Goldwater Institute Files Suit Against Massachusetts Ban on Corporate Political Contributions

Boston—Today the Goldwater Institute filed a legal challenge against the Massachusetts law banning business corporations from making political contributions to parties, candidates, and political committees.

Massachusetts has outright banned businesses from making political contributions to parties, candidates, and political committees for more than 100 years. But labor unions are allowed to directly contribute up to $15,000 to candidates, parties, and political committees with no disclosure requirements at all. On top of that, labor-directed political action committees are also allowed to contribute to candidates, parties, and other PACs. Business-directed PACs are banned from contributing altogether.

Last year, bipartisan efforts in the state legislature to address this unconstitutional discrimination against businesses failed.

The Goldwater Institute is representing two Massachusetts small businesses that would like to engage in the political process: 1A Auto, Inc., a family-owned auto parts retailer in Pepperell, Mass, and 126 Self Storage, Inc., a small self-storage facility in Ashland, Mass.

“Preventing businesses 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, the Goldwater Institute attorney representing the businesses. “It also directly conflicts with recent U.S. Supreme Court decisions.”

Seven states ban businesses from making political contributions: Iowa, Kentucky, Massachusetts, Minnesota, Mississippi, Montana, West Virginia. None of the 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 businesses 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 the only reason strong enough to justify limits on political speech is preventing quid pro quo corruption or the appearance thereof. This requires the government to offer evidence—not speculation—to justify the rationale that unions can contribute $15,000 to candidates with no threat of corruption, but a single dollar from a corporation would lead to corruption. The Massachusetts Supreme Judicial Court has held in a previous case that “the interest in avoiding corruption, and its appearance, cannot justify what will amount, in some cases, to an outright ban on a contributor’s right to express support for a candidate.”

Massachusetts’ contribution ban also prohibits businesses from establishing, maintaining, controlling, or even contributing to political action committees that contribute to candidates or parties. Beyond the special $15,000 limit for direct contributions to candidates, parties, political committees, union-controlled PACs can also contribute up to the ordinary PAC limits. 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 the Massachusetts courts to strike down the ban on business contributions to candidates, parties, and political committees, and at a minimum, apply the same campaign finance limitations to unions and businesses.

The Goldwater Institute filed 1A Auto, Inc. v. Sullivanin Massachusetts Superior Court, Suffolk County. If the case is successful, it will have implications for the bans on business political contributions in six other states. A 2011 decision by the U.S. Supreme Court is 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.

Read more about 1A Auto, Inc. v. Sullivanhere.