The Supreme Court ruled last week that the government cannot restrict corporate spending in elections, and corporations, unions and special interest groups can use general treasury funds to pay for issue ads running just before an election. The 5-4 decision, reversing two previous court decisions, represents a significant shift in campaign finance law, and could have a significant impact on the 2010 elections.

The ruling, handed down in a special session of the court, came after the court agreed last year to re-hear a free speech challenge to provisions in the nation’s campaign finance laws restricting corporate spending in support of or opposition to political candidates. The case was brought by Citizens United, which had attempted to air a documentary critical of then-Senator Hillary Clinton during the 2008 presidential primary campaign.

Writing the majority opinion, Justice Anthony Kennedy, who made the deciding vote in the case, said the decision was made to uphold the First Amendment which “prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.” He was joined by Chief Justice John Roberts and fellow justices Samuel Alito, Antonin Scalia and Clarence Thomas.

The Supreme Court had ruled in 1990 that restrictions on corporate spending in election campaigns do not violate First Amendment rights to free speech. The Bipartisan Campaign Reform Act of 2002, commonly known as the McCain-Feingold Act, prohibits corporate-funded political ads in the period before an election. The law also requires disclosure of the financial supporters behind political ads. In 2003, the Court upheld McCain-Feingold’s provision restricting corporations, unions and special interest groups from spending general treasury funds on electioneering ads within a certain time frame before an election.

While it opens the door to more spending, the Supreme Court ruling does not allow corporations or unions to make direct contributions to candidates, nor does it affect political action committees (PACs). Corporations, unions and special interest groups can create PACs that contribute directly to candidates, but they must be funded by individual contributions and not from company treasuries.

Reaction from recent campaign finance law supporters was of concern and there were pledges made to work on introducing legislation in the coming weeks restoring restraints on corporate influence over elections.

Election law experts are busy analyzing what impact the court’s ruling will have on election spending and the influence of corporations and special interests in deciding political races. MSAE will share these findings as they are available.