shareholders and a labor organization which submits regular, periodic reports to its members shall include in each such report, in a clear and conspicuous manner . . . the disbursements made by the corporation or labor organization for covered political activity during the period covered by the report . . . . 

Shareholders have pursued corporate disclosure of political activity with increasing frequency.  This legislation would essentially usurp those now-localized events at the individual corporate or labor union level and mandate disclosure of corporate spending.

But as Kevin Shortill notes, ambiguity in the proposed legislation (e.g., labor unions are not required to submit "regular, periodic reports") suggests that the scope of disclosure may actually be "illusory."

The second would limit 501(c)(4) spending on political activity to a 10% threshold. 501(c)(4)s are currently subject to a 50% threshold. The moves comes shortly after the IRS scandal in which the IRS began examining the legitimacy of 501(c)(4) organizations because it believed that many (particularly conservative) organizations may not actually be "social welfare" organizations for purposes of the tax code. And it comes after an increase in the number of such organizations taking advantage of exemption from disclosure after the Supreme Court's decision in Citizens United. A dramatic decrease in the percentage of 501(c)(4) spending that could be used on political activity would likely shift political resources elsewhere.

The fate of such proposals, even if relatively modest (or even "illusory"), remains uncertain in a contentious political chamber. But unlike wrong approaches, this one, at least, has the hallmarks of the type of legislation we may expect to see in the future--and, perhaps, achieve success.