Organizations Making Independent Expenditures Need Not Register As a PAC

by Scott Sundstrom | December 30, 2011

By Scott Sundstrom

A unanimous Iowa Supreme Court (with Justice Appel recused) ruled today that a corporation originally organized for purposes other than engaging in election activities does not need to follow the registration and reporting requirements applicable to political action committees (PACs) when the corporation spends more than $750 advocating for the election or defeat of specific candidates.  Instead, such corporations need only comply with the less onerous reporting requirements for “independent expenditures” under Iowa law.

The issue came before the Iowa Supreme Court as a certified question from Robert Pratt, Chief Judge of the United States District Court of the Southern District of Iowa.  In a federal lawsuit, Iowa Right to Life (IRTL) argued that the plain language of the 2010 revisions to Iowa’s campaign-finance laws required IRTL to register as a PAC if it made more than $750 of independent expenditures, and that the reporting burdens of doing so were unconstitutional.  (See our earlier post on the case here.)  The Iowa Supreme Court disagreed with IRTL’s interpretation of Iowa law.

This case required the Iowa Supreme Court to delve deeply into Iowa’s complex and “not entirely clear” campaign finance laws.  At issue were two related and potentially overlapping requirements applicable to corporations that engage in certain types of political activity:  the laws regulating PACs and the laws regulating independent expenditures. 

Iowa law (like federal law) limits the types of political activities that corporations may engage in.  Iowa bans corporations from making contributions to candidates or PACs, but does allow corporations to engage in other types of political activity, such as advocating for the election or defeat of specific candidates and the passage or defeat of non-candidate ballot issues.  To help state regulators keep tabs on such permitted political activity, a corporation that was originally formed for nonpolitical purposes must form a separate PAC if the corporation spends or receives more than $750 in the aggregate to engage in permitted political activities.  PACs are subject to detailed registration and reporting requirements.

Iowa law also seeks to regulate “independent expenditures,” which are expenditures in excess of $750 in the aggregate that expressly advocate the nomination, election, or defeat of a clearly identified candidate or the passage or defeat of a ballot issue and that are made without the prior approval of, or coordination with, a candidate.  Anyone – corporation or individual (other than PACs and campaign committees that are separately regulated) – who engages in independent expenditures must file reports with the Iowa Ethics and Campaign Disclosure Board.  The reporting requirements for independent expenditures are significantly less burdensome than the reporting requirements for PACs.

IRTL is an Iowa corporation that wants to make expenditures in excess of $750 to advocate for and against the election of specific candidates.  While there is no question that such expenditures are permitted, the question before the Iowa Supreme Court is how does Iowa law regulate such activity:  must IRTL form a separate PAC subject to the more burdensome PAC reporting requirements or may IRTL simply comply with the independent expenditure reporting requirements?

To answer that question, Justice Mansfield undertook an extensive review of the history of Iowa’s campaign finance laws from 1907 to 2010.  Most notably, it was not until 2010, in the aftermath of the United States Supreme Court’s decision in Citizens United v. FEC, that the Iowa legislature amended Iowa’s campaign finance laws to allow corporations to make independent expenditures advocating for the election or defeat of candidates for political office.  In light of those 2010 amendments, Justice Mansfield noted that “there is some degree of conflict in the statutes” concerning whether a corporation must form a separate PAC when making independent expenditures.

Justice Mansfield concluded that IRTL only needs to follow the independent expenditure reporting requirements and does not need to form a separate PAC.  He reached this conclusion for four reasons.  First, the recent 2010 changes to the Iowa Code allowing corporations to make independent expenditures trump prior law requiring corporations to form separate PACs when engaging in certain types of political activity because when statutes conflict, the more recent changes to the law take precedence.  Second, the relevant definitions in the Iowa Code apply “unless the context otherwise requires,” which allows the Court to make sense of the seeming conflict by reading the statutes contextually.  Third, the Court grants deference to the Iowa Ethics and Campaign Disclosure Board’s interpretation (which is the same as the Court’s) under administrative law principles.  Fourth, legislative intent in accord with the Court’s opinion was demonstrated by the evolution of the bill enacting the 2010 campaign finance law changes over the course of the legislative process.

The case will now return to federal court, where Judge Pratt will apply the Iowa Supreme Court’s rulings to the remaining count in IRTL’s federal court case.




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