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Austin v. Michigan Chamber of Commerce

Supreme Court of the United States · 1990 · Constitutional Law

Constitutional LawFirst AmendmentEqual ProtectionCampaign Financecorporate speechindependent expendituressegregated fundPAC alternative

Facts

Michigan's Campaign Finance Act barred corporations from using general treasury funds for independent expenditures supporting or opposing candidates for state office, but allowed such spending through a separate segregated political fund. The Michigan State Chamber of Commerce, a nonprofit corporation with more than 8,000 members, about three-quarters of whom were for-profit corporations, funded its general treasury through mandatory member dues and also maintained a separate political fund. In a special election for a Michigan House seat, the Chamber wanted to use general treasury funds to place a newspaper advertisement supporting a specific candidate. Because such spending was punishable as a felony, the Chamber challenged the law under the First and Fourteenth Amendments.

Issue

May Michigan constitutionally apply its ban on corporate independent expenditures from general treasury funds to the Michigan State Chamber of Commerce, a nonprofit corporation, while permitting such expenditures through a segregated political fund? Also, do the statute's distinctions between corporations and certain unincorporated entities or media corporations violate equal protection?

Rule

A state may prohibit corporations from using general treasury funds for independent expenditures in candidate elections, so long as corporations may speak through separate segregated funds, when the restriction is narrowly tailored to serve a compelling interest in preventing the corrosive and distorting effects of immense aggregations of wealth accumulated through the state-conferred advantages of the corporate form. A nonprofit corporation is constitutionally entitled to exemption only if it possesses the essential characteristics identified in MCFL: it is formed for the express purpose of promoting political ideas and cannot engage in business activities, it has no shareholders or similarly situated persons with claims on assets or earnings creating economic disincentives to disassociate, and it is independent of business corporations and labor unions so it cannot serve as a conduit for their spending.

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Colorado enacts a statute making it unlawful for any corporation to use general treasury funds for independent advertisements supporting or opposing candidates for state office. The statute permits corporations to make the same expenditures through a separate segregated political fund financed by voluntary donations. Front Range Builders Alliance, a nonprofit incorporated trade association in Denver, wants to buy radio ads from its general treasury endorsing a gubernatorial candidate.

If Front Range Builders Alliance brings a First Amendment challenge, which argument most strongly supports upholding the statute as applied?

Explanation. The majority held that requiring corporations to use a separate segregated fund burdens political expression, so strict scrutiny applies. But the restriction can be upheld because the State has a compelling interest in preventing the corrosive and distorting effects of corporate wealth accumulated through state-conferred corporate advantages, and the law is narrowly tailored because it is not an absolute ban: corporations may still engage in independent expenditures through segregated funds composed of money voluntarily given for political purposes. (Derived from Austin v. Michigan Chamber of Commerce (1990).)