HOW MUCH TRANSPARENCY IS TOO MUCH?

An important dialogue is taking place around the issue of disclosure by certain non-profit organizations that support or oppose candidates for federal office.  While the issues may seem technical, they impact on how our electoral process works and how we participate in it.

The American Bar Association (ABA) is considering a resolution that would require Section 501(c)(4) organizations that spend money supporting or opposing a candidate for federal office to disclose the names of their contributors.  A 501(c)(4) is a tax exempt advocacy organization such as the League of Women Voters, the National Rifle Association and IndependentVoting.org.  The last-named is my client.

Under present law, such organizations are allowed to spend funds from their general treasury to support or oppose candidates, so long as those expenditures do not constitute a significant portion of their budget.  The ABA resolution recommends that an organization which does so be required to disclose the identity of anyone who has contributed $200 or more to it.  The proposal is similar to H.R. 4010 (pending legislation in Congress regarding these issues), which mandates that a 501(c)(4) that uses funds from its general treasury to support or oppose a candidate for federal office must disclose the identity of all persons who gave more than $10,000 to the organization from the beginning of the calendar year prior to the date of the disclosure in question.  The ABA threshold for disclosure is significantly lower. 

I am wary of the presumption in the press and in the heat of the current presidential campaign that 501(c)(4) organizations exist only for purpose of evading campaign finance regulations.  The proposed disclosure and reporting requirements would impose a significant burden on such an organization should it choose to participate in the federal election process. 

Now, should a 501(c)(4) allow itself to become a conduit for wealthy people seeking to use it as a “pass through” for money spent to elect candidates, then this activity and the source of its funding should be disclosed.  It might happen, however, that in the course of a campaign, a candidate for Congress makes a statement on an issue related to the 501(c)(4)’s mission that prompts the organization to speak out against the candidate, even though the organization had not planned to do so, and had not and did not contemplate participating in the electoral arena. 

Under the ABA’s proposal, such expenditure would trigger disclosure of the identity of all contributors of $200 or more, including those who did not intend and had no knowledge that their money would be used for such expenditure.  This might discourage persons form contributing to the organization at all.  Consider a person living in a small, conservative, rural community who is strongly pro-choice.  Such a person might not contribute to a pro-choice 501(c)(4) for fear that her support would be disclosed and make her a target of hostility in the community where she lives and works. 

In First Amendment legal parlance, this is called "a chilling effect."  A person is less likely to exercise her right to free speech and free association for fear that doing so would cause her harm. 

Isn’t it enough to require that the organization making the expenditure disclose its identity?  That might cause a past contributor who did not agree with the expenditure to not give again.  But it would not discourage contributions for fear of possible disclosure and retaliation against the contributor. 

Sometimes, too much transparency can be a bad thing.