Colorado appeals court upholds fine, requirement for 'dark money' group to disclose spending

Colorado's second-highest court on Thursday agreed a group that spent $4 million backing conservative causes on the ballot in 2020 is required to disclose its contributions and spending, and pay a $40,000 fine for failing to register as an advocacy group.

A trial judge previously believed Unite for Colorado, which spent roughly $17 million during 2020, was not subject to the registration and disclosure requirement because its $4 million spent across multiple ballot initiatives was not substantial enough when broken down issue-by-issue.

However, a three-judge panel for the Court of Appeals rejected the idea that Unite for Colorado could spend millions of dollars on ballot measures and still be shielded from the requirement to register and disclose. The panel further rebuffed Unite for Colorado's argument that compelling it to follow campaign finance law would violate its First Amendment rights.

"The more money spent, the stronger the public’s interest in disclosure," wrote Judge Terry Fox in the March 28 opinion. "Coloradans recognized their interest in preventing wealthy special interest groups from anonymously exercising undue influence on the political process."

Unite for Colorado formed in late 2019 and was operated by Dustin Zvonek, now an Aurora city council member and its mayor pro tem. Zvonek, who formerly worked for the conservative advocacy group Americans for Prosperity, did not immediately respond to an email seeking comment.

In 2020, Unite for Colorado spent money on signature gathering and advertising around three ballot measures: Proposition 116, which reduced the state's income tax rate; Proposition 117, which required voter approval for certain state-run enterprises that are exempt from revenue limits; and Proposition 113, a referendum on the General Assembly's passage of the multistate National Popular Vote compact. Unite for Colorado supported the first two initiatives and opposed Prop 113. All three passed.

Unite for Colorado attracted a campaign finance complaint alleging it failed to register as an "issue committee." Issue committees must register with the state if they spend over $200 on any ballot initiative and if their "major purpose" is ballot issue advocacy. Disclosure requirements apply for committees that spend in excess of $5,000.

More recently, the General Assembly passed a forward-looking law that clarified how much an organization must spend on ballot measures relative to its total funds in order to have a "major purpose" of ballot issue advocacy. Under that framework, enacted in 2022, Unite for Colorado's $4 million expenditure — 23% of its total spending — would not have qualified.

However, under the legal standard in place at the time, an administrative law judge looked to Unite for Colorado's "pattern of conduct" to conclude ballot issue advocacy was a major purpose. Deputy Secretary of State Christopher Beall upheld that determination, ordered Unite for Colorado to pay a $40,000 fine, and required it to disclose its contributions and expenditures from early 2020 onward.

Unite for Colorado appealed to Denver District Court and persuaded Judge David H. Goldberg to overturn Beall's decision. Goldberg noted Colorado's campaign finance law referred to spending on "a ballot issue." Although Unite for Colorado spent nearly a quarter of its money on ballot issue advocacy, it spent less than 11% on each of the three individual measures.

"The statute at issue uses the letter 'a' in defining a major purpose and the term 'ballot question' – not the plural or an aggregation of expenditures," he reasoned in an April 2023 order.

The Colorado Secretary of State's Office appealed, insisting Goldberg's reading of the law was unreasonable. Hypothetically, an organization that raised $10,000 and spent all of it on one ballot initiative would count as an issue committee, but a group that spent $1 million on the same initiative could evade the registration and disclosure requirement by directing even more money elsewhere.

"To this day, Colorado voters still do not know where the more than $4 million Unite spent to influence their attitudes towards these measures came from, or where it went," wrote Senior Assistant Attorney General Peter G. Baumann.

In response, Unite for Colorado characterized itself as a "research" and "public education" organization that only "occasionally advocates" for changes in the law. It argued that requiring disclosure of its activities would significantly burden its free speech rights.

"The chilling effect on donors’ speech and Unite’s ability to solicit donations, is real," wrote Suzanne Taheri, a former high-ranking official in the secretary of state's office whose own campaign finance violation the Court of Appeals recently upheld.

The appellate panel agreed that Beall and the administrative law judge, applying the legal standard in place prior to the legislature's 2022 change, were correct to consider Unite for Colorado's total spending across all ballot initiatives. Weighing the circumstances, the group's $4 million expenditure — nearly 7% of all money spent on ballot initiatives that year — required it to register as an issue committee.

"We conclude that Unite is precisely the type of organization that the people of Colorado envisioned" in enacting campaign finance regulations, Fox wrote. "Thus, we conclude that the challenged statutory scheme is narrowly tailored to the state’s informational interest in knowing who supports or opposes Colorado’s ballot initiatives, and in what financial amount."

The case is Colorado Department of State et al. v. Unite for Colorado.