Federal Campaign Regulations Are as Clear as Fudge

Posted February 25, 2008 at 2:26pm

“I scream, you scream, we all scream for ice cream.” So it seemed, when Ben & Jerry’s heartily endorsed Sen. Barack Obama (D-Ill.) with a new confectionary flavor to complement (and compliment) his campaign theme of “change.”

Given the unprecedented excitement and participation in this year’s presidential campaign, many corporations may be similarly tempted to jump into the fray. But before they do, they had better review election laws, which may leave them screaming from indigestion.

Last week, ice cream moguls Ben Cohen and Jerry Greenfield threw their support behind Obama. Adding a cherry on top of their endorsement, they (or their company) lent the campaign two “ObamaMobiles,” which will distribute scoops of “Cherries for Change” to Vermont voters, whose Democratic primary is March 4.

Although federal election law may permit such novelty tie-ins between corporations and campaigns, it is by no means a cakewalk. As a general matter, corporations may not make any monetary contributions to federal candidates and parties, nor may they provide goods, services or facilities for free or below usual and normal charge. Moreover, corporations are prohibited from sponsoring coordinated communications to the public. (A corporation’s owners may provide goods, services or facilities at their own personal expense, subject to the individual contribution limits.)

Further dampening the fun for corporations are the Federal Election Commission’s rules governing independent expenditures. While corporations may endorse candidates, their active participation in the political process must remain impartial. To wit, federal election law specifically permits corporations to fund voter registration and get-out-the-vote efforts, or distribute voter guides, as long as they do so evenhandedly and do not coordinate with any campaign or party.

But perhaps a company would like to go beyond generic promotions of civic participation and actually help particular candidates. Here, things can get trickier. In principle, corporations may make independent expenditures that do not “expressly advocate” the election or defeat of “clearly identified” candidates or parties. Alas, the definition of “clearly identified” is not so clear, as it covers not only explicit references to candidates and parties, but also oblique references that, when taken in context, would be understood by the reasonable person to support or oppose particular candidates.

Of course, none of these restrictions apply to corporations acting as vendors. Thus, an ice cream company could sell as many cups of “Cherries for Change” as it wants to a campaign to distribute to voters, even if the company has publicly endorsed the campaign. Moreover, even if the company were to give the ice cream away at its own expense, the message in this case is innocuous enough that it could be viewed as an impartial political communication, not benefiting any particular candidate or party.

Adding even more swirls to the sundae of confusion is the Supreme Court’s recent decision striking down the prohibition on corporate sponsorship of issue advocacy ads within 30 or 60 days of a primary or general election, respectively. In response, the FEC issued regulations allowing corporations to fund such television and radio ads, as long as they are not coordinated and do not expressly urge the election or defeat of specific candidates or parties. Such ads may, however, mention candidates by name. Go figure.

Notwithstanding these restrictions, corporations are still permitted to sponsor political action committees, which may support candidates, subject to federal limits. PACs, however, must keep their funds strictly separate from corporate treasuries and are subject to a dizzying array of regulations.

The constraints on corporate campaign contributions are, without doubt, a confounding convolution. In the spirit of “Cherries for Change,” Congress, the Supreme Court and the FEC have on occasion made efforts at reform. But rather than simplifying matters, such efforts have merely added more flavors to the confusion. In the meantime, prospective participants in the political process will just have to settle for laws and regulations that, to many, seem as clear as fudge.

Eric Wang is an attorney at Blank Rome LLP.