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An expenditure must constitute "express advocacy" in order to be subject to the prohibition of § 316 of the Federal Election Campaign Act, codified at 2 U.S.C.S. § 441b.
In September 1978, appellee Massachusetts Citizens for Life, Inc. (MCFL), a non-profit, non-stock corporation, prepared and distributed a "Special Edition" exhorting readers to vote "pro-life" in the upcoming primary elections in Massachusetts, listing the candidates for each state and federal office in every voting district in the State, and identifying each one as either supporting or opposing appellee's views. While some 400 candidates were listed, the photographs of only 13 were featured, all of whom were identified as favoring appellee's views. The publication was prepared by a staff that had prepared no regular newsletter, was distributed to a much larger audience than that of the regular newsletter, most of whom were members of the general public, and was financed by money taken from appellee's general treasury funds. A complaint was filed with appellant Federal Election Commission (FEC) alleging that the "Special Edition" violated § 316 of the Federal Election Campaign Act (FECA or Act) as representing an expenditure of funds from a corporate treasury to distribute to the general public a campaign flyer on behalf of certain political candidates. After the FEC determined that there was probable cause to believe that appellee had violated the statute, the FEC filed a complaint in Federal District Court, seeking a civil penalty and other relief. The District Court granted appellee's motion for summary judgment, holding that § 316 did not apply to appellee but that if it did it was unconstitutional as a violation of the First Amendment. The Court of Appeals held that the statute applied to appellee and as so applied was unconstitutional.
The Court held that the publication of the special edition was within the prohibition of 441b. The preparation and distribution of the newsletter fell within the Act's definition of "expenditure." The publication urged voters to vote for the pro-life candidates and provided photographs of the preferred candidates. Thus, the newsletter fell squarely within § 441b because it represented express advocacy of the election of particular candidates and was distributed to members of the general public. However, the Court held that 441b violated the First Amendment guaranties of freedom of speech as applied to corporations, such as the appellee, which were formed for the express purpose of promoting political ideas and cannot engage in business activities, have no shareholders or other persons affiliated so as to have a claim on their assets or earnings, and were not established by business corporations or labor unions and have a policy of not accepting contributions from such entities.