Supreme Court Upholds Ban on Direct Political Gifts by Nonprofit Groups

The U.S. Supreme Court last week ruled that nonprofit organizations, just like for-profit businesses, must abide by a longstanding ban on direct contributions to federal political candidates.

By a vote of 7 to 2, the court said that applying the prohibition to nonprofit groups does not violate the groups’ constitutionally protected free-speech rights.

The ruling was issued against the backdrop of a much broader case, to be heard by the Supreme Court in September, that challenges the new federal campaign-finance law — the Bipartisan Campaign Reform Act, usually referred to as the McCain-Feingold law.

In the just-decided case, North Carolina Right to Life, an anti-abortion group, challenged a nearly century-old prohibition against corporations — nonprofit, as well as for-profit — contributing money directly to candidates in federal elections. Under those rules, corporations that wish to make political contributions must form separate political-action committees, which are subject to limits and disclosure rules. Critics say the political-action-committee requirement is expensive and burdensome.

The North Carolina organization argued that nonprofit advocacy groups ought to be treated differently from for-profit companies. The organization sought the court’s permission to allow nonprofit groups to pool their money and give it directly to candidates, without having to form a political-action committee. Unlike for-profit businesses, nonprofit advocacy groups are already allowed to spend money on what are called “independent expenditures” in a politcal election, such as on advertisments that support a particular candidate.

Two lower courts ruled in favor of the North Carolina group, holding that applying the direct-contributions ban to nonprofit groups unfairly restricts the groups’ ability to participate in politics.

But the Supreme Court rejected the lower courts’ decisions, saying the ban helps guard against potential abuses in the elections process. Requiring corporations of all types to create political-action committees keeps donors from masking their participation, exceeding the limits of individual contributions, and improperly channeling corporate earnings or charitable contributions to political candidates, the court’s ruling says.

James Bopp Jr., a lawyer in Terre Haute, Ind., who represents North Carolina Right to Life, said the Supreme Court missed the heart of the case by not making the distinction between for-profit corporations and nonprofit advocacy groups, which, he said, do not hold the same potential to corrupt the political process. “The court said a contribution is a contribution,” he said. “It disregarded the nature of the contributor.”

The Supreme Court’s ruling in the case, Federal Election Commission v. Beaumont, can be found at http://www.supremecourtus.gov/opinions/02pdf/02-403.pdf.