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Campaign Finance Alert: Minnesota Responds to Citizens United


Campaign Finance Alert:
Minnesota Responds to Citizens United


Citizens United
On January 21, 2010, the United States Supreme Court issued its decision in the case of Citizen’s United v. Federal Election Commission. Among its most important rulings, the Court concluded that independent expenditures by corporations in opposition to or in support of candidates for political office were protected by the First Amendment to the United States Constitution.
 
The Court’s decision in Citizen’s United immediately put into question certain provisions of Minnesota’s campaign finance law. Minnesota Statutes, Section 211B.15, subdivision 3, specifically prohibited corporations from engaging in independent expenditure activities. Labor unions have long been free to contribute directly to candidates or to make independent expenditures on their behalf.
 
The penalties under the Minnesota law were significant. An individual assisting in an illegal corporate contribution or independent expenditure would be liable upon conviction for up to five years in jail, a $20,000 fine, or both (Minn. Stat. §211B.15, subd. 6), while a corporation violating the law was subject to having its rights to do business in the state withdrawn and the corporation dissolved as well as a fine of up to $40,000 (Minn. Stat. §211B.15, subd. 7).

Minnesota Chamber Litigation
In an effort to clarify the Minnesota law and the rights of business corporations for protected political speech, the Minnesota Chamber of Commerce (“Chamber”), with the support of other statewide trade associations and local chambers, brought suit in Federal District Court in Minnesota. Minnesota Chamber of Commerce v. Gaertner, No. 10-426, 2010 WL 1838362 (D. Minn. May 7, 2010). The Chamber sought a declaration that Minnesota Statutes, Section 211B.15, subdivision 3, which prohibits corporate independent expenditures, was unconstitutional on its face and Minnesota Statutes, Section 211B.15, subdivision 2, which prohibits corporate contributions to candidates for political office, was unconstitutional insofar as it could be applied to corporate independent expenditures.
 
On May 7, 2010, just eight days after a summary judgment motion in the case had been argued, Judge Paul Magnuson of the Federal District Court in Minnesota issued his opinion. Judge Magnuson determined that, as the Chamber contended, the offending statutes violated the First Amendment as articulated in the Citizen’s United case. In addition to declaring the law unconstitutional, Judge Magnuson issued an injunction preventing Ramsey County Attorney Susan Gaertner and the other 86 county attorneys in Minnesota from enforcing the offending law. 

Legislative Discussions
Even prior to Judge Magnuson’s decision, discussions had been ongoing among DFL and Republican legislators, business groups, the League of Women Voters, Common Cause, and other groups, over a legislative correction to the Minnesota corporate independent expenditure law. However, with Judge Magnuson’s May 7 decision, those negotiations intensified and culminated in the passage on May 16 of SF 2471 which became Laws of Minnesota 2010, Chapter 397. The bill was one of the very last bills passed during the 2010 session but, in the end, it passed the DFL-controlled Legislature unanimously and was signed into law by Republican Governor Tim Pawlenty on May 27, 2010. Most of the new law’s provisions became effective on June 1, 2010.

New Independent Expenditure Law
Chapter 397 amends Minnesota Statutes, Section 211B.15, subdivisions 2 and 3 to specifically allow corporations to make independent expenditures in support of or in opposition to political candidates. However, any corporation making an independent expenditure in excess of $100 is required to register with the Minnesota Campaign Finance and Public Disclosure Board (“Board”) with 14 days of receiving or expending $100. The independent expenditure fund is then required to file five periodic reports of receipts and expenditures during an election year, two prior to the primary election and three prior to the general election.
 
Registered independent expenditure groups are required to report any contributions in excess of $100. A business corporation or any other association that uses solely business income for contributions to independent expenditure groups is not required to provide any underlying disclosure of the source of money used to make the expenditure. Unregistered associations that contribute to independent expenditure political committees or funds are required to disclose the source of the money included in their donations if the donor association is not a business entity using solely business income as the source of its contribution and the donor has given $5,000 in aggregate to all independent expenditure political committees or funds during the calendar year. 
 
Any donor association that meets the triggers for disclosure of underlying sources of money used to make contributions to independent expenditure political committees or funds must provide written disclosure to the treasurer of the independent expenditure political committee or fund receiving the contribution. That disclosure must include the underlying source to which $1,000 or more of the contributions to the independent expenditure political committee or fund is attributed. The new law provides two different methods for an association to identify underlying sources of money used to make a contribution to an independent expenditure political committee or fund.

Penalties
An association that makes an independent expenditure without registering its own independent expenditure political fund or donating to an existing independent expenditure political committee or fund, is subject to a penalty of up to four times the amount of the expenditure, but not to exceed $25,000, unless the violation was intentional. An independent expenditure political committee or fund that makes a contribution to a candidate, party unit, or political committee or fund other than an independent expenditure political committee or fund, is subject to a penalty of up to four times the amount of the contribution or approved expenditure. An association that fails to provide the required statement disclosing underlying sources or an independent expenditure political committee or fund that fails to file a statement by the date that its next report is due, is subject to a penalty of up to four times of the amount of the expenditure, but not to exceed $25,000, unless the violation was intentional.

Insurance Company
The long-standing prohibition in Minnesota Statutes, Section 72A.12, subdivision 5 prohibiting political activities and campaign contributions by insurance companies was repealed.  Chapter 397, Section 20. Incorporated insurance companies, however, remain subject to the general prohibition on corporate political contributions in Minnesota Statutes, Section 211B.15, subdivision 2.

Public Utilities
Rate regulated public utilities will not be allowed to recover from ratepayers expenses resulting from a contribution or expenditure incurred to promote or defeat a candidate for public office or to advocate approval or defeat of a ballot question. Chapter 397, Section  19.

Political Impact
With a hotly contested and wide open Governor’s race and all 201 seats in the Minnesota Legislature up for election in 2010, there will certainly be lots of opportunity for independent expenditure groups to participate in this year’s elections. Political commentators have suggested that independent expenditures in the Governor’s race alone could be as high as $10 to $30 million. Such a sum could dwarf the amounts expected to be spent by the gubernatorial candidates themselves as well as by political parties in support of their candidates. As of July 1, seven organizations had registered with the Board as independent expenditure political committees or political funds. Additional groups will likely register.

NOTICE
This client alert is a periodic publication of Winthrop & Weinstine, P.A., and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your legal counsel concerning your situation and any specific legal questions you may have.
For More Information
Deb Cochran
Direct: (612) 604-6688
 
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