On September 17, 1999, U.S. District Judge Ann D. Montgomery struck down the language of Minnesota Statutes, chapter 10A, that "An expenditure by a political party or a political party unit in a race where the political party has a candidate on the ballot is not an independent expenditure." Republican Party of Minnesota v. Pauly, 63 F. Supp. 2d 1008 (D. Minn. 1999). This bill replaces the old language with a new voluntary agreement by political parties not to make independent expenditures in return for participating in the income tax checkoff and political contribution refund programs.

Section 1 expands the definition of "campaign expenditure" to include costs incurred to disseminate communications that might formerly have been classified as "issue ads" rather than as campaign ads. The additional communications covered are those that do not use the "magic words" set forth in the U.S. Supreme Court's decision in Buckley v. Valeo, 424 U.S. 1 (1976) (per curiam), but that, in context, can have no reasonable meaning other than to advocate support for or opposition to the nomination or election of a candidate. It also creates a rebuttable presumption that a communication that names or depicts a candidate, is disseminated close to an election, and costs more than a threshold amount is a campaign expenditure.

Section 2 strikes the sentence found unconstitutional in Republican Party of Minnesota v. Pauley. It also creates a rebuttable presumption that various subtle methods of coordinating expenditures are not independent.

Section 3 provides that the prohibition on independent expenditures by political parties applies only to a political party that has signed an agreement not to make independent expenditures as a condition of receiving a public subsidy for the party's activities.

Section 4 prohibits a political party or party unit from making an independent expenditure. It also provides that, if another political party does not agree to the prohibition and makes an independent expenditure during that election cycle, the prohibition no longer applies to the parties that have signed an agreement and they remain eligible to receive a public subsidy.

Section 5 applies the penalty for exceeding expenditure limits to the chair of a political party or party unit that makes expenditures in violation of its agreement not to make independent expenditures.

Section 6 provides that both major and minor political parties must qualify in order to participate in the income tax checkoff program.

Section 7 limits the income tax checkoff program for the state committee of a political party to those state committees that have signed and filed with the Board of Campaign Finance and Public Disclosure an agreement not to make independent expenditures. Money not allocated to a state committee because it has not signed an agreement must be canceled to the general fund.

Section 8, subdivision 1, advances from September 1 to August 1 the deadline for a candidate to file a spending limit agreement with the Board. It also clarifies that the Board need not notify the Commissioner of Revenue of a spending limit agreement until it has been filed with the Board. It incorporates the provisions of subdivision 2 into subdivision 1 in order to facilitate the creation of a new subdivision relating to agreements by political parties not to make independent expenditures.

Subdivision 2, paragraph (a), requires the chair of the state committee of a political party to sign and file with the Board an agreement not to make independent expenditures in order for the party to be eligible to receive a public subsidy. The agreement must be filed with the Board by February 1 in order for the state committee to be allocated money designated to the party account on tax returns for the preceding and current taxable years. The agreement remains in effect until the end of the first general election cycle completed after the agreement was filed or the dissolution of the political party, whichever occurs first.

Subdivision 4 requires that the political contribution receipt form given out by political parties include a statement that the political party has signed an agreement not to make independent expenditures. The chair or treasurer of a political party unit who willfully issues an official refund receipt form without the state chair having signed an agreement is guilty of a misdemeanor.

Section 9 limits the political contribution refund program for political parties or party units to those whose state chair has signed and filed an agreement not to make independent expenditures. It applies the definitions of "political party" and "party unit" found in section 10A.01.

Section 10 makes the act effective January 1, 2004, for contributions received and expenditures and checkoff money distributions made on and after that date.

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