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U.S. appeals court weighs donor secrecy of outside spending groups
* Groups seek to reinstate donor anonymity
* Tax-exempt groups spend millions on "issue ads"
* Court ruled earlier to increase disclosure
By Alina Selyukh
WASHINGTON, Sept 14 (Reuters) - Two conservative groups asked the U.S. Court of Appeals in Washington on Friday to allow tax-exempt organizations that pump millions of dollars into election ads in the weeks leading up to the Nov. 6 vote to keep the names of their donors secret.
The Center for Individual Freedom and the Hispanic Leadership Fund are appealing a March federal court ruling that required the organizations, known for their tax code as 501(c) groups, to disclose previously anonymous donors if they run so-called issue ads in the weeks before the election.
Such ads are nuanced to make no overt call for election or defeat of specific candidates but, for instance, talk about their voting records. That way these groups can keep donors anonymous under tax and campaign finance laws that allow such secrecy as long as politics is not the groups' chief activity.
The two groups ultimately want the courts to reinstate the Federal Election Commission rules protecting the names of donors. They were quashed by a lower court earlier this year in a case was brought by Democratic congressman Chris Van Hollen.
Republican-aligned tax-exempt organizations -- such as the Chamber of Commerce or Crossroads GPS -- are spending millions of dollars on "issue ads" in the 2012 election campaign.
Thomas Kirby, a lawyer representing the two groups, asked whether congressional lawmakers intended such "topsy-turvy" and complex regulations for political expression when writing guidelines for the FEC years ago.
"Did Congress clearly and unambiguously intend to compel the Federal Election Commission to require corporations and labor unions to make much broader and more burdensome disclosures?" Kirby said.
The three-judge panel, which has a conservative majority, expressed concerns that the FEC -- the agency created to interpret and enforce campaign finance disclosure rules -- was not the one raising more question in the case.
"You have the worst scenario here," said Judge Harry Edwards, appointed by Democratic President Jimmy Carter. "Even if you prevail ... we can't tell the agency that has jurisdiction what to do. They're not here."
His concern was echoed by Judge A. Raymond Randolph, appointed by Republican President George H. W. Bush. "We don't have authority to reinstate the regulation," he said.
The third judge, Janice Rogers Brown made no comments on the case, making it difficult to infer how the panel will rule.
Many Democrats fear their 501(c) backers are losing the money race to Republicans, so that may cost them seats in Congress and in the campaign for the presidency.
A federal court ruled in March that, in the final 60 days before the general elections and 30 days before primaries, groups running "issue ads" must reveal the identities of donors of $1,000 or more.
But leading advocacy groups have made clear they plan to carry on and have no intention of revealing their donors' identities thanks to loopholes in the law.
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