FRANKFORT, Ky. (use 18, 2015) — On behalf of an anti-union entity, the Goldwater Institute filed a legal challenge today against the Kentucky law banning corporations from making political contributions to political parties, candidates and political committees.
Kentucky law outright bans corporations from making political contributions to parties, candidates, and political committees. But labor unions are allowed to directly contribute up to $1,000 to candidates and up to $2,500 to political parties. Unincorporated businesses organized as LLCs are also allowed to directly contribute up to $1,000 to candidates and up to $2,500 to political parties. On top of that, labor and LLC-financed political action committees are also allowed to contribute to candidates, parties, and other PACs. Corporate-financed PACs are banned from contributing altogether.
Corporations that violate this law in Kentucky are forcibly dissolved. An out-of-state corporation convicted of violating the law loses all right to carry on business in the state. And a corporate officer who assists the corporation’s political speech is guilty of a felony.
The Goldwater Institute is representing Protect My Check Inc., a 501(c)(4) non-profit group that supports local legislators, workers and employers who seek to expand employee rights and create jobs by passing local right to work protections in the 25 states lacking statewide protections.
“Preventing corporations from making any political contributions at all is a violation of the free speech and equal protection guarantees of the U.S. and state constitutions,” said Jim Manley, one of the Goldwater Institute attorneys representing the businesses. “It also directly conflicts with recent U.S. Supreme Court decisions.”
Six states ban businesses from making political contributions: Iowa, Kentucky, Massachusetts, Minnesota, Montana, West Virginia. None of these states ban labor unions or other special interest groups from engaging in the political process. In these states, unions are free to spend millions to promote their political allies, but businesses that want to support pro-business candidates do so with one hand tied behind their backs because they are only able to contribute to independent expenditure groups that are prohibited by law from coordinating with candidates.
“There is room to debate many campaign finance regulations, but this is not one of them. A total ban on corporations participating in the political process—while their counterparts from the other side of the bargaining table dole out stacks of cash to their preferred candidates and committees—is unfair and unconstitutional from any perspective” said Manley.
The recent trend in U.S. Supreme Court decisions has been toward increased protection for political speech, including a decision just last year that found contribution disclosure, rather than a ban on political contributions, is the constitutionally permissible approach to campaign finance regulation.
Courts have ruled that preventing quid pro quo corruption or the appearance of corruption justifies limits on political speech. This requires the government to offer evidence to justify the rationale that unions and LLCs can contribute $1,000 to candidates with no threat of corruption, but a single dollar from a corporation would lead to corruption, according to the Goldwater Institute.
Kentucky’s contribution ban also prohibits businesses from establishing, maintaining, controlling, or even contributing to political action committees that contribute to candidates or parties. The U.S. Supreme Court has never upheld a regulation on corporate political contributions without noting that it was doing so because those regulations allowed businesses to establish, finance, maintain, and control a PAC.
With this lawsuit, the Goldwater Institute is asking a federal court to strike down Kentucky’s ban on corporate contributions to candidates, parties, and political committees, and at a minimum, apply the same campaign finance limitations to unions and corporations.
The Goldwater Institute filed Protect My Check v. Dilger in United States District Court for the Eastern District of Kentucky in Frankfort. If the case is successful, it will have implications for the bans on business political contributions in five other states. A 2011 decision by the U.S. Supreme Court in a case brought by the Goldwater Institute struck down a provision of Arizona’s “Clean Elections Act” that gave taxpayer-funded “matching-funds” to political candidates. That decision eliminated similar provisions in thirteen states.