Michigan Showdown Looms on “Citizens United”

How have lawmakers in Michigan’s state capital dealt with the biggest recent development in political campaign finance law?

They haven’t. Democrats are in denial. Majority Republicans appear gutless.

We’re talking about Citizens United v. Federal Elections Commission (FEC), the landmark 2010 decision by the U.S. Supreme Court declaring that freedom of speech prohibits government from restricting independent political expenditures by non-profit corporations, for-profit corporations, labor unions and other associations.

In Michigan, the Legislature’s continued failure to codify into state law the Citizens United verdict as well as a significant federal district court ruling (Michigan Chamber of Commerce v. Land) means that contributors to Super PACs are vulnerable to fines upwards of tens of thousands of dollars.

Michigan’s Legislature has a long history of foot-dragging when it comes to codifying court decisions into state law. An example would be the so-called “Apol standards” approved in 1982 by the state Supreme Court with regards to reapportionment of the state Senate and House of Representatives. It took nearly a decade and a half before the Legislature finally incorporated those standards into statute.

Seven years of foot-dragging on the Citizens United verdict may be coming to an end, however.

On July 5, Lansing attorney Bob LaBrant requested a declaratory ruling or interpretative statement from the Department of State on proposed statutory language that would retroactively bring contributors to Super PACs in line with contributors to ballot question committees, where no registration or reporting obligation occurs. Language similar to what is in LaBrant’s request can also be found in Section 3 of Senate Bill 335, which has been unanimously reported out of committee and is now on the Senate general orders calendar.

The Secretary of State has 45 business days before it must provide at least a preliminary response to LaBrant’s request. This means that, shortly after Labor Day, the Department must publish a decision that probably will force the issue encapsulated in SB 335 and previous bills that the legislature has failed to enact.

The contributions addressed in LaBrant’s request cut across the political spectrum — from labor unions and liberal activist groups to business organizations and conservative Republican operatives. Absent action by the Legislature, all are exposed to stiff financial penalties retroactive to 2010 if the Michigan Department of State issues a ruling or statement holding that contributors to a Super PAC of $500 or more from a corporation or labor union must themselves register and report as a Super PAC by virtue of making that contribution.

The Department hasn’t issued such a ruling so far, but that doesn’t mean that it can’t or won’t. It depends to a great extent who is the elected Secretary of State, and who is his or her director of elections.

At this point, the state House has failed three times — in 2012, 2014 and 2016 — to approve Senate-passed legislation codifying Citizens United and the Chamber v. Land decision, which if enacted would have nullified any attempt by the Secretary of State to rule. Those three bills would have clarified that corporations and labor unions to Super PACs do not trigger any registration and reporting obligations on the part of the contributor, only the recipient Super PAC.

Over the past seven years, the Michigan Department of State has only once — and with very little fanfare — brought an enforcement action against a non-profit corporation that contributed $500 or more, and that was to “Detroit Forward,” a Super PAC connected to the 2013 Detroit mayoral campaign. As part of a conciliation agreement, the Department ruled that the Michigan Community Education Fund (MCEF) was required to register and report itself as a Super Pac. MCEF was penalized with a late filing fee.

However, one piece of unfinished business the recently-retired Elections Director Chris Thomas left behind is a mystery — WHY did the Department keep this 2014 MCEF conciliation agreement a virtual secret for the past three years? Why didn’t it follow up on it? Why didn’t it post any registration or reporting obligation announcement on the Department’s website or in any letter regularly sent by the Department to new Super PACs?

After all, Department of State campaign finance analysts regularly review Super PAC disclosure reports, yet no “failure to file” notices have ever been sent out by the Department to corporations or labor unions that make contributions to a Super PAC of $500 or more in a reporting cycle.

Such notices, a fundamental tenant of procedural due process, should guide the response by the Department to LaBrant’s request for a declaratory ruling or interpretive statement.

LaBrant’s request argues that the repeated failure of the Department to provide such notices to Super PAC contributors should mean that any ruling/statement issued by the Department henceforth should be applied prospectively, not retroactively. This would place the Legislature on notice that widespread fines and penalties against both labor unions and corporations will result if the House and Senate fail to extend the same protection already afforded to ballot question committees to independent expenditure-only political committee contributors as well.

How many political committees are we talking about that could be affected by the Department’s negligence, anyway? The answer: At least 68 independent-only political committees (Super PACs), most of them formed by liberal groups and labor unions. As things stand, failure to register as a Super PAC by filing a statement of organization could cost these contributors $300. That may not sound like much, but every unfiled quarterly report could be assessed a fine as high as $1,000. Multiple failures to file may constitute a misdemeanor offense.

If a $500 contribution to a Super PAC dated back to 2011, that contributor could now face over $26,000 in late filing fees.

What categories of groups could face fines?

At the local level, county Right to Life organizations, county Farm Bureaus, local boards of realtors, and local and regional labor councils currently are on the books as contributors of $500 or more to state Super PACs.

Many labor unions, such as the Michigan AFL-CIO, regularly make contributions to Super PACs using their union treasury funds. The carpenters union, Metro Detroit AFL-CIO and the Michigan Nurses Association show up as significant contributors in 2016 to Working Michigan, a Super PAC. The Michigan Education Association (MEA), Association for Justice (trial lawyers) and the United Food & Commercial Workers International Union made contributions last year to Northern Michigan First, another Super PAC.

Major corporations that have made contributions to Super PACs include Business Leaders of Michigan, the Michigan Chamber of Commerce, the Detroit Regional Chamber and the Grand Rapids Chamber.

In addition, corporations made substantial contributions to Turnaround Detroit, a Super PAC organized to make independent expenditures urging the election of Mike Duggan as Mayor of Detroit four years ago.

All these groups are at risk pending the Department’s response to LaBrant’s request and the failure of the Legislature to codify Citizens United.

So, why the failure of the Legislature to act long before now? Sloth, surely. But also the dream by Democrats that Hillary Clinton would be elected President in 2016 and would appoint a Supreme Court Justice to fill the vacancy left by the late Antonin Scalia who would vote to overturn Citizens United.. But we now know that, instead, Donald Trump was elected President, and he appointed the pro-Citizens United Neil Gorsuch, who was confirmed by the U.S. Senate and is now a justice. The time has long since passed for “denial” of political reality by Michigan Democrats.

So, what’s the Republicans’ excuse? Apparently, they’re scared. Citizens United has been so demonized by not only Democrats but the Mainstream Media that the majority GOP is simply afraid to bring anything related to Citizens United up for consideration because it is bound to be used by the Republicans’ opponents against them.

Fear and denial may soon be at an end. Lawmakers may not know it yet, but they’re about to find out they’ll have to screw their courage to the sticking place.

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