This Saturday, voters in South Carolina will cast their ballots to decide which candidate they want to represent their party in the 2012 presidential election. Saturday also marks the two-year anniversary of the U.S. Supreme Court’s ruling in Citizens United v. FEC. As anyone who has followed the presidential campaign knows, Citizens United and its effect on the election is a topic of hot debate. In particular, there has been a tremendous amount of news coverage regarding so-called “Super PACs,” which were made possible, in part, by that ruling.

Because the Institute for Justice supported the Court’s ruling in Citizens United and, indeed, played a direct role in the rise of Super PACs, we thought our readers might appreciate a little background on what exactly Super PACs are, how they came about, and how the law has continued to develop. What follows is not a complete history, but it should provide a solid overview.

In 2002, Congress passed the Bipartisan Campaign Reform Act of 2002, or BCRA (also popularly known as McCain-Feingold). Under that law, political parties were no longer permitted to accept unlimited contributions of so-called “soft money” to fund “electioneering communications,” that is, ads that mentioned a political candidate but did not expressly advocate his defeat or election.

As a result of BCRA, during the 2004 election money started to flow to third-party groups like MoveOn.org and Swift Boat Veterans for Truth, which were popularly called 527 groups. These groups accepted unlimited contributions to engage in independent political spending. Ultimately, they were hit with huge, six-figure fines by the Federal Election Commission (FEC) because they had failed to register and operate as “political committees.” Among other things, political committees—which are also known as PACs—are subject to multiple regulations that limit the amount of money they can receive from any one person, limit who may give them money, and impose extensive disclosure requirements.

Enter David Keating, the founder of SpeechNow.org. David was extremely familiar with campaign-finance law and knew that, under the Supreme Court’s 1976 ruling in Buckley v. Valeo, an individual was permitted to spend an unlimited amount of money on his own to advocate the defeat or election of federal candidates. Thus, under then-existing law, Bill Gates could spend $1 billion advocating the defeat or election of a candidate. But if David joined with even one other person and spent as little as $1,000, they would instantly become a PAC and be limited to putting in $5,000 apiece.

This made no sense. If one person could do it, why couldn’t two or more? So on February 14, 2008, David joined with the Institute for Justice and the Center for Competitive Politics to file SpeechNow.org v. FEC. The premise of the case was that if one person can spend an unlimited amount of money on political speech without having to jump through a lot of hoops, two or more people should be allowed to do the same thing.

While IJ was litigating SpeechNow.org v. FEC, there was another campaign-finance case winding its way through the system: Citizens United v. FEC. As readers of Make No Law probably know, that case concerned whether a nonprofit corporation could fund a political documentary about then-presidential candidate Hillary Clinton. On January 21, 2010, the Supreme Court ultimately held that yes, Citizens United could fund the documentary and, what is more, any U.S. corporation or union could spend an unlimited amount of money on independent political speech, so long as they complied with any applicable disclosure laws.

One week after the decision in Citizens United, we had our oral argument before the en banc D.C. Circuit in SpeechNow.org. Two months later, the court handed down its ruling. The court correctly recognized that if corporations—which are associations of people—may spend unlimited amounts of money on political speech, then unincorporated groups like SpeechNow.org should be able to accept unlimited contributions to do the same thing. However, the court also held that groups like SpeechNow.org would have to register with the FEC as PACs. We appealed that part of the ruling—the Supreme Court in Citizens United had, after all, held that PAC requirements were unconstitutionally burdensome even for large corporations and unions—but the Supreme Court did not accept review, so the decision stood.

In the wake of Citizens United (which said that corporations and unions can spend unlimited amounts of money on independent speech in elections) and SpeechNow.org (which said that individuals could pool unlimited amounts of money to spend on independent speech in elections as long as they did so through a PAC), the FEC issued two advisory opinions, Advisory Opinion 2010-09 (Club for Growth) and Advisory Opinion 2010-11 (Commonsense Ten). These opinions permitted the creation of a new breed of PAC: independent-expenditure-only political committees. These committees would have to register with the FEC and comply with all disclosure requirements, but could accept unlimited contributions from individuals, associations, corporations and unions, and could make unlimited expenditures in support of or opposition to federal candidates. The only caveat was that they could not coordinate their activity with those candidates.

“Independent-expenditure-only political committee” is an unwieldy name, and the media settled on calling them Super PACs (we had hoped they would be called SpeechNow groups, as had happened after a similar case called MCFL v. FEC led to the creation of MCFL groups, but it was not to be). It appears that Eliza Newlin Carney coined the term.

There has been some subsequent litigation over Super PACs, most notably Carey v. FEC. That case held that regular PACs may establish a separate fund for accepting unlimited contributions to fund independent expenditures. Some people have started calling these “hybrid PACs.” We blogged about the case shortly after the plaintiffs secured a preliminary injunction, which later resulted in a settlement.

One of the attorneys in the Carey case has now asked the FEC to permit PACs that are affiliated with corporations to establish a separate fund like the kind permitted in the Carey case. In light of Carey, this shouldn’t be particularly controversial, and it’s likely that the FEC will allow it.

Not every attempt to expand Super PACs has been successful, however. The same lawyer sought FEC permission to allow elected officials to start their own Super PACs. The FEC denied that request unanimously.

Similarly, campaign finance attorney Jim Bopp, who filed the Citizens United case, sought permission for political candidates and elected officials to be able to solicit unlimited contributions for Super PACs. The FEC rejected that request, but held that candidates and elected officials could solicit contributions of no more than $5,000 to Super PACs ($5,000 being the contribution limit for regular PACs).

The Supreme Court also recently summarily affirmed a lower-court ruling that had upheld a prohibition on political contributions of any kind by noncitizens who lawfully reside in the United States. That ruling, Bluman v. FEC, precludes noncitizens from making contributions to Super PACs.

Finally, it is still illegal for federal government contractors to make political contributions related to federal elections.  This prohibitions is also the subject of ongoing litigation.

So that brings us to where we are today. To summarize:

Super PACs are PACs, which means they have to register with the FEC and comply with all disclosure rules that apply to PACs. Reformers may dispute the effectiveness of that disclosure, but the fact that they have to disclose is not arguable.

Super PACS may accept unlimited contributions from practically any domestic source—individual, association, corporation or union—as long as they only use that money for independent expenditures (i.e., expenditures that are not coordinated with a federal candidate).

Political candidates may not solicit unlimited contributions to Super PACs, but may solicit amounts of no more than $5,000.

Regular PACs may do some of what Super PACs do, as long as they set up a separate account and comply with the prohibition on coordination.

We hope this summary has helped demystify Super PACs. If any readers have questions, feel free to post them in the comment section, and we’ll address them in a future post.