Senate Bills 335 and 336 were signed into law by Governor Snyder as 2017 PA 119 and 120 on September 20, with immediate effect. Seven years after the U.S. Supreme Court Decision in Citizens United v. Federal Election Commission and the federal district court decision in Michigan Chamber of Commerce V. Land, the Michigan legislature has now codified how our state will treat independent expenditures and Super PAC’s through these bills. Many would argue that the bills simply enshrine the state regulatory framework and practice that arose by necessity in the absence of legislative amendments to implement the landmark federal case and its progeny. Others contend that the bills went further than necessary in what they allow, or did not go far enough beyond current practice to address perceived evils.
The Citizens United decision effectively reversed longstanding policy codified in the Michigan Campaign Finance Act, holding that, under the First Amendment, corporations and labor union could make independent expenditures in any amount expressly advocating for the election or defeat of candidates. With no coordination, discussion, or understanding between the maker and beneficiary, the “sin” of quid pro quo corruption arguably does not exist. Later case law clarified that these entities can also give to independent expenditure-only political committees to effectuate political speech. The Michigan Department of State implemented these decisions as best they could without further guidance from the legislature.
PA 119 rectified the statutory gap to provide certainty on independent expenditure for the entities and committees that make them. PA 120 as a companion bill codified the penalties for violation. With the new laws in place, the MCFA now provides for the following:
• The federal definition of “independent expenditure” – which emphasizes against coordination in any form – is adopted. An independent expenditure that satisfies the definitional test is not a contribution under the Act, but becomes one if independence is compromised.
• Provisions of the MCFA that were in conflict with the federal cases have been amended, making clear that corporations and labor unions can make independent expenditures, give to committees that are formed to do so, and do not themselves have to become a committee for doing so unless they solicit or receive funds.
• A new “independent expenditure committee” is created for the purpose of making independent expenditures, with powers and prohibitions that are largely consistent with federal case law and regulations, and pre-existing state practice. The new committee files campaign statements on the same schedule as political and independent committees, with the same degree of transparency and penalties for non-compliance.
• An entity that itself makes an independent expenditure will likely owe an independent expenditure report providing detail on the specific expenditure, but would not become a committee with ongoing filing obligations unless it solicits or receives funds to make the expenditure.
• Late filing fees are extended to independent expenditure reports and reporting for independent expenditures relating to candidates for state office or statewide ballot questions is centralized with MDOS.
• Heavy fines and felony criminal penalties for improper activities and contributions are codified.
The two most controversial provisions of the bills spell out policy on the line between coordination and independence:
• An independent expenditure committee or an entity making an independent expenditure may share a common vendor with a candidate committee as long as no coordination or information sharing occurs between them.
• A candidate or their staff may solicit funds for an independent expenditure committee, even if that committee later makes an independent expenditure benefiting that candidate, as long as no further coordination of any sort occurs.
While it may seem counterintuitive, the law’s treatment of common vendors is on par with federal guidance. Further, MDOS indicated in testimony on the bills that they have ruled in at least one complaint that a common vendor does not by itself constitute coordination. In that regulatory case, the vendors were able to illustrate the internal protections set up to avoid coordination and the penalties involved. With regard to candidate solicitations, critics have contended that this could end-run direct contribution limits for candidates. However, any knowledge, discussion, etc., of any potential expenditures before, during, or after the solicitation would destroy independence and result in an illegal contribution to the candidate, which should eliminate the utility of any bad intention.
Privately, both supporters and opponents have admitted that the bills shouldn’t significantly change how entities and committees go about making independent expenditures. Under Citizens United, they could always spend unrestricted amounts on independent expenditures, and what are now called independent expenditure committees could always raise unlimited amounts. The bills do not enable or prohibit so-called “dark money” - that phrase applies to unreported funds for “issue ads” which do not expressly advocate for the election or defeat of a candidate, or the qualification, passage, or defeat of a ballot questions. PA 119 only deals with fully reportable funds raised or expended for express advocacy. The legislation did raise some politically uncomfortable questions for both sides on coordination. The lines drawn in the law are clear, based on known regulatory and legal quantities, and stiff penalties and real criminal provisions should provide strong deterrents against misbehavior, but time will tell how practice and enforcement play out.