BY EMAIL (CPPRules@mt.gov)

The Hon. Jonathan Motl
Commissioner of Political Practices
State of Montana
1209 Eighth Avenue
Helena, MT 59620

Re:      Comments on Mont. Admin. Reg. Notice No. 44-2-207

Dear Commissioner Motl:

The Center for Competitive Politics (“CCP”) submits these comments in response to your office’s proposed changes to ARM § 44.10.301 et seq., as published in the Montana Administrative Register on August 13, 2015 (hereinafter, the “Published Draft”). Once again, CCP appreciates the opportunity to have been able to review and comment on the initial draft of these proposed rules that was shared with us in late June (hereinafter, the “Initial Draft”).

It appears that the Published Draft of the proposed rules addresses some of the concerns that CCP raised in its comments on the Initial Draft.[1] However, the Published Draft still proposes to adopt an unconstitutionally vague definition of “election activity” that contradicts the statute, and uses this term to define critical terms related to coordination and an entity’s status as a political committee. The Wisconsin Supreme Court’s recent ruling in the “John Doe” investigation should offer a cautionary example of how campaign finance laws based on vague definitions like this can lead to disastrous results both for speakers and for regulators and prosecutors attempting to apply and enforce such definitions.

CCP also strongly reiterates its earlier concern about the proposal to define “electioneering communications” to include an open-ended and unspecified “facts and circumstances” standard, which is retained in the Published Draft. The Internal Revenue Service has relied on a “facts and circumstances” standard to regulate activities as political campaign intervention, and the catastrophic failure that resulted in part from the agency’s use of that standard should counsel against adopting such a rule.

Additionally, while CCP supports shortening the Initial Draft’s 24-month time window for establishing a rebuttable presumption of coordination when a candidate’s former vendor works on an independent spending effort, the proposed 12-month time window in the Published Draft is still far too long.

Lastly, CCP supports the comments submitted by the Montana Conservation Voters, the Montana MEA-AFT and Montana State AFL-CIO, and the Montana Trial Lawyers objecting to the overly vague definitions of “primary purpose” and “incidental committee” in the Initial Draft. These problems persist in the Published Draft.

A) “Election Activity” Definition

As CCP discussed in its comments regarding the Initial Draft, the proposal to define “election activity” as “any action . . . that concerns, relates to, or could be reasonably interpreted as an attempt to influence or affect an election”[2] is unworkable because it could apply to practically anything that has even the most remote and tangential relation to an election.[3] A typical “grassroots lobbying” campaign that does not mention any election or candidate, and which is not even regulated by Montana’s lobbying laws,[4] could result in a group being regulated as a political committee if the issue happens to “concern[]” or “relate[] to” an election, and because “election activity” factors into the group’s “primary purpose” under the proposed rules.[5]

As the U.S. Supreme Court noted in Buckley v. Valeo, because candidates are often “intimately tied to public issues involving legislative proposals and governmental actions,” the “distinction between discussion of issues and candidates and advocacy of election or defeat of candidates may often dissolve in practical application.”[6] The Court held that it would be impermissible to rely on vague standards under which issue speech could potentially be regulated as candidate advocacy – what the Commissioner proposes to do with the definition of “election activity” in this rulemaking – because to do so would “put[] the speaker in these circumstances wholly at the mercy of the varied understanding of his hearers and consequently of whatever inference may be drawn as to his intent and meaning.”[7]

As CCP also pointed out in its comments on the Initial Draft, SB 289 specifically exempted nonpartisan voter registration and get-out-the-vote drives, as well as news stories and editorials, from regulation under the campaign finance laws.[8] Although the proposed rules contain a news media exemption under the coordination definition,[9] there is no such exemption under the “primary purpose” definition. Thus, a popular political news blog such as the “Montana Cowgirl Blog” may be deemed to engage in “election activity” under the proposed rules because it publishes content that “concerns” and “relates to” Montana elections.[10] If the Montana Cowgirl Blog’s “primary purpose” is determined to focus on “election activity,” the website would be regulated as a full-fledged political committee. This is clearly contrary to the plain text of SB 289.

Notably, unlike most of the other provisions in the proposed rules, the Commissioner’s Montana Administrative Register notice for this rulemaking does not even attempt to justify the proposed definition of “election activity,” or explain why the term is even being proposed. As CCP explained in its comments on the initial draft, nothing in the statute authorizes, commands or so much as suggests that the Commissioner should create and define this new term.[11]

The “John Doe” investigation in Wisconsin provides a recent example of how vague standards like the proposed definition of “election activity” do not work well in practical application, and why the Commissioner should not adopt it. The thrust of the prosecutors’ theory in that matter was that the coordination of issue advocacy communications between various advocacy groups with Governor Scott Walker’s campaign committee should have been regulated as in-kind contributions to the campaign committee.[12] Under Wisconsin law, the definition of an in-kind contribution depends on the making of a political “disbursement,” which in turn is defined as something that is made for “political purposes.”[13] As the Wisconsin Supreme Court held (and the U.S. Court of Appeals for the Seventh Circuit also had held earlier in a separate and unrelated matter[14]), this phrase was unconstitutionally vague.[15] To eliminate this vagueness, the Wisconsin Supreme Court limited the phrase “political purposes” to mean only express advocacy and its functional equivalent – an interpretation which ended the investigation.[16]

The lesson from the Wisconsin case is that vague standards in campaign finance laws not only chill speech for the public, but they also lay a weak foundation for regulators and prosecutors attempting to apply and enforce them. The definition of “election activity” in the Commissioner’s proposed rule is no more precise than the definition of a political “disbursement” under Wisconsin law, and it is likely to turn out to be as much of a house of cards in practical application.

B) “Electioneering Communications” Definition

As CCP also noted in its comments on the Initial Draft, the proposed definition of “electioneering communications” goes beyond the statutory definition of this term in SB 289 by adding an open-ended “facts and circumstances” standard.[17]

Under the federal tax laws, 501(c)(3) organizations generally are prohibited from engaging in political campaign intervention, while 501(c)(4) organizations may not have the primary purpose of political campaign intervention.[18] As the Internal Revenue Service has explained, “Over the years, the IRS has stated that whether an organization is engaged in political campaign intervention depends upon all of the facts and circumstances.”[19] Similar to the Commissioner’s proposed rule, these so-called “facts and circumstances” have included, among other factors, evaluation of a communication’s purpose, timing, and distribution.[20]

In a proposed rulemaking in late 2013, the IRS acknowledged that this “facts and circumstances” standard has resulted in the “lack of a clear and concise definition of ‘political campaign intervention,’” and that “both the public and the IRS would benefit from clearer definitions of these concepts.”[21] What the IRS left unsaid was that the “facts and circumstances” test – the same standard used in the Commissioner’s proposed definition of “electioneering communications” – contributed to the agency’s mishandling of applications for tax-exempt status.[22] This, in turn, led to numerous congressional and criminal investigations and resignations over the past two years, from which the IRS is still reeling. Surely this is not an experience the Commissioner wishes to replicate by adopting the same troublesome standard in the Montana regulations.

C) Former Vendor/Employee Coordination Time Window and Publicly Available Information Exception

The Initial Draft provided that any person who worked as a “paid agent or consultant” to a candidate or a political committee within the past 24 months, and who subsequently works on an “election activity,” is presumed to be coordinating with the candidate or political committee.

The Published Draft has moved in the right direction by shortening this time window to 12 months.[23] As the Published Draft explains, “Given the population size of Montana and relationships that exist between Montanans, the [Commissioner] has proposed the adoption of a lessor [sic] 12-month time frame for the rebuttable presumption to attach.”[24] This 12-month time window is still far too long, however, and will unduly restrict the ability of independent speakers to retain competent and qualified talent.

The federal coordination rules establish a four-month time window during which former vendors and employees of a candidate or political party are presumed to be coordinating when they subsequently work for a third-party sponsor of a political communication.[25] For various reasons articulated in a 2010 rulemaking, the Federal Election Commission concluded that “it is extremely unlikely that a common vendor or former employee [of a candidate or political party committee] may possess information that remains material when it is more than four months old.”[26]

Considering that the federal coordination rules apply to congressional district races, statewide races (including Montana U.S. Senate races), and nationwide races, the Published Draft’s 12-month time window for presuming coordination by former campaign vendors and employees is still unduly burdensome. CCP suggests that the Commissioner adopt an anti-coordination “cooling-off period” for former campaign employees and vendors that is no longer than the four-month period contained in the federal rules.

Relatedly, the proposed rules provide for a rebuttable presumption of coordination when an activity is “based on information that is provided by the candidate or an agent of the candidate.”[27] To ensure the rules are workable in practice, the Commissioner should provide for an exemption for information obtained from publicly available sources, as the federal coordination rules do.[28] Otherwise, any time the sponsor of an independent expenditure reads or hears something in the news about a candidate that the independent expenditure supports, the expenditure would cease to become independent. This would effectively outlaw independent expenditures – an approach Montana has tried before, and which did not turn out well.[29]

D) “Primary Purpose” and “Incidental Committee” Definitions

For the reasons explained in the comments submitted by the Montana Conservation Voters (dated July 15, 2015), the Montana MEA-AFT and Montana State AFL-CIO (dated July 15, 2015), and the Montana Trial Lawyers (dated July 14, 2015), the proposed definition of “primary purpose” (in both the Initial and Published Drafts) is overly broad and contrary to the statute.

The proposal fails to explain how any of the proposed criteria would be applied. For example, how would the “allocation” of a group’s budget affect its “primary purpose” of being an independent committee? Would spending even one percent of a group’s budget on independent expenditures, electioneering communications, and election communications cause it to meet the primary purpose threshold? What about 25 percent? Or 50 percent? The absence of any threshold whatsoever in the proposed rule would, in practice, give the Commissioner the sole discretion to regulate speakers differently as he personally sees fit, without regard to any objective standards. This fatal flaw exists for each of the other proposed factors.

Additionally, the proposed definition of “primary purpose” also appears to deviate from the statutory command that an entity must have one, and only one, “primary purpose” of “supporting or opposing candidates or ballot issues” in order for it to be regulated as a full-fledged political committee. In SB 289, the Legislature specified that:

(a) “Incidental committee” means a political committee that is not specific ally organized or operating for the primary purpose of supporting or opposing candidates or ballot issues but that may incidentally become a political committee by receiving a contribution or making an expenditure.

(b) For the purpose of this subsection (22), the primary purpose is determined by the commissioner by rule and includes criteria such as the allocation of budget, staff, or members’ activity or the statement of purpose or goal of the person or individuals that form the committee.[30]

In Human Life of Washington, Inc. v. Brumsickle, the U.S. Court of Appeals for the Ninth Circuit (in whose jurisdiction Montana lies) upheld the constitutionality of a Washington State statute defining a political committee as an entity having as its “primary or one of the primary purposes . . . supporting or opposing candidates or ballot propositions.”[31] The court accepted the plaintiff’s characterization of the statute as covering groups with “‘a’ primary purpose of political advocacy, instead of being limited to groups with ‘the’ primary purpose of political advocacy,” but rejected the plaintiff’s claim that the U.S. Supreme Court held that only groups with “the” primary purpose of influencing elections could be regulated as political committees.[32] Other courts also have recognized that using the articles “a” and “the” to characterize an entity’s “primary purpose” in determining its status as a political committee results in profoundly different meanings.[33]

CCP disagrees with the Ninth Circuit’s holding that there is not a constitutional requirement to limit the application of political committee laws only to those entities that have “the” primary purpose of influencing elections.[34] Regardless, it is beyond dispute that, in Montana, the Legislature did in fact specify that an entity will be treated as a full-fledged political committee only if it has “the” primary purpose of “supporting or opposing candidates or ballot issues.”[35] Since the Commissioner may not act contrary to the statute,[36] the proposed regulation’s references to “a major, principal, or important goal, function, or reason for existence” and “a primary purpose,” as well as the related open-ended criteria for determining “primary purpose,”[37] are contrary to law. This provision needs to be totally rewritten.

Relatedly, the proposed definitions of an “incidental committee” and “incidental committee election activity” also are unconstitutionally vague. Specifically, the proposed rule provides that “incidental committee election activity” (as well as “reportable election activity”) include accepting contributions “in response to an appeal.”[38] This begs the critical question: In response to an appeal for what, precisely? If the proposal means appeals specifically for political contributions, then it should state so explicitly. By contrast, elsewhere, the proposed definition of “primary purpose” is more specific in specifying which contributions “in response to an appeal” are subject to regulation.[39]

E) Conclusion

The Published Draft of the proposed regulations represents an appreciable improvement over the Initial Draft, but this latest version still suffers from several major flaws that could be fixed relatively easily.[40] For the reasons discussed above, the Commissioner should:

• Dispense with the “election activity” concept altogether;
• Delete the “facts and circumstances” standard from the “electioneering communications” definition;
• Shorten the time window during which a former campaign vendor or employee is presumed to be coordinating;
• Include an exemption under the coordination rules for publicly available information; and
• Clarify the definitions of “incidental committee”/“incidental committee activity,” and “reportable election activity”;
• Rewrite the definition of “primary purpose.”

The attached redline suggests changes to the published rule text to address most of these issues.

Thank you once again for your consideration of CCP’s comments. Please do not hesitate to contact me should you have any questions.

Respectfully yours,

Eric Wang
Senior Fellow[41]
Center for Competitive Politics

cc: The Hon. Sen. Dee Brown, Chair, State Administration and Veterans’ Affairs Interim Committee
The Hon. Rep. Bryce Bennett,
Sen. Doug Kary,
Sen. Cliff Larsen,
Rep. Forrest Mandeville,
Rep. Wendy McKamey,
Rep. Kathy Swanson, and
Sen. Jonathan Windy Boy
Members, State Administration and Veterans’ Affairs Interim Committee

https://ifs-site.mysitebuild.com/wp-content/uploads/2015/08/2015-08-18_Wang-CCP-Comments_MT_COPP-Rulemaking.pdf

[1] Comments Regarding Proposed Changes to Montana ARM § 44.10.301 et seq., Jul. 14, 2015, available at https://ifs-site.mysitebuild.com/2015/07/14/comments-regarding-proposed-changes-to-montana-arm-%C2%A7-44-10-301-et-seq/.

[2] Proposed ARM § 44.10.103(15).

[3] Comments Regarding Proposed Changes to Montana ARM § 44.10.301 et seq., supra note 1, at 4.

[4] See, e.g., Mont. Cmmr. of Pol. Practices, Lobbying FAQ at 3, available at http://politicalpractices.mt.gov/content/4lobbying/FAQupdated2015.

[5] Proposed ARM § 44.11.203.

[6] 424 U.S. 1, 42 (1976).

[7] Id. at 43.

[8] Comments Regarding Proposed Changes to Montana ARM § 44.10.301 et seq., supra note 1, at 4 (citing SB 289 § 2, to be codified at Mont. Code § 13-1-101(47).

[9] Proposed ARM § 44.11.602(3)(c).

[10] See Montana Cowgirl Blog, at http://mtcowgirl.com/.

[11] Comments Regarding Proposed Changes to Montana ARM § 44.10.301 et seq., supra note 1, at 1-2.

[12] State of Wis. ex rel. Two Unnamed Petitioners v. Peterson et al., Case No. 2013AP296-0A, slip op. at 45 (Wis. Jul. 16, 2015).

[13] Id.

[14] Wis. Right to Life, Inc. v. Barland, 751 F.3d 8041 (7th Cir. 2014).

[15] State of Wis. ex rel. Two Unnamed Petitioners, slip op. at 45.

[16] Id.

[17] Comments Regarding Proposed Changes to Montana ARM § 44.10.301 et seq., supra note 1, at 3.

[18] See 26 C.F.R. §§ 1.501(c)(3)-1 and 1.501(c)(4)-1.

[19] Dept. of the Treas., Internal Rev. Svc., Notice of Proposed Rulemaking, Guidance for Tax-Exempt Social Welfare Organizations on Candidate-Related Political Activities, 78 Fed. Reg. 71535, 71536 (Nov. 29, 2013) (emphasis added).

[20]   See, e.g., Internal Rev. Svc., Rev. Rulings 2004-6 and 2007-41.

[21] Dept. of the Treas., Internal Rev. Svc., Notice of Proposed Rulemaking, supra note 19.

While the IRS rulemaking has stalled, it was not because the agency’s self-criticism of its “facts and circumstances” standard was off the mark, but rather because the proposed alternative rule was also riddled with flaws. See, e.g. Matea Gold, “IRS plan to curb politically active groups is threatened by opposition from both sides,” Wash. Post, Feb. 12, 2014, available at http://www.washingtonpost.com/politics/irs-plan-to-curb-politically-active-groups-threatened-by-opposition-from-both-sides/2014/02/12/99dcfd2a-932a-11e3-b46a-5a3d0d2130da_story.html

In fact, one of the main critiques of the proposed rule was that it “sweeps into that category [of political campaign intervention] many routine functions of advocacy groups, including nonpartisan voter registration, candidate forums and get-out-the-vote activities,” which relates to our point above regarding the Commissioner’s proposed definition of “election activity.” See id.

[22] See, e.g., U.S. Senate Permanent Subcommittee on Investigations, “IRS and TIGTA Management Failures Related to 501(c)(4) Applicants Engaged in Campaign Activity” (Sep. 5, 2014) at 2, available at www.hsgac.senate.gov/download/report_-irs-and-tigta-mgmt-failures-related-to-501c4-sept-5-2014.

[23] Proposed ARM § 44.11.602(6); see also id. § 44.11.602(2). In addition, the published draft uses a 12-month time window to establish a presumption of coordination if a candidate raises money for election activity funded by a third party. See id. § 44.11.602(5)(g).

[24] Mont. Admin. Reg. Notice No. 44-2-207 at 1149.

[25] See 11 C.F.R. § 109.21(d)(4)(ii).

[26] Explanation and Justification for Final Rules on Coordinated Communications, 75 Fed. Reg. 55947, 55957-55959 (Sep. 15, 2010).

[27] Proposed ARM § 44.11.602(5)(a).

[28] See 11 C.F.R. § 109.21(d)(2), (3), (4), and (5); see also Explanation and Justification for Final Rules on Coordinated Communications, 71 Fed. Reg. 33190, 33205 (Jun. 8, 2006).

[29] See Am. Tradition P’ship v. Bullock, 132 S. Ct. 2490 (2012).

[30] SB 289 § 2, to be codified at Mont. Code § 13-1-101(22) (emphasis added).

[31] 624 F.3d 990, 1008 (9th Cir. 2010).

[32] Id. at 1008-110 (emphasis added).

[33] See, e.g., N.C. Right to Life v. Leake, 525 F.3d 274, 286 (4th Cir. 2008).

[34] See Buckley v. Valeo, 424 U.S. 1, 79 (1976).

[35] Supra note 30.

[36] See, e.g., Schuster v. Northwestern Energy Co., 373 Mont. 54, 57 (2013).

[37] Proposed ARM § 44.11.203.

[38] Proposed ARM §§ 44.11.202(6)(c) and 44.11.103(31).

[39] Compare id. with proposed ARM § 44.11.203(2)(f).

[40] CCP does not necessarily agree with every other provision of the proposed rules that CCP has not specifically addressed in its two comments.

[41] Eric Wang is also Special Counsel in the Election Law practice group at the Washington, DC law firm of Wiley Rein, LLP. Any opinions expressed herein are those of the Center for Competitive Politics and Mr. Wang, and not necessarily those of his firm or its clients.