Complicated, but not Comprehensive

November 2, 2006   •  By IFS staff   •    •  
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Thanks to advocates of campaign finance “reform”, the enterprise of political speech in America has become complicated business.  But while the regulatory regime advanced by reformers is incredibly complicated, it is not comprehensive; there are gaps.  Reformers call these “loopholes,” although we prefer to call the absence of regulation “freedom”.

As freedom becomes harder to find in the morass of campaign finance regulation, claims to have discovered some are met with a reflexive sort of skepticism.  Surely, it is thought, in a code this complicated there must be some applicable regulation.  In a recent draft Advisory Opinion, AO 2006-30 (ActBlue), the FEC’s Office of General Counsel appears to have fallen into this trap.  We at CCP would like to help pull them out.

ActBlue is a non-connected political committee that helps Democratic federal candidates raise money by serving as a conduit for earmarked contributions made through ActBlue’s website.  ActBlue requested an advisory opinion from the Commission regarding its plan to solicit donations for likely candidates in the 2008 presidential primary.  Under their plan, ActBlue would retain these donations until the individuals to whom they are directed register campaign committees with the Commission.  Should a prospective candidate decide not to run, or fail to register a campaign committee by a week before the Democratic National Convention, ActBlue would pass funds retained for that prospective candidate to the Democratic National Committee.  Donors would be made aware of this arrangement at the outset.

Campaign finance law being what it is, surely there must be something wrong with this plan, right?  Wrong.  In fact, there’s nothing wrong with it, not because the law makes an exception for this sort of plan, but because campaign finance law is silent on the issue.   But the instinct to regulate is a strong one, as we can see in the draft Advisory Opinion that the Commission will consider today.  It holds that ActBlue may not retain these donations, rather, it must forward them to prospective candidates with 10 days of receipt.  Prospective candidates are then given 10 days to decide whether or not to return the money, or deposit and handle the money with all the formalities required of announced candidates.

The problem with this approach, however, is the word “prospective”.  While the advisory opinion treats it as a formalistic distinction, there is a world of difference between actual candidates and people who are only considering becoming candidates.  For one thing, the regulation relied on in the Advisory Opinion (11 CFR 110.6) only applies to honest-to-goodness candidates.  Once one of the prospective candidates for whom ActBlue has collected funds becomes an official “candidate”, ActBlue will have 10 days to disburse the collected funds.  Until that happens, however, ActBlue is simply outside of the FEC’s regulatory authority and has a perfect right to retain the donations.

Moreover, if it were agreed to by the donors, ActBlue would have a perfect right to distribute the funds before the prospective candidates begin campaigning, and these individuals could accept the funds without becoming “candidates”.  The draft advisory opinion ignores the fact that prospective candidates have a right to “test the waters”; they may raise and spend money in order to determine whether or not to run for office.  And it doesn’t matter whether those testing-the-waters funds come directly from donors or are channeled through a group like ActBlue.  Merely because ActBlue has a reporting requirement as a non-connected political committee does not mean that everyone who receives money from it is a “candidate”.  If ActBlue desires (and donors agree), it may forward donations to prospective candidates for testing the waters, and is simply obliged to report these “disbursements”.

When the Commission considers this draft advisory opinion today, we hope they’ll recognize that ActBlue’s plan is outside the Commission’s regulatory authority; despite reformers’ best efforts, campaign finance regulation is not yet all-encompassing.

And thank goodness for that.  Thanks to this gap in the law, ActBlue is free to use the power of the Internet to reach out to people who may never have given money to a political campaign before.  It’s free to retain their donations and distribute them only to “candidates”, those who have surveyed the political landscape and are serious about running for office.  More importantly, this freedom can be enjoyed by any non-connected political committee, of any partisan persuasion, that wants to follow ActBlue’s example.  We could use more “loopholes” like that.

We’ll keep you updated on the Commission’s decision.  To read CCP’s comments on Draft Advisory Opinion 2006-30, click here.

IFS staff

IFS staff