Yesterday, the Seventh Circuit added another chapter to the long-running debate over whether, at a general level, state campaign finance laws imposing registration and disclosure requirements can be applied to entities that do not have, as their “major purpose,” influencing elections. This test primarily affects 501(c)(4) organizations, which must limit their election-related activity in order to retain tax-exempt status, as opposed to PACs whose stated purpose is to influence elections.
The “major purpose” test dates back to the Supreme Court’s seminal decision in Buckley v. Valeo. In interpreting the “expenditure” provisions of the Federal Election Campaign Act of 1971, the Supreme Court raised the concern, motivated by the First Amendment, that the provision “could be interpreted to reach groups engaged purely in issue discussion” and thus impermissibly chill some speech. To avoid this problem, the Court stated that the Act should be interpreted to “encompass organizations that are under the control of a candidate or the major purpose of which is the nomination or election of a candidate.”
As these excerpts hint, Buckley’s “major purpose” test can be interpreted two ways. The first view is that the test is constitutionally mandated under the First Amendment. The second is that the “major purpose” test was simply a court construction of a federal statute, rather than a constitutional necessity.
The difference is significant both in theory and in practice. If the major purpose test is constitutionally mandated, it is a prerequisite for the application of similar state and federal laws under the First Amendment. The Seventh Circuit rejected this approach, finding it to be “a creature of statutory interpretation, not constitutional command.” And as noted in the decision at footnote 23, at least the Fourth and Tenth Circuits have arrived at the opposite conclusion, with both invalidating state disclosure laws because they were inconsistent with the major purpose test and thus the Constitution.
Unless and until the Supreme Court resolves this split in authority, the scope of the major purpose test will continue to be unclear. In some states, organizations may be exempt from registration and disclosure laws that, on their face, would seem to apply because they can invoke the major purpose test. In others, the test will offer no defense. Coupled with the fact that the major purpose test may require case-by-case line-drawing, this area of the law requires a fair dose of caution.