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Political Advertising|By Elizabeth Wilner, December 3, 2013

IMPACT FOR STATIONS? The Obama Administration’s proposed rules to curb the influence of nonprofit groups in elections by 2016 are being met with a “meh” by some top election lawyers. Broadcasters may not feel quite so sanguine given the prominence of these nonprofits in their business model. Along with other types of outside groups, 501(c)4 organizations have been the biggest booster of skyrocketing television ad spending in politics because of the vast amounts they spend with local stations and because stations aren’t obliged to give them a break in ad rates. Any well enforced regulation—emphasis on well enforced—that reduces this spending could impact broadcasters’ bottom lines.

The Sunlight Foundation reported back in May that of the 50 groups that spent the most in 2012, 15 were the type of group the Administration is now seeking to regulate, including Crossroads GPS, Americans for Prosperity, American Future Fund, American Action Network, the League of Conservation Voters, National Rifle Association Institute, Patriot Majority and Planned Parenthood Action Fund. Every one of these names save Crossroads GPS has advertised on TV in 2013.

In the 2014 midterm elections, outside groups are on track to account for a majority of all TV ad spending. In a recent talk for the association of local TV broadcasters, the University of San Francisco’s Ken Goldstein, using CMAG data, calculated that outside groups’ share of spending on TV advertising in midterm elections escalated eight-fold within eight years: from just 6% in 2002, to 26% in 2006, to 48% in 2010.

Groups’ growing share of TV ad spending has come mostly at the expense of parties, whose share shrunk from 32% of TV ad spending in 2002 to 21% in 2006, to a paltry 8% in 2010, per Goldstein and CMAG data. Lobbyist Bruce Mehlman sums up in a presentation to clients, “McCain-Feingold drove money [and] power from broader, transparent party committees to opaque, single-issue outside groups.”

Candidates’ share of ad spending also has dropped over the past three midterm cycles, from 61% in 2002 to 53% in 2006 to 44%—i.e., a smaller share than that of outside groups—in 2010.

While the proposed regulations wouldn’t go into effect until 2016, and groups kicked in a significant chunk of TV ad spending in the last presidential race, they play hardest in the competitive Senate races that are critical in spreading the wealth among non-battleground TV stations not in line for a jolt of presidential ad spending every four years.

In 2012, per CMAG, outside groups accounted for a strong plurality of TV ad spending by one side or both in five competitive Senate races: Missouri (R), Montana (D and R), North Dakota (D and R), Nebraska (D and R), and Wisconsin (D). Of these states, only Wisconsin saw any real presidential ad spending, plus Omaha stations seen in Iowa.

Groups also accounted for at least 50% of the TV ad spending by one side or both in three 2012 Senate races, including the race in non-battleground Indiana (D and R). The other two were Ohio (R) and Wisconsin (R).

In the last midterm election in 2010, Democratic groups accounted for largest share of TV ad spending only in Senate Majority Leader Harry Reid’s grueling re-election fight in Nevada. That said, it was a hefty share of the ad spending: more than half. But on the Republican side, it was a different story: groups accounted for more than half the TV ad spending in Colorado, roughly or nearly half in Illinois, Missouri and Pennsylvania, and a good chunk of it in California and Nevada.

SOME LAWYERS SHRUG
. Some election lawyers, on the other hand, don’t mind the guidance the regulations would bring. One top Republican election lawyer privately told Charlie Cook, “Based on the [press] release, I think this is a good first step in the right direction. It can give clarity and certainty on how to operate. Of course, a lot can go wrong in the process, but if I read this correctly any final rules will simply codify the advice that most Republican and Democratic election lawyers have been giving all along to tax-exempt groups. If so, it should not hurt one side or the other.”

“The real problem, by the way, is the absence of a disclosure law that would require groups to disclose financial supporters,” the lawyer goes on to say. “I think that will have to be done by statute. If that occurs, it would likely hurt GOP [groups] more than Ds.”

Or, as another leading election lawyer told me, “As drafted,” the regs are “more about creative lawyering to keep things legal. The concern is that this is just the start. If the ‘political’ amount”—meaning, the percentage of allowed candidate-related political activity—“were dropped to something like 20% or less and it applies to all 501(c)s, then it would be a game-changer on how the money flows.”

WHAT % FOR SOCIAL WELFARE?
The big question for 501(c)4’s is, what percentage of their activities have to promote social welfare versus falling under the new, non-social welfare category of “candidate-related political activity.” Election lawyers at the firm Clark Hill point out, “Currently, the regulations provide that engaging in ‘social welfare’ activities must be an organization's primary purpose. Many organizations interpret this to mean that more than 50% must be spent on their ‘social welfare’ purpose and less than 50% on political campaign activities (i.e., a 51/49 ratio). The Administration's proposed guidance does not suggest or recommend a particular percentage, but seeks comment on this issue.”

“[A]ny candidate-related political activity could not be the primary purpose of a section 501(c)(4) organization,” advise Mike Wittenwyler and Wendy Richards of Godfrey & Kahn. A 501(c)(4) “would need to make sure that it has other primary activities – including lobbying and educational activities.”

NO MORE LOBBYING LAWMAKERS BEFORE THEIR ELECTIONS. That said, lobbying would no longer qualify as “social welfare activity” within 30 or 60 days of an election, either. Wittenwyler and Richards also advise, “As a result of the new definition of ‘candidate-related political activity,’ any grassroots lobbying communications that identify a public official who is also a candidate on the ballot would no longer be considered lobbying in the 30 days before a primary election or 60 days before a general election. Instead, these communications would be [candidate-related] political activity.”

NEW GANG OF 500.
“An issue advocacy communication that would be included as candidate-related political activity would include a communication distributed via broadcast, cable, satellite, Internet, newspaper, magazines, other periodicals, other forms of paid advertising or ‘otherwise reaches, or is intended to reach, more than 500 persons,’” write Wittenwyler and Richards.

THE LIST. For your reference, Clark Hill provides the following list of efforts that would qualify under the proposed regs as “candidate-related political activity:”

“Communications/Advertising


Communications that contain express advocacy;

Communications made within 30 days of a primary election or 60 days of a general election and that clearly identify a candidate or political party;

Communication expenditures that must be reported to the Federal Election Commission.


Grants and Contributions


Any contribution that must be reported under federal, state or local campaign finance laws;

Grants to 527 political organizations or to other tax-exempt organizations that conduct ‘candidate-related political activity.’


Other Election-Related Activities


Voter registration and ‘get-out-the-vote’ drives;

Distribution of materials prepared by or on behalf of candidates or 527 political organizations;

Preparation and distribution of voter guides that refer to candidates, or in a general election, to political parties;

Holding an event within 30 days of a primary election or 60 days of a general election at which a candidate appears as part of a program.”