3 Entity choice and basic "rules" for corporations 3 Entity choice and basic "rules" for corporations
3.1 Readings 3.1 Readings
3.1.1 A. P. Smith Manufacturing Co. v. Barlow 3.1.1 A. P. Smith Manufacturing Co. v. Barlow
THE A. P. SMITH MANUFACTURING COMPANY, PLAINTIFF-RESPONDENT, v. RUTH F. BARLOW, WILLIAM B. CAMPBELL, WILLIAM M. BRENN, EUGENE M. SMITH AND JOSEPH P. HALPIN, INDIVIDUALLY AND AS REPRESENTATIVES OF THE HOLDERS OF THE PREFERRED AND COMMON SHARES OF THE A. P. SMITH MANUFACTURING COMPANY, DEFENDANTS-APPELLANTS, AND THEODORE D. PARSONS, ATTORNEY-GENERAL OF NEW JERSEY, DEFENDANT-RESPONDENT.
Argued June 9, 1953
Decided June 25, 1953.
*146Mr. Josiah Stryker argued the cause for defendants-appellants (Messrs. Stryker, Tams & Horner, attorneys).
Mr. Waldron M. Ward argued the cause for plaintiff-respondent (Messrs. Pitney, Hardin A Ward, attorneys; Mr. Bobert P. Weil of the New York Bar, of counsel).
Mr. Theodore D. Parsons, Attorney-General, argued the cause for the State of New Jersey (Mr. Thomas P. Cook, Deputy Attorney-General, on the brief).
Messrs. Jackson, Nash, Brophy, Barringer & Brooks (Mr. Williamson Pell, Jr., of counsel) of the New York Bar, attorneys for Princeton University, amicus curiae.
The opinion of the court was delivered by
The Chancery Division, in a well-reasoned opinion by Judge Stein, determined that a donation by the *147plaintiff The A. P. Smith Manufacturing Company to Princeton University was intra vires. Because of the public importance of the issues presented, the appeal duly taken to the Appellate Division has been certified directly to this court under Rule 1:5-1 (a).
The company was incorporated in 1896 and is engaged in the manufacture and sale of valves, fire hydrants and special equipment, mainly for water and gas industries. Its plant is located in East Orange and Bloomfield and it has approximately 300 employees. Over the years the company has contributed regularly to the local community chest and on occasions to Upsala College in East Orange and Newark University, now part of Rutgers, the State University. On July 24, 1951 the board of directors adopted a resolution which set forth that it was in the corporation’s best interests to join with others in the 1951 Annual Giving to Princeton University, and appropriated the sum of $1,500 to be transferred by the corporation’s treasurer to the university as a contribution towards its maintenance. When this action was questioned by stockholders the corporation instituted a declaratory judgment action in the Chancery Division and trial was had in due course.
Mr. Hubert E. O’Brien, the president of the company, testified that he considered the contribution to be a sound investment, that the public expects corporations to aid philanthropic and benevolent institutions, that they obtain good will in the community by so doing, and that their charitable donations create favorable environment for their business operations. In addition, he expressed the thought that in contributing to liberal arts institutions, corporations were furthering their self-interest in assuring the free flow of properly trained personnel for administrative and other corporate employment. Mr. Frank W. Abrams, chairman of the board of the Standard Oil Company of New Jersey, testified that corporations are expected to acknowledge their public responsibilities in support of the essential elements of our free enterprise system. He indicated that it was not “good business” to disappoint “this reasonable and justified *148public expectation,” nor was it good business for corporations “to take substantial benefits from their membership in the economic community while avoiding the normally accepted obligations of citizenship in the social community.” Mr. Irving S. Olds, former chairman of the board of the United States Steel Corporation, pointed out that corporations have a self-interest in the maintenance of liberal education as the bulwark of good government. He stated that “Capitalism and free enterprise owe their survival in no small degree to the existence of our private, independent universities” and that if American business does not aid in their maintenance it is not “properly protecting the long-range interest of its stockholders, its employees and its customers.” Similarly, Dr. Harold W. Dodds, President of Princeton University, suggested that if private institutions of higher learning were replaced by governmental institutions our society would be vastly different and private enterprise in other fields would fade out rather promptly. Further on he stated that “democratic society will not long endure if it does not nourish within itself strong centers of non-governmental fountains of knowledge, opinions of all sorts not gorernmentally or politically originated. If the time comes when all these centers are absorbed into government, then freedom as we know it, I submit, is at an end.”
The objecting stockholders have not disputed any of the foregoing testimony nor the showing of great need by Princeton and other private institutions of higher learning and the important public service being rendered by them for democratic government and industry alike. Similarly, they have acknowledged that for over two decades there has been state legislation on our books which expresses a strong public policy in favor of corporate contributions such as that being by them. Nevertheless, they have taken the position that (1) the plaintiff’s certificate of incorporation does not expressly authorize the contribution and under common-law principles the company does not possess any imp1i.ftd_mn-iacid.-eBta1 power to make it, and (2) the New Jersey statutes which expressly authorize the contribution *149may not constitutionally be applied to the plaintiff, a corporation created long before their enactment. See R. S. 14:3-13; R. S. 14:3-13.1 et seq.
\ In his discussion of the early history of business corporations Professor Williston refers to a 1702 publication where the author stated flatly that “The general intent and end of all civil incorporations is for better government.” And he points out that the early corporate charters, particularly their recitals, furnish additional support for the notion that the corporate object was the public one of managing and ordering the trade as well as the private one of profit for the members. See 3 Select Essays on Anglo-American Legal History 201 (1909); 1 Fletcher, Corporations (rev. ed. 1931), 6. See also Currie's Administrators v. The Mutual Assurance Society, 4 Hen. & M. 315, 347 (Va. Sup. Ct. App. 1809), where Judge Eoane referred to the English corporate charters and expressed the view that acts of incorporation ought never to be passed “but in consideration of services to be rendered to the public.” However, with later economic and social developments and the free availability of the corporate device for all trades, the end of private profit became generally accepted as the controlling one in all businesses other than those classed broadly as public utilities. Of. Dodd, For Whom Are Corporate Managers Trustees?, 45 Harv. L. Rev. 1145, 1148 (1932). As a concomitant the pYómiKbiPlSÁv^ruIJ developed that those who managed the corporationcoiild not disburse any corporate funds for philanthropic or other worthy public cause unless the expenditure would benefit the corporation. Hutton v. West Cork Railway Company, 23 Ch. D. 654 (1883); Dodge v. Ford Motor Co., 204 Mich. 459, 170 N. W. 668, 3 A. L. R. 413 (Sup. Ct. 1919). Ballantine, Corporations (rev. ed. 1946), 228; 6A Fletcher, supra, 667. During the 19th Century when corporations were relatively few and small and did not dominate the country’s wealth, the common-law rule did not significantly interfere with the public interest. But the 20th Century has presented a different climate. Berle and Means, The Modern Corporation and Private *150Property (1948). Control of economic wealth has passed largely from individual entrepreneurs to dominating corporations, and calls upon the corporations for reasonable philanthropic donations have come to be made with increased public support. In many instances such contributions' have been sustained by the courts within the common-law doctrine upon liberal findings that the donations tended reasonably to promote the corporate objectives. See Cousens, How Far Corporations May Contribute to Charity, 35 Va. L. Rev. 401 (1949).
Thus, in the leading case of Evans v. Brunner, Mond & Company, Ltd. [1921] 1 Ch. 359, the court held that it was within the incidental power of a chemical company to grant £100,000 to uniyersities or other scientific institutions selected by the directors “for the furtherance of scientific education and research.” The testimony indicated that the company desired to encourage and assist men who would devote their time and abilities to scientific study and research generally, a class of men' for whom the company was constantly on the lookout. This benefit was not considered by ...the. court to be so remote, as to bring it outside the common-law rule» Similarly,' in Armstrong Cork Co. v. H. A. Meldram Co., 285 F. 58 (D. C. W. D. N. Y. 1922), the court sustained contributions made by the corporation to the University of Buffalo and Canisius College. In the course of its opinion the court quoted the familiar comment from Steinway v. Steinway & Sons, 17 Misc. 43, 40 N. Y. S. 718 (Sup. Ct. 1896), to the effect that as industrial conditions change business methods must change with them and acts become permissible which theretofore were considered beyond the corporate powers; and on the issue as to whether the corporation had received any corporate benefit it said:
“It was also considered, in making the subscriptions or donations, that the company would receive advertisement of substantial value, including the good will of many influential citizens and of its patrons, who were interested in the success of the development of these branches of education, and, on the other hand, suffer a loss of prestige if the contributions were not made, in view of the fact that business competitors had donated and shown a commendable public *151spirit in that relation. In the circumstances the rule of law that may fairly be applied is that the action of the officers of the company was not ultra vires, but was in fact within their corporate powers, since it tended to promote the welfare of the business in which the corporation was engaged.”
In American Rolling Mill Co. v. Commissioner of Internal Revenue, 41 F. 2d 314 (C. C. A. 6 1930), the corporation had joined with other local industries in the creation of a civic improvement fund to be distributed amongst community enterprises including the Boy Scouts and Girl Scouts, the Y. M. C. A., the Hospital, etc. The court readily sustained the contribution as an ordinary and necessary expense of the business within the Revenue Act. And in Greene County Nat. Farm Loan Ass’n v. Federal Land Bank of Louisville, 57 F. Supp. 783, 789 (D. C. W. D. Ky. 1944), affirmed 152 F. 2d 215 (6th Cir. 1945), cert. denied 328 U. S. 834, 66 S. Ct. 978, 90 L. Ed. 1610 (1946), the court in dealing with a comparable problem said:
“But it is equally well established that corporations are permitted to make substantial contributions which have the outward form of gifts where the activity being promoted by the so-called gift tends reasonably to promote the goodwill of the business of the contributing corporation. Courts recognize in such cases that although there is no dollar and cent supporting consideration, yet there is often substantial indirect benefit accruing to the corporation which supports such action. So-called contributions by corporations to churches, schools, hospitals, and civic improvement funds, and the establishment of bonus and pension plans with the payment of large sums flowing therefrom have been upheld many times as reasonable business expenditures rather than being classified as charitable gifts. American Rolling Mill Co. v. Commissioner of Internal Revenue, 6 Cir., 41 F. 2d 314; Heinz v. National Bank of Commerce, 8 Cir., 237 F. 942; Corning Glass Works v. Lucas, 59 App. D. C. 168, 37 F. 2d 798, 68 A. L. R. 736; Forbes Lithograph Mfg. Co. v. White, D. C. Mass., 42 F. 2d 287; American National Assurance Co. v. Ricketts, 230 Ky. 398, 19 S. W. 2d 1071.”
The foregoing authorities illustrate how courts, while adhering to the terms of the common-law rule, have applied it very broadly to enable worthy corporate donations with indirect benefits to the corporations. In State ex rel. Sorensen v. Chicago B. & Q. R. Co., 112 Neb. 248, 199 N. W. 534, *152537 (1924), the Supreme Court of Nebraska, through Justice Letton, went even further and without referring to any limitation based on economic benefits to the corporation said that it saw “no reason why if a railroad company desires to foster, encourage and contribute to a charitable enterprise, or to one designed for the public weal and welfare, it may not do so”; later in its opinion it repeated this view with the expression that it saw “no reason why a railroad corporation may not, to a reasonable extent, donate funds or services to aid in good works.” Similarly, the court in Carey v. Corporation Commission of Oklahoma, 168 Olka. 487, 33 P. 2d 788, 794 (Sup. Ct. 1934), while holding that a public service company was not entitled to an increase in its rates because of its reasonable charitable donations, broadly recognized that corporations, like individuals, have power to make them. Cf. New Jersey Bell Telephone Company v. Department of Public Utilities, 12 N. J. 568 (1953). In the course of his opinion for the court in the Carey case Justice Bayless said:
“Next is the question of dues, donations, and philanthropies of the Company. It is a matter for the discretion of corporate management in making donations and paying dues. In that respect a corporation does not occupy a status far different from an individual. An individual determines the propriety of joining organizations, and contributing to their support by paying dues, and all contribution to public charities, etc., according to his means. He does not make such contributions above his means with the hope that his employer will increase his compensation accordingly. A corporation likewise should not do so. Its ultimate purpose, from its own standpoint, is to earn and pay dividends. If, as a matter of judgment, it desires to take part of its earnings, just as would an individual, and contribute them to a worthy public cause, it may do so; but we do not feel that it should be allowed to increase its earnings to take care thereof.”
Over 20 years ago Professor Dodd, supra, 45 Harv. L. Rev., at 1159, 1160, cited the views of Justice Letton in State ex rel. Sorensen v. Chicago B. & Q. R. Co., supra, with seeming approval and suggested the doctrine that corporations may properly support charities which are important to the welfare *153of the communities where they do business as soundly representative of the public attitude and actual corporate practice. Developments since he wrote leave no doubts on this score, When the wealth of the nation was primarily in the hands of individuals they discharged their responsibilities as citizens by donating freely for charitable purposes. With the transfer of most of the wealth to corporate hands and the imposition of heavy burdens of individual taxation, they have been unable to keep pace with increased philanthropic needs. They have therefore, with justification, turned to corporations to assume the modern obligations of good citizenship in the same manner as humans do. Congress and state legislatures have enacted laws which encourage corporate contributions, and much has recently been written to indicate the crying need and adequate legal basis therefor. See Ruml, The Manual of Corporate Giving, 3, 35 (1952); Garrett, Corporate Donations to Charity, 4 The Business Lawyer 28 (1948); 8 The Business Lawyer 22 (1953); Bell, Corporate Support of Education, 38 A. B. A. J. 119 (1952); de Capriles and Garrett, Legality of Corporate Support to Education, 38 A. B. A. J. 209 (1952); Bleicken, Corporate Contributions to Charity, 38 A. B. A. J. 999 (1952); Andrews, Corporation Giving, 15, 158, 201 (1952). Cf. Navarro, Corporate Authority to Contribute to Charity, 26 Phil. L. J. 187 (1951); Stevens, Corporations (2d ed. 1949), 252. In actual practice corporate giving has correspondingly increased. Thus, it is estimated that annual corporate contributions throughout the nation aggregate over 300 million dollars with over 60 million dollars thereof going to universities and other educational institutions. Similarly, it is estimated that local community chests receive well over 40% of their contributions from corporations; these contributions and those made by corporations to the American Red Cross, to Boy Scouts and Girl Scouts, to 4-H Clubs and similar organizations have almost invariably been unquestioned.
During the first world war corporations loaned their personnel and contributed sxrbstantial corporate funds in order to insure survival; during* the depression of the ’30s *154V they made contributions to alleviate the desperate hardships of the millions of unemployed; and during the second world Xwar they again contributed to insure survival. They now recognize that we are faced with other, though nonetheless vigjous, threats from abroad which must be withstood without impairing the jdgox-of our democratic institutions_afJhome and that otherwise victory will be pyrrhic indeed. Morejuid rnr)Te_£hi3y—hmve_CQ:mp._to recognize that their salvation rests upon-sousd-oGonomic^nd:-soeiul-envir-onment_wMch-.in~tuT-n ^•ests inmicHnMgnlfieant—nart—u-p&n—freeuAnd vigorous nongovernmental institutions of learning. It seems to us that just .as the conditions prevailing when corporations were originally created required that they serve public as well as private interests, modern conditions require that corporations acknowledge and discharge social as well as private responsibilities as members of the communities within which they operate. Within this broad concept there is no difficulty in sustmmngTm^ijinciRentaL-toZiEeNZ^rbpmZAbjectsVnd in aid of the public welfare, the power of corporations to contribute corporate funds within reasonable limits in support of academic institutions. But even if-we confine ourselves to the terms of the common-law, rule in its application—'to-cu-rrent conditions, such expenditures may likewise readily be justified as being for the benefit of the corporation; indeed, if need be the matter may be viewed strictly in terms'!)!-actual survival of the corporation in a free enterprise system. The genius of our common law has been its capacity for growth and its adaptability to the needs of the times. Generally courts have accomplished the desired result indirectly through the molding of old forms. Occasionally they have done it directly through frank rejection of the old and recognition of the new. But whichever path the common law has taken it has not been found wanting as the proper tool for the advancement of the general good. Cf. Holmes, The Common Law, 1, 5 (1951); Cardoza, Paradoxes of Legal Science, Halh, Selected Writings, 253 (1947).
In 1930 aStatm|^was enacted in our State which expressly provided thatUmy corporation could cooperate with other *155corporations and natural persons in the creation and maintenance of community funds and charitable, philanthropic or benevolent instrumentalities conducive to public welfare, and could for such purposes expend such corporate sums as the directors “deem expedient and as in their judgment, will contribute to the protection of the corporate interests.” L. 1930, c. 105; L. 1931, c. 290; R. S. 14:3-13. See 53 N. J. L. J. 335 (1930). Under the terms of the statute donations in excess of 1% of the capital stock required 10 days’ notice to stockholders and approval at a stockholders’ meeting if written objections were made by the holders of more than 25% of the stock; in 1949 the statute was amended to increase the limitation to 1% of capital and surplus. See L. 1949, c. 171. In 1950 a more comprehensive statute was enacted. L. 1950, c.,220; N. J. S. A. 14:3-13.1 et seq. In this enactment the Legislature declared that it shall be the public policy of our State and in furtherance of the public interest and welfare that encouragement be given to the creation and maintenance of institutions engaged in community fund, hospital, charitable, philanthropic, educational, scientific or benevolent activities or patriotic or civic activities conducive to the betterment of social and economic conditions; and it expressly empowered corporations acting singly or with others to contribute reasonable sums to such institutions, provided, however, that the contribution shall not be permissible if the donee institution owns more than 10% of the voting stock of the donor and provided, further, that the contribution shall not exceed 1% of capital and surplus unless the excess is authorized by the stockholders at a regular or special meeting. To insure that the grant of express power in the 1950 statute would not displace preexisting power at common law or otherwise, the Legislature provided that the “act shall not be construed as directly or indirectly minimizing or interpreting the rights and powers qf corporations, as heretofore existing, with reference to appropriations, expenditures or contributions of the nature above specified.” N. J. S. A. 14:3-13.3. It may be noted that statutes relating to charitable contributions by corpora*156tions have now been passed in 29 states. See Andrews, supra, 235.
The appellants contend that the foregoing New Jersey statutes may not be applied to corporations created before their passage. Fifty years before the incorporation of The A. P. Smith Manufacturing Company our Legislature provided that every corporate charter thereafter granted “shall be subject to alteration, suspension and repeal,- in the discretion of the legislature.” L. 1846, p. 16; R. S. 14:2-9. A similar reserved power was placed into our State Constitution in 1875 (Art. IV, Sec. VII, par. 11), and is found in our present Constitution. Art. IV, Sec. VII, par. 9. In the early case Zabriskie v. Hackensack and New York Railroad Company, 18 N. J. Eq. 178 (Ch. 1867), the court was called upon to determine whether a railroad could extend its line, above objection by a stockholder, under a legislative enactment passed under the reserve power after the incorporation of the railroad. Notwithstanding the breadth of the statutory language and persuasive authority elsewhere (Durfee v. Old Colony & Fall River Railroad Company, 87 Mass. 230 (Sup. Jud. Ct. 1862)), it was held that the proposed extension of the company's line constituted a vital change of its corporate object which could not be accomplished without unanimous consent. See Lattin, A Primer on Fundamental Corporate Changes, 1 West. Res. L. Rev. 3, 7 (1949). The court announced the now familiar New Jersey doctrine that although the reserved power permits alterations in the public interest of the contract between the state and the corporation, it has no effect on the contractual rights between the corporation and its stockholders and between stockholders inter se. Unfortunately, the court did not consider whether it was not contrary to the public interest to permit the single minority stockholder before it to restrain the railroad's normal corporate growth and development as authorized by the Legislature and approved, reasonably and in good faith, by the corporation’s managing directors and majority stockholders. Although the later cases in New Jersey have not disavowed the doctrine of the Zabrislcie case, it is noteworthy *157that they have repeatedly recognized that where justified by' the advancement of the public interest the reserved power may be invoked to sustain later charter alterations even though they affect contractual rights between the corporation and its stockholders and between stockholders inter se. See Berger v. United States Steel Corporation, 63 N. J. Eq. 809, 824 (E. & A. 1902); Murray v. Beattie Manufacturing Co., 79 N. J. Eq. 604, 609 (E. & A. 1912); Grausman v. Porto Rican-American Tobacco Co., 95 N. J. Eq. 155 (Ch. 1923), affirmed on other ground 95 N. J. Eq. 223 (E. & A. 1923); Bingham v. Savings Investment & Trust Co., 101 N. J. Eq. 413, 415 (Ch. 1927), affirmed 102 N. J. Eq. 302 (E. & A. 1928); In re Collins-Doan Co., 3 N. J. 382, 391 (1949). Of. State v. Miller, 30 N. J. L. 368, 373 (Sup. Ct. 1863), affirmed 31 N. J. L. 521 (E. & A. 1864); Montclair v. New York & Greenwood Latte Railway Co., 45 N. J. Eq. 436, 444 (Ch. 1889), reversed on other grounds 47 N. J. Eq. 591 (E. & A. 1890); Moore v. Conover, 123 N. J. Eq. 61, 74 (Ch. 1937).
Thus, in the Berger case the Court of Errors and Appeals sustained the applicability under the reserved power of provisions relating to corporate borrowing and the purchase of corporate stock, and in considering the doctrine of the Zabrisltie case noted that the rights of the stockholders inter se may not be impaired “except in so far as impairment may result from an alteration required by the public interest.” And later in its opinion the court, referring to the provision in the Corporation Act of 1896 that the act and all amendments shall be a part of the charter of every corporation formed theretofore or thereafter, said: “It is difficult to perceive how any substantial force can be accorded to it, unless some amendment may be made which may affect the rights of stockholders inter sese to some extent.” In the Murray case the court sustained a statute substituting a discretionary power to pay dividends for a pre-existing duty; in the course of his opinion Justice Swayze indicated that even apart from stockholders’ consent the statutory alteration could be sustained since it was “a matter of state concern *158that a corporation should be permitted to accumulate a sufficient fund to secure its credit and make permanent its successful operation.” And in the Bingham case the court sustained a bank .merger under the authority of legislation enacted after the incorporation of the bank, with Vice-Chancellor Backes pointing out that the office of the reserve power in our organic and statutory law “is to safeguard the public interests in corporate grants.”
This court had recent occasion to deal with the problem in In re Collins-Doan Co., supra. There it appeared that the board of directors was hopelessly deadlocked and application was duly made under L. 1938, c. 303 (N. J. S. A. 14:13-15) by the plaintiffs, representing half the directors and stockholders, for dissolution of the corporation. The defendants representing the other half resisted the application, contending that since the corporation was formed in 1916 it could not be dissolved except with the consent of two-thirds of the stockholders. This court, while recognizing that the later enactment did affect the rights between the corporation and its stockholders and between the stockholders inter se, nevertheless held that it was applicable to the pre-existing corporation as a proper exercise of the reserved power. In the course of his opinion for the court Justice Iieher pointed out that “the contractual rights of the stockholders inter se are not proof against ‘alteration required by the public interest/ ” It may be noted that the later enactment not only affected the relations between the corporation and stockholders and the stockholders inter se, but also enabled complete termination of the original corporate objectives; yet this court found little difficulty in subordinating these considerations to the paramount public interest in avoiding the indefinite continuance of a corporation which could not function with propriety because of the “stalemate in corporate management.” See In re Evening Journal Association, 1 N. J. 437, 444 (1948). The legislative function recognized here may be considered somewhat akin to that under the police power generally where private interests frequently are called upon to give way to the *159paramount public interest. See Reingold v. Harper, 6 N. J. 182, 193 (1951); McSweeney v. Equitable Trust Co., 16 N. J. Misc. 193, 197 (Sup. Ct. 1938), affirmed 127 N. J. L. 299 (E. & A. 1941), app. dism. 315 U. S. 785, 62 S. Ct. 805, 86 L. Ed. 1191 (1942); Union Dry Goods Company v. Georgia Public Service Corporation, 248 U. S. 372, 39 S. Ct. 117, 63 L. Ed. 309 (1919). See also Lakewood Express Service, Inc. v. Board of Public Utility Commissioners, 1 N. J. 45, 50 (1948), where Justice Oliphant, in discussing the police power, said:
“This power extends to all great public needs and the constitutional interdictions as to due process and the protection of property rights does not prevent a state from exercising such powers as are vested in it for the promotion of the common weal or are necessary for the general gopd of the public even though property or contract rights are affected. Manigualt v. Springs, 199 U. S. 473, 26 S. Ct. 127, 50 L. Ed. 274; Home Building A Loan Ass’n v. Blaisdell, 290 U. S. 398, 54 S. Ct. 231, 78 L. Ed. 413, 88 A. L. R. 1481; Veix v. Sixth Ward B. & L. Ass’n of Newark, N. J., 310 U. S. 32, 60 S. Ct. 792, 84 L. Ed. 1061; Bucsi v. Longworth B. & L. Ass’n, Err. & App. 1937, 119 N. J. L. 120, 123.”
13] State legislation adopted in the public interest and applied to pre-existing corporations under the reserved power has repeatedly been sustained by the United States Supreme Court above the contention that it impairs the rights of stockholders and violates constitutional guarantees under the Federal Constitution. Thus, in Looker v. Maynard, 179 U. S. 46, 21 S. Ct. 21, 45 L. Ed. 79 (1900), the court sustained the application to pre-existing corporations of later legislation designed to secure minority representation on boards of directors by permitting cumulative voting by stockholders; in Polk v. Mutual Reserve Fund Life Association of New York, 207 U. S. 310, 28 S. Ct. 65, 52 L. Ed. 222 (1907), the court sustained state legislation which permitted reorganizations of existing corporations involving changes in their corporate purposes; in Veix v. Sixth Ward Bldg. & Loan Association of Newark, 310 U. S. 32, 60 S. Ct. 792, 84 L. Ed. 1061 (1940), a New Jersey statute which altered the withdrawal rights of building and loan shareholders was *160upheld; and in Sutton v. New Jersey, 244 U. S. 258, 37 S. Ct. 508, 61 L. Ed. 1117 (1917), a New Jersey statute which required pre-existing street railway corporations to carry police officers without charge was upheld as a proper exercise of the reserve power. Many other instances which sustain legislative enactments adopted in the public interest but affecting the relations between the corporation and its stockholders and between stockholders inter se, as well as the contract between the State and the corporation, may be found cited in the opinion below and in Ballantine, supra, p. 648; 7 Fletcher, supra, p. 815; 54 Harv. L. Rev. 1368 (1941); 13 Am. Jur. 233 (1938); 16 C. J. S., Constitutional Law, § 320, p. 759 (1939). We are entirely satisfied that within the orbit of above authorities the legislative enactments found in R. S. 14:3-13 and N. J. S. A. 14:3-13.1 et seq. and applied to pre-existing corporations do not violate any constitutional guarantees afforded to their stockholders.
It seems clear to us that the public policy supporting the statutory enactments under consideration is far greater and the alteration of pre-existing rights of stockholders much lesser than in the cited cases sustaining various exercises of the reserve power. In encouraging and expressly authorizing reasonable charitable contributions by corporations, our State has not only joined with other states in advancing the national interest but has also specially furthered the interests of its own people who must bear the burdens of taxation resulting from increased state and federal aid upon default in voluntary giving. It is significant that injtsjma^mants the State had not in^lñyMg^óñgllt^WUmñó^e-anv. _compitlBui7^ffiigations^j)X_altexJihe-- corpnraifi__ob j eetives. And since'in"duir view the corporate power to make reasonable charitable contributions exists under modern conditions, even apart from express statutory provision, its enactments simply constitute helpful and confirmatory declarations of such power, accompanied by limiting safeguards.
In the light of all of the foregoing we have no hesitancy in sustaining the validity of the donation by the *161plaintiff. .IhexeMs_AiD_snggestioiuYhatM±__SEas_made_ indiserÁrnÍTiaífibMffi-ÍP,a pet charity of the corporate directors in fnjtheranna_Qf-_personal rather than corporate ends. On the contrary, it was made to a preeminent institution of higheT learning, was modest in amount and well within the limitations imposed by the statutory enactments, and was^ynluntarily made in the reasonable,, belief that it.would._aid the public Iwelfare -and admuce-the-ú-nter-ests-of-the -plaintiff- as a private corporation and as part of the community in--which it operates. We find that it was a lawful exercise of the corporation’s implied and incidental powers- under common-law principles and that it came within the express authority of the pertinent state legislation. As has been indicated, there is now widespread belief throughout the nation that free and vigorous non-governmental institutions of learning are vital to our democracy and the system of free enterprise and that withdrawal of corporate authority to make such contributions within reasonable limits would seriously ^threaten their continuance. Corporations have come to recognize this and with their enlightenment have sought in varying measures, as has the plaintiff by its contribution, to insure and strengthen the society which gives them existence and the means of aiding themselves and their fellow citizens.
^Clearly then, the appellants, as individual stockholders whose private interests rest entirely upon the well-being of the plaintiff corporation, ought not be permitted to close their eyes to present-day realities and thwart the long-visioned corporate action in recognizing and voluntarily discharging its high obligations as a constituent of our modern social , .structure.
The judgment entered in the Chancery Division is in all respects
Affirmed.
For affirmance—Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wacheneeld, Burling and Jacobs—-6.
For reversal—None.
3.1.2 Citizens United v. Federal Election Commission 3.1.2 Citizens United v. Federal Election Commission
CITIZENS UNITED v. FEDERAL ELECTION COMMISSION
No. 08-205.
Argued March 24, 2009 — Reargued September 9, 2009—
Decided January 21, 2010
*316Kennedy, J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia and Alito, JJ., joined, in which Thomas, J., joined as to all but Part IV, and in which Stevens, Ginsburg, Breyer, and Soto-mayor, JJ., joined as to Part IV. Roberts, C. J., filed a concurring opinion, in which Alito, J., joined, post, p. 372. Scalia, J., filed a concurring opinion, in which Alito, J., joined, and in which Thomas, J., joined in part, post, p. 385. Stevens, J., filed an opinion concurring in part and dissenting in part, in whieh Ginsburg, Breyer, and Sotomayor, JJ., joined, post, p. 393. Thomas, J., filed an opinion concurring in part and dissenting in part, post, p. 480.
Theodore B. Olson argued and reargued the cause for appellant. With him on the briefs were Matthew D. McGill, Amir C. Tayrani, and Michael Boos.
Floyd Abrams argued the cause for Senator Mitch McConnell as amicus curiae. With him on the brief was Susan Buckley.
Solicitor General Kagan reargued the cause for appellee. Deputy Solicitor General Stewart argued the cause for ap*317pellee on the original argument. With them on the briefs were then -Acting Solicitor General Kneedler, William M. Jay, Thomasenia P. Duncan, David Kolker, Kevin Deeley, and Adav Noti.
Seth P. Waxman argued the cause for Senator John McCain et al. as amici curiae urging affirmance. With him on the briefs were Randolph D. Moss, Roger M. Witten, Scott L. Nelson, Alan B. Morrison, Brian Wolf man, Trevor Potter, J. Gerald Hebert, Paul S. Ryan, Tara Malloy, Fred Wertheimer, and Donald J. Simon.*
delivered the opinion of the Court.
Federal law prohibits corporations and unions from using their general treasury funds to make independent expendi*319tures for speech defined as an “electioneering communication” or for speech expressly advocating the election or defeat of a candidate. 2 U. S. C. § 441b. Limits on electioneering communications were upheld in McConnell v. Federal Election Comm’n, 540 U. S. 93, 203-209 (2003). The holding of McConnell rested to a large extent on an earlier case, Austin v. Michigan Chamber of Commerce, 494 U. S. 652 (1990). Austin had held that political speech may be banned based on the speaker’s corporate identity.
In this case we are asked to reconsider Austin and, in effect, McConnell. It has been noted that “Austin was a significant departure from ancient First Amendment principles,” Federal Election Comm’n v. Wisconsin Right to Life, Inc., 551 U. S. 449, 490 (2007) (WRTL) (Scalia, J., concurring in part and concurring in judgment). We agree with that conclusion and hold that stare decisis does not compel the continued acceptance of Austin. The Government may regulate corporate political speech through disclaimer and disclosure requirements, but it may not suppress that speech altogether. We turn to the case now before us.
I
A
Citizens United is a nonprofit corporation. It brought this action in the United States District Court for the District of Columbia. A three-judge court later convened to hear the cause. The resulting judgment gives rise to this appeal.
Citizens United has an annual budget of about $12 million. Most of its funds are from donations by individuals; but, in addition, it accepts a small portion of its funds from for-profit corporations.
In January 2008, Citizens United released a film entitled Hillary: The Movie. We refer to the film as Hillary. It is a 90-minute documentary about then-Senator Hillary Clinton, who was a candidate in the Democratic Party’s 2008 Presidential primary elections. Hillary mentions Senator *320Clinton by name and depicts interviews with political commentators and other persons, most of them quite critical of Senator Clinton. Hillary was released in theaters and on DVD, but Citizens United wanted to increase distribution by making it available through video-on-demand.
Video-on-demand allows digital cable subscribers to select programming from various menus, including movies, television shows, sports, news, and music. The viewer can watch the program at any time and can elect to rewind or pause the program. In December 2007, a cable company offered, for a payment of $1.2 million, to make Hillary available on a video-on-demand channel called “Elections ’08.” App. 255a-257a. Some video-on-demand services require viewers to pay a small fee to view a selected program, but here the proposal was to make Hillary available to viewers free of charge.
To implement the proposal, Citizens United was prepared to pay for the video-on-demand; and to promote the film, it produced two 10-second ads and one 30-second ad for Hillary. Each ad includes a short (and, in our view, pejorative) statement about Senator Clinton, followed by the name of the movie and the movie’s Web site address. Id., at 26a-27a. Citizens United desired to promote the video-on-demand offering by running advertisements on broadcast and cable television.
B
Before the Bipartisan Campaign Reform Act of 2002 (BCRA), federal law prohibited — and still does prohibit— corporations and unions from using general treasury funds to make direct contributions to candidates or independent expenditures that expressly advocate the election or defeat of a candidate, through any form of media, in connection with certain qualified federal elections. 2 U. S. C. § 441b (2000 ed.); see McConnell, supra, at 204, and n. 87; Federal Election Comm’n v. Massachusetts Citizens for Life, Inc., 479 U.S. 238, 249 (1986) (MCFL). BCRA §203 amended *321§441b to prohibit any “electioneering communication” as well. 2 U. S. C. §441b(b)(2) (2006 ed.). An electioneering communication is defined as “any broadcast, cable, or satellite communication” that “refers to a clearly identified candidate for Federal office” and is made within 30 days of a primary or 60 days of a general election. § 434(f)(3)(A). The Federal Election Commission’s (FEC) regulations further define an electioneering communication as a communication that is “publicly distributed.” 11 CFR § 100.29(a)(2) (2009). “In the case of a candidate for nomination for President... publicly distributed means” that the communication “[c]an be received by 50,000 or more persons in a State where a primary election ... is being held within 30 days.” § 100.29(b)(3)(ii)(A). Corporations and unions are barred from using their general treasury funds for express advocacy or electioneering communications. They may establish, however, a “separate segregated fund” (known as a political action committee, or PAC) for these purposes. 2 U. S. C. § 441b(b)(2). The moneys received by the segregated fund are limited to donations from stockholders and employees of the corporation or, in the case of unions, members of the union. Ibid.
C
Citizens United wanted to make Hillary available through video-on-demand within 30 days of the 2008 primary elections. It feared, however, that both the film and the ads would be covered by §441b’s ban on corporate-funded independent expenditures, thus subjecting the corporation to civil and criminal penalties under §437g. In December 2007, Citizens United sought declaratory and injunctive relief against the FEC. It argued that (1) §441b is unconstitutional as applied to Hillary; and (2) BCRA’s disclaimer and disclosure requirements, BCRA §§201 and 311, 116 Stat. 88, 105, are unconstitutional as applied to Hillary and to the three ads for the movie.
*322The District Court denied Citizens United’s motion for a preliminary injunction, 530 F. Supp. 2d 274 (DC 2008) (per curiam), and then granted the FEC’s motion for summary judgment, App. 261a-262a. See id., at 261a (“Based on the reasoning of our prior opinion, we find that the [FEC] is entitled to judgment as a matter of law. See Citizen[s] United v. FEC, 530 F. Supp. 2d 274 (D. D. C. 2008) (denying Citizens United’s request for a preliminary injunction)”). The court held that § 441b was facially constitutional under McConnell, and that §441b was constitutional as applied to Hillary because it was “susceptible of no other interpretation than to inform the electorate that Senator Clinton is unfit for office, that the United States would be a dangerous place in a President Hillary Clinton world, and that viewers should vote against her.” 530 F. Supp. 2d, at 279. The court also rejected Citizens United’s challenge to BCRA’s disclaimer and disclosure requirements. It noted that “the Supreme Court has written approvingly of disclosure provisions triggered by political speech even though the speech itself was constitutionally protected under the First Amendment.” Id., at 281.
We noted probable jurisdiction. 555 U. S. 1028 (2008). The case was reargued in this Court after the Court asked the parties to file supplemental briefs addressing whether we should overrule either or both Austin and the part of McConnell which addresses the facial validity of 2 U. S. C. § 441b. See 557 U. S. 932 (2009).
II
Before considering whether Austin should be overruled, we first address whether Citizens United’s claim that § 441b cannot be applied to Hillary may be resolved on other, narrower grounds.
A
Citizens United contends that § 441b does not cover Hillary, as a matter of statutory interpretation, because the film *323does not qualify as an “electioneering communication.” §441b(b)(2). Citizens United raises this issue for the first time before us, but we consider the issue because “it was addressed by the court below.” Lebron v. National Railroad Passenger Corporation, 513 U. S. 374, 379 (1995); see 530 F. Supp. 2d, at 277, n. 6. Under the definition of electioneering communication, the video-on-demand showing of Hillary on cable television would have been a “cable . . . communication” that “referred] to a clearly identified candidate for Federal office” and that was made within 30 days of a primary election. 2 U. S. C. §434(f)(3)(A)(i). Citizens United, however, argues that Hillary was not “publicly distributed,” because a single video-on-demand transmission is sent only to a requesting cable converter box and each separate transmission, in most instances, will be seen by just one household — not 50,000 or more persons. 11 CFR § 100.29(a)(2); see § 100.29(b)(3)(ii).
This argument ignores the regulation’s instruction on how to determine whether a cable transmission “[c]an be received by 50,000 or more persons.” § 100.29(b)(3)(ii). The regulation provides that the number of people who can receive a cable transmission is determined by the number of cable subscribers in the relevant area. §§ 100.29(b)(7)(i)(G), (ii). Here, Citizens United wanted to use a cable video-on-demand system that had 34.5 million subscribers nationwide. App. 256a. Thus, Hillary could have been received by 50,000 persons or more.
One amici brief asks us, alternatively, to construe the condition that the communication “[c]an be received by 50,000 or more persons,” § 100.29(b)(3)(ii)(A), to require “a plausible likelihood that the communication will be viewed by 50,000 or more potential voters” — as opposed to requiring only that the communication is “technologically capable” of being seen by that many people, Brief for Former Officials of the American Civil Liberties Union 5. Whether the population and demographic statistics in a proposed viewing area consisted *324of 50,000 registered voters — but not “infants, pre-teens, or otherwise electorally ineligible recipients” — would be a required determination, subject to judicial challenge and review, in any case where the issue was in doubt. Id., at 6.
In our view the statute cannot be saved by limiting the reach of 2 U. S. C. § 441b through this suggested interpretation. In addition to the costs and burdens of litigation, this result would require a calculation as to the number of people a particular communication is likely to reach, with an inaccurate estimate potentially subjecting the speaker to criminal sanctions. The First Amendment does not permit laws that force speakers to retain a campaign finance attorney, conduct demographic marketing research, or seek declaratory rulings before discussing the most salient political issues of our day. Prolix laws chill speech for the same reason that vague laws chill speech: People “of common intelligence must necessarily guess at [the law’s] meaning and differ as to its application.” Connally v. General Constr. Co., 269 U. S. 385, 391 (1926). The Government may not render a ban on political speech constitutional by carving out a limited exemption through an amorphous regulatory interpretation. We must reject the approach suggested by the amici. Section 441b covers Hillary.
B
Citizens United next argues that § 441b may not be applied to Hillary under the approach taken in WRTL. McConnell decided that §441b(b)(2)’s definition of an “electioneering communication” was facially constitutional insofar as it restricted speech that was “the functional equivalent of express advocacy” for or against a specific candidate. 540 U. S., at 206. WRTL then found an unconstitutional application of § 441b where the speech was not “express advocacy or its functional equivalent.” 551 U. S., at 481 (opinion of Roberts, C. J.). As explained by The Chief Justice’s controlling opinion in WRTL, the fimctional-equivalent test is objective: “[A] court should find that [a communication] is *325the functional equivalent of express advocacy only if [it] is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.” Id., at 469-470.
Under this test, Hillary is equivalent to express advocacy. The movie, in essence, is a feature-length negative advertisement that urges viewers to vote against Senator Clinton for President. In light of historical footage, interviews with persons critical of her, and voiceover narration, the film would be understood by most viewers as an extended criticism of Senator Clinton’s character and her fitness for the office of the Presidency. The narrative may contain more suggestions and arguments than facts, but there is little doubt that the thesis of the film is that she is unfit for the Presidency. The movie concentrates on alleged wrongdoing during the Clinton administration, Senator Clinton’s qualifications and fitness for office, and policies the commentators predict she would pursue if elected President. It calls Senator Clinton “Machiavellian,” App. 64a, and asks whether she is “the most qualified to hit the ground running if elected President,” id., at 88a. The narrator reminds viewers that “Americans have never been keen on dynasties” and that “a vote for Hillary is a vote to continue 20 years of a Bush or a Clinton in the White House,” id., at 143a-144a.
Citizens United argues that Hillary is just “a documentary film that examines certain historical events.” Brief for Appellant 35. We disagree. The movie’s consistent emphasis is on the relevance of these events to Senator Clinton’s candidacy for President. The narrator begins by asking “could [Senator Clinton] become the first female President in the history of the United States?” App. 35a. And the narrator reiterates the movie’s message in his closing line: “Finally, before America decides on our next president, voters should need no reminders of . . . what’s at stake — the well being and prosperity of our nation.” Id., at 144a-145a.
*326As the District Court found, there is no reasonable inter-. pretation of Hillary other than as an appeal to vote against Senator Clinton. Under the standard stated in McConnell and further elaborated in WRTL, the film qualifies as the functional equivalent of express advocacy.
C
Citizens United further contends that § 441b should be invalidated as applied to movies shown through video-on-demand, arguing that this delivery system has a lower risk of distorting the political process than do television ads. Cf. McConnell, supra, at 207. On what we might call conventional television, advertising spots reach viewers who have chosen a channel or a program for reasons unrelated to the advertising. With video-on-demand, by contrast, the viewer selects a program after taking “a series of affirmative steps”: subscribing to cable; navigating through various menus; and selecting the program. See Reno v. American Civil Liberties Union, 521 U. S. 844, 867 (1997).
While some means of communication may be less effective than others at influencing the public in different contexts, any effort by the Judiciary to decide which means of communications are to be preferred for the particular type of message and speaker would raise questions as to the courts’ own lawful authority. Substantial questions would arise if courts were to begin saying what means of speech should be preferred or disfavored. And in all events, those differentiations might soon prove to be irrelevant or outdated by technologies that are in rapid flux. See Turner Broadcasting System, Inc. v. FCC, 512 U. S. 622, 639 (1994).
Courts, too, are bound by the First Amendment. We must decline to draw, and then redraw, constitutional lines based on the particular media or technology used to disseminate political speech from a particular speaker. It must be noted, moreover, that this undertaking would require substantial litigation over an extended time, all to interpret a *327law that beyond doubt discloses serious First Amendment flaws. The interpretive process itself would create an inevitable, pervasive, and serious risk of chilling protected speech pending the drawing of fine distinctions that, in the end, would themselves be questionable. First Amendment standards, however, “must give the benefit of any doubt to protecting rather than stifling speech.” WRTL, 551 U. S., at 469 (opinion of Roberts, C. J.) (citing New York Times Co. v. Sullivan, 376 U. S. 254, 269-270 (1964)).
D
Citizens United also asks us to carve out an exception to §441b’s expenditure ban for nonprofit corporate political speech funded overwhelmingly by individuals. As an alternative to reconsidering Austin, the Government also seems to prefer this approach. This line of analysis, however, would be unavailing.
In MCFL, the Court found unconstitutional §441b’s restrictions on corporate expenditures as applied to nonprofit corporations that were formed for the sole purpose of promoting political ideas, did not engage in business activities, and did not accept contributions from for-profit corporations or labor unions. 479 U. S., at 263-264; see also 11 CFR §114.10. BCRA’s so-called Wellstone Amendment applied §441b’s expenditure ban to all nonprofit corporations. See 2 U. S. C. §441b(e)(6); McConnell, 540 U. S., at 209. McConnell then interpreted the Wellstone Amendment to retain the MCFL exemption to §441b’s expenditure prohibition. 540 U. S., at 211. Citizens United does not qualify for the MCFL exemption, however, since some funds used to make the movie were donations from for-profit corporations.
The Government suggests we could find BCRA’s Wellstone Amendment unconstitutional, sever it from the statute, and hold that Citizens United’s speech is exempt from §441b’s ban under BCRA’s Snowe-Jeffords Amendment, §441b(c)(2). See Tr. of Oral Arg. 37-38 (Sept. 9, 2009). The Snowe-Jeffords Amendment operates as a backup provision that *328only takes effect if the Wellstone Amendment is invalidated. See McConnell, supra, at 339 (Kennedy, J., concurring in judgment in part and dissenting in part). The Snowe-Jeffords Amendment would exempt from § 44 lb’s expenditure ban the political speech of certain nonprofit corporations if the speech were funded “exclusively” by individual donors and the funds were maintained in a segregated account. §441b(c)(2). Citizens United would not qualify for the Snowe-Jeffords exemption, under its terms as written, because Hillary was funded in part with donations from for-profit corporations.
Consequently, to hold for Citizens United on this argument, the Court would be required to revise the text of MCFL, sever BCRA’s Wellstone Amendment, §441b(c)(6), and ignore the plain text of BCRA’s Snowe-Jeffords Amendment, §441b(c)(2). If the Court decided to create a de minimis exception to MCFL or the Snowe-Jeffords Amendment, the result would be to allow for-profit corporate general treasury funds to be spent for independent expenditures that support candidates. There is no principled basis for doing this without rewriting Austin’s holding that the Government can restrict corporate independent expenditures for political speech.
Though it is true that the Court should construe statutes as necessary to avoid constitutional questions, the series of steps suggested would be difficult to take in view of the language of the statute. In addition to those difficulties the Government’s suggestion is troubling for still another reason. The Government does not say that it agrees with the interpretation it wants us to consider. See Supp. Brief for Appellee 3, n. 1 (“Some courts” have implied a de minimis exception, and “appellant would appear to be covered by these decisions”). Presumably it would find textual difficulties in this approach too. The Government, like any party, can make arguments in the alternative; but it ought to say if there is merit to an alternative proposal instead of *329merely suggesting it. This is especially true in the context of the First Amendment. As the Government stated, this case “would require a remand” to apply a de minimis standard. Tr. of Oral Arg. 39 (Sept. 9, 2009). Applying this standard would thus require case-by-case determinations. But archetypical political speech would be chilled in the meantime. “'First Amendment freedoms need breathing space to survive.’” WRTL, supra, at 468-469 (opinion of Roberts, C. J.) (quoting NAACP v. Button, 371 U. S. 415, 433 (1963)). We decline to adopt an interpretation that requires intricate case-by-case determinations to verify whether political speech is banned, especially if we are convinced that, in the end, this corporation has a constitutional right to speak on this subject.
E
As the foregoing analysis confirms, the Court cannot resolve this ease on a narrower ground without chilling political speech, speech that is central to the meaning and purpose of the First Amendment. See Morse v. Frederick, 551 U. S. 393, 403 (2007). It is not judicial restraint to accept an unsound, narrow argument just so the Court can avoid another argument with broader implications. Indeed, a court would be remiss in performing its duties were it to accept an unsound principle merely to avoid the necessity of making a broader ruling. Here, the lack of a valid basis for an alternative ruling requires full consideration of the continuing effect of the speech suppression upheld in Austin.
Citizens United stipulated to dismissing count 5 of its complaint, which raised a facial challenge to § 441b, even though count 3 raised an as-applied challenge. See App. 23a (count 3: “As applied to Hillary, [§ 441b] is unconstitutional under the First Amendment guarantees of free expression and association”). The Government argues that Citizens United waived its challenge to Austin by dismissing count 5. We disagree.
*330First, even if a party could somehow waive a facial challenge while preserving an as-applied challenge, that would not prevent the Court from reconsidering Austin or addressing the facial validity of § 441b in this case. “Our practice 'permit[s] review of an issue not pressed [below] so long as it has been passed upon . . . .’” Lebron, 513 U. S., at 379 (quoting United States v. Williams, 504 U. S. 36, 41 (1992); first alteration in original). And here, the District Court addressed Citizens United’s facial challenge. See 530 F. Supp. 2d, at 278 (“Citizens wants us to enjoin the operation of BCEA § 203 as a facially unconstitutional burden on the First Amendment right to freedom of speech”). In rejecting the claim, it noted that it “would have to overrule McConnell” for Citizens United to prevail on its facial challenge and that “[o]nly the Supreme Court may overrule its decisions.” Ibid, (citing Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U. S. 477, 484 (1989)). The District Court did not provide much analysis regarding the facial challenge because it could not ignore the controlling Supreme Court decisions in Austin and McConnell. Even so, the District Court did '"pas[s] upon’” the issue. Lebron, supra, at 379. Furthermore, the District Court’s later opinion, which granted the FEC summary judgment, was “[b]ased on the reasoning of [its] prior opinion,” which included the discussion of the facial challenge. App. 261a (citing 530 F. Supp. 2d 274). After the District Court addressed the facial validity of the statute, Citizens United raised its challenge to Austin in this Court. See Brief for Appellant 30 ('Austin was wrongly decided and should be overruled”); id., at 30-32. In these circumstances, it is necessary to consider Citizens United’s challenge to Austin and the facial validity of § 441b’s expenditure ban.
Second, throughout the litigation, Citizens United has asserted a claim that the FEC has violated its First Amendment right to free speech. All concede that this claim is properly before us. And “ '[o]nce a federal claim is properly *331presented, a party can make any argument in support of that claim; parties are not limited to the precise arguments they made below.’ ” Lebron, supra, at 379 (quoting Yee v. Escondido, 503 U. S. 519, 534 (1992); alteration in original). Citizens United’s argument that Austin should be overruled is "not a new claim.” Lebron, 513 U. S., at 379. Rather, it is — at most — “a new argument to support what has been [a] consistent claim: that [the FEC] did not accord [Citizens United] the rights it was obliged to provide by the First Amendment.” Ibid.
Third, the distinction between facial and as-applied challenges is not so well defined that it has some automatic effect or that it must always control the pleadings and disposition in every case involving a constitutional challenge. The distinction is both instructive and necessary, for it goes to the breadth of the remedy employed by the Court, not what must be pleaded in a complaint. See United States v. Treasury Employees, 513 U. S. 454, 477-478 (1995) (contrasting “a facial challenge” with “a narrower remedy”). The parties cannot enter into a stipulation that prevents the Court from considering certain remedies if those remedies are necessary to resolve a claim that has been preserved. Citizens United has preserved its First Amendment challenge to §441b as applied to the facts of its case; and given all the circumstances, we cannot easily address that issue without assuming a premise — the permissibility of restricting corporate political speech — that is itself in doubt. See Fallon, As-Applied and Facial Challenges and Third-Party Standing, 113 Harv. L. Rev. 1321, 1339 (2000) (“[0]nce a case is brought, no general categorical line bars a court from making broader pronouncements of invalidity in properly ‘as-applied’ cases”); id., at 1327-1328. As our request for supplemental briefing implied, Citizens United’s claim implicates the validity of Austin, which in turn implicates the facial validity of §441b.
When the statute now at issue came before the Court in McConnell, both the majority and the dissenting opinions *332considered the question of its facial validity. The holding and validity of Austin were essential to the reasoning of the McConnell majority opinion, which upheld BCRA’s extension of § 441b. See 540 U. S., at 205 (quoting Austin, 494 U. S., at 660). McConnell permitted federal felony punishment for speech by all corporations, including nonprofit ones, that speak on prohibited subjects shortly before federal elections. See 540 U. S., at 203-209. Four Members of the McConnell Court would have overruled Austin, including Chief Justice Rehnquist, who had joined the Court’s opinion in Austin but reconsidered that conclusion. See 540 U. S., at 256-262 (Scalia, J., concurring in part, concurring in judgment in part, and dissenting in part); id., at 273-275 (Thomas, J., concurring in part, concurring in result in part, concurring in judgment in part, and dissenting in part); id., at 322-338 (opinion of Kennedy, J., joined by Rehnquist, C. J., and Scalia, J.). That inquiry into the facial validity of the statute was facilitated by the extensive record, which was “over 100,000 pages” long, made in the three-judge District Court. McConnell v. Federal Election Comm’n, 251 F. Supp. 2d 176, 209 (DC 2003) (per curiam) (McConnell I). It is not the case, then, that the Court today is premature in interpreting § 441b “ ‘on the basis of [a] factually barebones recor[d].’” Washington State Grange v. Washington State Republican Party, 552 U. S. 442, 450 (2008) (quoting Sabri v. United States, 541 U. S. 600, 609 (2004)).
The McConnell majority considered whether the statute was facially invalid. An as-applied challenge was brought in Wisconsin Right to Life, Inc. v. Federal Election Comm’n, 546 U. S. 410, 411-412 (2006) (per curiam), and the Court confirmed that the challenge could be maintained. Then, in WRTL, the controlling opinion of the Court not only entertained an as-applied challenge but also sustained it. Three Justices noted that they would continue to maintain the position that the record in McConnell demonstrated the invalidity of the Act on its face. 551 U. S., at 485-504 (opinion of *333Scaua, J.). The controlling opinion in WRTL, which refrained from holding the statute invalid except as applied to the facts then before the Court, was a careful attempt to accept the-essential elements of the Court’s opinion in McConnell, while vindicating the First Amendment arguments made by the WRTL parties. 551 U. S., at 482 (opinion of Koberts, C. J.).
As noted above, Citizens United’s narrower arguments are not sustainable under a fair reading of the statute. In the exercise of its judicial responsibility, it is necessary then for the Court to consider the facial validity of § 441b. Any other course of decision would prolong the substantial, nationwide chilling effect caused by §441b’s prohibitions on corporate expenditures. Consideration of the facial validity of § 441b is further supported by the following reasons.
First is the uncertainty caused by the litigating position of the Government. As discussed above, see Part II-D, supra, the Government suggests, as an alternative argument, that an as-applied challenge might have merit. This argument proceeds on the premise that the nonprofit corporation involved here may have received only de minimis donations from for-profit corporations and that some nonprofit corporations may be exempted from the operation of the statute. The Government also suggests that an as-applied challenge to §441b’s ban on books may be successful, although it would defend §441b’s ban as applied to almost every other form of media including pamphlets. See Tr. of Oral Arg. 65-66 (Sept. 9, 2009). The Government thus, by its own position, contributes to the uncertainty that §441b causes. When the Government holds out the possibility of ruling for Citizens United on a narrow ground yet refrains from adopting that position, the added uncertainty demonstrates the necessity to address the question of statutory validity.
Second, substantial time would be required to bring clarity to the application of the statutory provision on these points *334in order to avoid any chilling effect caused by some improper interpretation. See Part IX-C, supra. It is well known that the public begins to concentrate on elections only in the weeks immediately before they are held. There are short timeframes in which speech can have influence. The need or relevance of the speech will often first be apparent at this stage in the campaign. The decision to speak is made in the heat of political campaigns, when speakers react to messages conveyed by others. A speaker’s ability to engage in political speech that could have a chance of persuading voters is stifled if the speaker must first commence a protracted lawsuit. By the time the lawsuit concludes, the election will be over and the litigants in most cases will have neither the incentive nor, perhaps, the resources to carry on, even if they could establish that the case is not moot because the issue is “capable of repetition, yet evading review.” WRTL, supra, at 462 (opinion of Roberts, C. J.) (citing Los Angeles v. Lyons, 461 U. S. 95, 109 (1983); Southern Pacific Terminal Co. v. ICC, 219 U. S. 498, 515 (1911)). Here, Citizens United decided to litigate its case to the end. Today, Citizens United finally learns, two years after the fact, whether it could have spoken during the 2008 Presidential primary— long after the opportunity to persuade primary voters has passed.
Third is the primary importance of speech itself to the integrity of the election process. As additional rules are created for regulating political speech, any speech arguably within their reach is chilled. See Part II-A, supra. Campaign finance regulations now impose “unique and complex rules” on “71 distinct entities.” Brief for Seven Former Chairmen of FEC et al. as Amici Curiae 11-12. These entities are subject to separate rules for 33 different types of political speech. Id., at 14-15, n. 10. The FEC has adopted 568 pages of regulations, 1,278 pages of explanations and justifications for those regulations, and 1,771 advisory opinions since 1975. See id., at 6, n. 7. In fact, after this Court in *335WBTL adopted an objective “appeal to vote” test for determining whether a communication was the functional equivalent of express advocacy, 551 U. S., at 470 (opinion of Roberts, C. J.), the FEC adopted a two-part, 11-factor balancing test to implement WRTL’s ruling. See 11 CFR §114.15; Brief for Wyoming Liberty Group et al. as Amici Curiae 17-27 (filed Jan. 15, 2009).
This regulatory scheme may not be a prior restraint on speech in the strict sense of that term, for prospective speakers are not compelled by law to seek an advisory opinion from the FEC before the speech takes place. Cf. Near v. Minnesota ex rel. Olson, 283 U. S. 697, 712-713 (1931). As a practical matter, however, given the complexity of the regulations and the deference courts show to administrative determinations, a speaker who wants to avoid threats of criminal liability and the heavy costs of defending against FEC enforcement must ask a governmental agency for prior permission to speak. See 2 U. S. C. §437f; 11 CFR §112.1. These onerous restrictions thus function as the equivalent of prior restraint by giving the FEC power analogous to licensing laws implemented in 16th- and 17th-century England, laws and governmental practices of the sort that the First Amendment was drawn to prohibit. See Thomas v. Chicago Park Dist., 534 U. S. 316, 320 (2002); Lovell v. City of Griffin, 303 U. S. 444, 451-452 (1938); Near, supra, at 713-714. Because the EEC’s “business is to censor, there inheres the danger that [it] may well be less responsive than a court— part of an independent branch of government — to the constitutionally protected interests in free expression.” Freedman v. Maryland, 380 U. S. 51, 57-58 (1965). When the FEC issues advisory opinions that prohibit speech, “[m]any persons, rather than undertake the considerable burden (and sometimes risk) of vindicating their rights through case-by-case litigation, will choose simply to abstain from protected speech — harming not only themselves but society as a whole, which is deprived of an uninhibited marketplace of ideas.” *336Virginia v. Hicks, 539 U. S. 113, 119 (2003) (citation omitted). Consequently, “the censor’s determination may in practice be final.” Freedman, supra, at 58.
This is precisely what WBTL sought to avoid. WRTL said that First Amendment standards “must eschew ‘the open-ended rough-and-tumble of factors,’ which ‘invit[es] complex argument in a trial court and a virtually inevitable appeal.’ ” 551 U. S., at 469 (opinion of Roberts, C. J.) (quoting Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U. S. 527, 547 (1995); alteration in original). Yet, the FEC has created a regime that allows it to select what political speech is safe for public consumption by applying ambiguous tests. If parties want to avoid litigation and the possibility of civil and criminal penalties, they must either refrain from speaking or ask the FEC to issue an advisory opinion approving of the political speech in question. Government officials pore over each word of a text to see if, in their judgment, it accords with the 11-factor test they have promulgated. This is an unprecedented governmental intervention into the realm of speech.
The ongoing chill upon speech that is beyond all doubt protected makes it necessary in this case to invoke the earlier precedents that a statute which chills speech can and must be invalidated where its facial invalidity has been demonstrated. See WRTL, supra, at 482-483 (Alito, J., concurring); Thornhill v. Alabama, 310 U. S. 88, 97-98 (1940). For these reasons we find it necessary to reconsider Austin.
III
The First Amendment provides that “Congress shall make no law... abridging the freedom of speech.” Laws enacted to control or suppress speech may operate at different points in the speech process. The following are just a few examples of restrictions that have been attempted at different stages of the speech process — all laws found to be invalid: restrictions requiring a permit at the outset, Watchtower *337Bible & Tract Soc. of N. Y., Inc. v. Village of Stratton, 536 U. S. 150, 153 (2002); imposing a burden by impounding proceeds on receipts or royalties, Simon & Schuster, Inc. v. Members of N. Y. State Crime Victims Bd., 502 U. S. 105, 108, 123 (1991); seeking to exact a cost after the speech occurs, New York Times Co. v. Sullivan, 376 U. S., at 267; and subjecting the speaker to criminal penalties, Brandenburg v. Ohio, 395 U. S. 444, 445 (1969) (per curiam).
The law before us is an outright ban, backed by criminal sanctions. Section 441b makes it a felony for all corporations — including nonprofit advocacy corporations — either to expressly advocate the election or defeat of candidates or to broadcast electioneering communications within 30 days of a primary election and 60 days of a general election. Thus, the following acts would all be felonies under §441b: The Sierra Club runs an ad, within the crucial phase of 60 days before the general election, that exhorts the public to disapprove of a Congressman who favors logging in national forests; the National Rifle Association publishes a book urging the public to vote for the challenger because the incumbent U. S. Senator supports a handgun ban; and the American Civil Liberties Union creates a Web site telling the public to vote for a Presidential candidate in light of that candidate’s defense of free speech. These prohibitions are classic examples of censorship.
Section 441b is a ban on corporate speech notwithstanding the fact that a PAC created by a corporation can still speak. See McConnell, 540 U. S., at 330-333 (opinion of Kennedy, J.). A PAC is a separate association from the corporation. So the PAC exemption from §441b’s expenditure ban, §441b(b)(2), does not allow corporations to speak. Even if a PAC could somehow allow a corporation to speak — and it does not — the option to form PACs does not alleviate the First Amendment problems with §441b. PACs are burdensome alternatives; they are expensive to administer and subject to extensive regulations. For example, every PAC *338must appoint a treasurer, forward donations to the treasurer promptly, keep detailed records of the identities of the persons making donations, preserve receipts for three years, and file an organization statement and report changes to this information within 10 days. See id., at 330-332 (quoting MCFL, 479 U. S., at 253-254 (opinion of Brennan, J.)).
And that is just the beginning: PACs must file detailed monthly reports with the FEC, which are due at different times depending on the type of election that is about to occur:
“ These reports must contain information regarding the amount of cash on hand; the total amount of receipts, detailed by 10 different categories; the identification of each political committee and candidate’s authorized or affiliated committee making contributions, and any persons making loans, providing rebates, refunds, dividends, or interest or any other offset to operating expenditures in an aggregate amount over $200; the total amount of all disbursements, detailed by 12 different categories; the names of all authorized or affiliated committees to whom expenditures aggregating over $200 have been made; persons to whom loan repayments or refunds have been made; the total sum of all contributions, operating expenses, outstanding debts and obligations, and the settlement terms of the retirement of any debt or obligation.’ ” 540 U. S., at 331-332 (quoting MCFL, supra, at 253-254).
PACs have to comply with these regulations just to speak. This might explain why fewer than 2,000 of the millions of corporations in this country have PACs. See Brief for Seven Former Chairmen of FEC et al. as Amici Curiae 11 (citing FEC, Summary of PAC Activity 1990-2006, online at http://www.fec.gov/press/press2007/20071009pac/sumhistory .pdf (as visited Jan. 18, 2010, and available in Clerk of Court’s case file)); IRS, Statistics of Income: 2006, Corporation In*339come Tax Returns 2 (2009) (hereinafter Statistics of Income) (5.8 million for-profit corporations filed 2006 tax returns). PACs, furthermore, must exist before they can speak. Given the onerous restrictions, a corporation may not be able to establish a PAC in time to make its views known regarding candidates and issues in a current campaign.
Section 441b’s prohibition on corporate independent expenditures is thus a ban on speech. As a “restriction on the amount of money a person or group can spend on political communication during a campaign,” that statute “necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached.” Buckley v. Valeo, 424 U. S. 1, 19 (1976) (per curiam). Were the Court to uphold these restrictions, the Government could repress speech by silencing certain voices at any of the various points in the speech process. See McConnell, supra, at 251 (opinion of Scalia, J.) (Government could repress speech by “attacking all levels of the production and dissemination of ideas,” for “effective public communication requires the speaker to make use of the services of others”). If §441b applied to individuals, no one would believe that it is merely a time, place, or manner restriction on speech. Its purpose and effect are to silence entities whose voices the Government deems to be suspect.
Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people. See Buckley, supra, at 14-15 (“In a republic where the people are sovereign, the ability of the citizenry to make informed choices among candidates for office is essential”). The right of citizens to inquire, to hear, to speak, and to use information to reach consensus is a precondition to enlightened self-government and a necessary means to protect it. The First Amendment “ 'has its fullest and most urgent application’ to speech uttered during a campaign for political office.” Eu v. San Francisco County Democratic Central Comm., 489 *340U. S. 214, 223 (1989) (quoting Monitor Patriot Co. v. Roy, 401 U. S. 265, 272 (1971)); see Buckley, supra, at 14 (“Discussion of public issues and debate on the qualifications of candidates are integral to the operation of the system of government established by our Constitution”).
For these reasons, political speech must prevail against laws that would suppress it, whether by design or inadvertence. Laws that burden political speech are “subject to strict scrutiny,” which requires the Government to prove that the restriction “furthers a compelling interest and is narrowly tailored to achieve that interest.” WRTL, 551 U. S., at 464 (opinion of Roberts, C. J.). While it might be maintained that political speech simply cannot be banned or restricted as a categorical matter, see Simon & Schuster, 502 U. S., at 124 (Kennedy, J., concurring in judgment), the quoted language from WRTL provides a sufficient framework for protecting the relevant First Amendment interests in this case. We shall employ it here.
Premised on mistrust of governmental power, the First Amendment stands against attempts to disfavor certain subjects or viewpoints. See, e. g., United States v. Playboy Entertainment Group, Inc., 529 U. S. 803, 813 (2000) (striking dowm content-based restriction). Prohibited, too, are restrictions distinguishing among different speakers, allowing speech by some but not others. See First Nat. Bank of Boston v. Bellotti, 435 U. S. 765, 784 (1978). As instruments to censor, these categories are interrelated: Speech restrictions based on the identity of the speaker are all too often simply a means to control content.
Quite apart from the purpose or effect of regulating content, moreover, the Government may commit a constitutional wrong when by law it identifies certain preferred speakers. By taking the right to speak from some and giving it to others, the Government deprives the disadvantaged person or class of the right to use speech to strive to establish worth, *341standing, and respect for the speaker’s voice. The Government may not by these means deprive the public of the right and privilege to determine for itself what speech and speakers are worthy of consideration. The First Amendment protects speech and speaker, and the ideas that flow from each.
The Court has upheld a narrow class of speech restrictions that operate to the disadvantage of certain persons, but these rulings were based on an interest in allowing governmental entities to perform their functions. See, e. g., Bethel School Dist. No. 403 v. Fraser, 478 U. S. 675, 683 (1986) (protecting the “function of public school education”); Jones v. North Carolina Prisoners’ Labor Union, Inc., 433 U. S. 119, 129 (1977) (furthering “the legitimate penological objectives of the corrections system” (internal quotation marks omitted)); Parker v. Levy, 417 U. S. 733, 759 (1974) (ensuring “the capacity of the Government to discharge its [military] responsibilities” (internal quotation marks omitted)); Civil Service Comm’n v. Letter Carriers, 413 U. S. 548, 557 (1973) (“[F]ederal service should depend upon meritorious performance rather than political service”). The corporate independent expenditures at issue in this ease, however, would not interfere with governmental functions, so these cases are inapposite. These precedents stand only for the proposition that there are certain governmental functions that cannot operate without some restrictions on particular kinds of speech. By contrast, it is inherent in the nature of the political process that voters must be free to obtain information from diverse sources in order to determine how to cast their votes. At least before Austin, the Court had not allowed the exclusion of a class of speakers from the general public dialogue.
We find no basis for the proposition that, in the context of political speech, the Government may impose restrictions on certain disfavored speakers. Both history and logic lead us to this conclusion.
*342A
1
The Court has recognized that First Amendment protection extends to corporations. Bellotti, supra, at 778, n. 14 (citing Limnark Associates, Inc. v. Willingboro, 431 U. S. 85 (1977) ; Time, Inc. v. Firestone, 424 U. S. 448 (1976); Doran v. Salem Inn, Inc., 422 U. S. 922 (1975); Southeastern Promotions, Ltd. v. Conrad, 420 U. S. 546 (1975); Cox Broadcasting Corp. v. Cohn, 420 U. S. 469 (1975); Miami Herald Publishing Co. v. Tornillo, 418 U. S. 241 (1974); New York Times Co. v. United States, 403 U. S. 713 (1971) (per curiam); Time, Inc. v. Hill, 385 U. S. 374 (1967); New York Times Co. v. Sullivan, 376 U. S. 254; Kingsley Int’l Pictures Corp. v. Regents of Univ. of N. Y., 360 U. S. 684 (1959); Joseph Burstyn, Inc. v. Wilson, 343 U. S. 495 (1952)); see, e. g., Turner Broadcasting System, Inc. v. FCC, 520 U. S. 180 (1997); Denver Area Ed. Telecommunications Consortium, Inc. v. FCC, 518 U. S. 727 (1996); Turner, 512 U. S. 622; Simon & Schuster, 502 U. S. 105; Sable Communications of Cal., Inc. v. FCC, 492 U. S. 115 (1989); Florida Star v. B. J. F., 491 U. S. 524 (1989); Philadelphia Newspapers, Inc. v. Hepps, 475 U. S. 767 (1986); Landmark Communications, Inc. v. Virginia, 435 U. S. 829 (1978) ; Young v. American Mini Theatres, Inc., 427 U. S. 50 (1976); Gertz v. Robert Welch, Inc., 418 U. S. 323 (1974); Greenbelt Cooperative Publishing Assn., Inc. v. Bresler, 398 U. S. 6 (1970).
This protection has been extended by explicit holdings to the context of political speech. See, e. g., Button, 371 U. S., at 428-429; Grosjean v. American Press Co., 297 U. S. 233, 244 (1936). Under the rationale of these precedents, political speech does not lose First Amendment protection “simply because its source is a corporation.” Bellotti, supra, at 784; see Pacific Gas & Elec. Co. v. Public Util. Comm’n of Cal., 475 U. S. 1, 8 (1986) (plurality opinion) (“The identity of the speaker is not decisive in determining whether speech is pro*343tected. Corporations and other associations, like individuals, contribute to the ‘discussion, debate, and the dissemination of information and ideas’ that the First Amendment seeks to foster” (quoting Bellotti, 435 U. S., at 783)). The Court has thus rejected the argument that political speech of corporations or other associations should be treated differently under the First Amendment simply because such associations are not “natural persons.” Id., at 776; see id., at 780, n. 16. Cf. id., at 828 (Rehnquist, J., dissenting).
At least since the latter part of the 19th century, the laws of some States and of the United States imposed a ban on corporate direct contributions to candidates. See B. Smith, Unfree Speech: The Folly of Campaign Finance Reform 23 (2001). Yet not until 1947 did Congress first prohibit independent expenditures by corporations and labor unions in §304 of the Labor Management Relations Act, 1947, 61 Stat. 159 (codified at 2 U. S. C. §251 (1946 ed., Supp. I)). In passing this Act Congress overrode the veto of President Truman, who warned that the expenditure ban was a “dangerous intrusion on free speech.” Message from the President of the United States, H. R. Doc. No. 334, 80th Cong., 1st Sess., 9 (1947).
For almost three decades thereafter, the Court did not reach the question whether restrictions on corporate and union expenditures are constitutional. See WRTL, 551 U. S., at 502 (opinion of Scalia, J.). The question was in the background of United States v. CIO, 335 U. S. 106 (1948). There, a labor union endorsed a congressional candidate in its weekly periodical. The Court stated that “the gravest doubt would arise in our minds as to [the federal expenditure prohibition’s] constitutionality” if it were construed to suppress that writing. . Id., at 121. The Court engaged in statutory interpretation and found the statute did not cover the publication. Id., at 121-122, and n. 20. Four Justices, however, said they would reach the constitutional question and invalidate the Labor-Management Relations Act’s expendi*344ture ban. Id., at 155 (Rutledge, J., joined by Black, Douglas, and Murphy, JJ., concurring in result). The concurrence explained that any “ 'undue influence’ ” generated by a speaker’s “large expenditures” was outweighed “by the loss for democratic processes resulting from the restrictions upon free and full public discussion.” Id., at 143.
In United States v. Automobile Workers, 352 U. S. 567 (1957), the Court again encountered the independent expenditure ban, which had been recodified at 18 U. S. C. § 610 (1952 ed.). See 62 Stat. 723-724. After holding only that a union television broadcast that endorsed candidates was covered by the statute, the Court “[r]efus[ed] to anticipate constitutional questions” and remanded for the trial to proceed. 352 U. S., at 591. Three Justices dissented, arguing that the Court should have reached the constitutional question and that the ban on independent expenditures was unconstitutional:
“Under our Constitution it is We The People who are sovereign. The people have the final say. The legislators are their spokesmen. The people determine through their votes the destiny of the nation. It is therefore important — vitally important — that all channels of communication be open to them during every election, that no point of view be restrained or barred, and that the people have access to the views of every group in the community.” Id., at 593 (opinion of Douglas, J., joined by Warren, C. J., and Black, J.).
The dissent concluded that deeming a particular group “too powerful” was not a “justificatio[n] for withholding First Amendment rights from any group — labor or corporate.” Id., at 597. The Court did not get another opportunity to consider the constitutional question in that case; for after a remand, a jury found the defendants not guilty. See Hayward, Revisiting the Fable of Reform, 45 Harv. J. Legis. 421, 463 (2008).
*345Later, in Pipefitters v. United States, 407 U. S. 385, 400-401 (1972), the Court reversed a conviction for expenditure of union funds for political speech — again without reaching the constitutional question. The Court would not resolve that question for another four years.
2
In Buckley, 424 U. S. 1, the Court addressed various challenges to the Federal Election Campaign Act of 1971 (FECA) as amended in 1974. These amendments created 18 U. S. C. § 608(e) (1970 ed., Supp. V), see 88 Stat. 1265, an independent expenditure ban separate from §610 that applied to individuals as well as corporations and labor unions, Buckley, 424 U. S., at 23, 39, and n. 45.
Before addressing the constitutionality of §608(e)’s independent expenditure ban, Buckley first upheld § 608(b), FECA’s limits on direct contributions to candidates. The Buckley Court recognized a “sufficiently important” governmental interest in “the prevention of corruption and the appearance of corruption.” Id., at 25; see id., at 26. This followed from the Court’s concern that large contributions could be given “to secure a political quid pro quo.” Ibid.
The Buckley Court explained that the potential for quid pro quo corruption distinguished direct contributions to candidates from independent expenditures. The Court emphasized that “the independent expenditure ceiling . . . fails to serve any substantial governmental interest in stemming the reality or appearance of corruption in the electoral process,” id., at 47-48, because “[t]he absence of prearrangement and coordination ... alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate,” id., at 47. Buckley invalidated § 608(e)’s restrictions on independent expenditures, with only one Justice dissenting. See Federal Election Comm’n v. National Conservative Political Action Comm., 470 U. S. 480, 491, n. 3 (1985) (NCPAC).
*346Buckley did not consider § 610’s separate ban on corporate and union independent expenditures, the prohibition that had also been in the background in CIO, Automobile Workers, and Pipefitters. Had § 610 been challenged in the wake of Buckley, however, it could not have been squared with the reasoning and analysis of that precedent. See WRTL, 551 U. S., at 487 (opinion of Scalia, J.) (“Buckley might well have been the last word on limitations on independent expenditures”); Austin, 494 U. S., at 683 (SCALIA, J., dissenting). The expenditure ban invalidated in Buckley, § 608(e), applied to corporations and unions, 424 U. S., at 23, 39, n. 45; and some of the prevailing plaintiffs in Buckley were corporations, id., at 8. The Buckley Court did not invoke the First Amendment’s overbreadth doctrine, see Broadrick v. Oklahoma, 413 U. S. 601, 615 (1973), to suggest that § 608(e)’s expenditure ban would have been constitutional if it had applied only to corporations and not to individuals, 424 U. S., at 50. Buckley cited with approval the Automobile Workers dissent, which argued that §610 was unconstitutional. 424 U. S., at 43 (citing 352 U. S., at 595-596 (opinion of Douglas, J.)).
Notwithstanding this precedent, Congress recodified § 61Q’s corporate and union expenditure ban at 2 U. S. C. § 441b four months after Buckley was decided. See 90 Stat. 490. Section 441b is the independent expenditure restriction challenged here.
Less than two years after Buckley, Bellotti, 435 U. S. 765, reaffirmed the First Amendment principle that the Government cannot restrict political speech based on the speaker’s corporate identity. Bellotti could not have been clearer when it struck down a state-law prohibition on corporate independent expenditures related to referenda issues:
“We thus find no support in the First... Amendment, or in the decisions of this Court, for the proposition that speech that otherwise would be within the protection of the First Amendment loses that protection simply be*347cause its source is a corporation that cannot prove, to the satisfaction of a court, a material effect on its business or property. . . . [That proposition] amounts to an impermissible legislative prohibition of speech based on the identity of the interests that spokesmen may represent in public debate over controversial issues and a requirement that the speaker have a sufficiently great interest in the subject to justify communication.
“In the realm of protected speech, the legislature is constitutionally disqualified from dictating the subjects about which persons may speak and the speakers who may address a public issue.” Id., at 784-785.
It is important to note that the reasoning and holding of Bellotti did not rest on the existence of a viewpoint-discriminatory statute. It rested on the principle that the Government lacks the power to ban corporations from speaking.
Bellotti did not address the constitutionality of the State’s ban on corporate independent expenditures to support candidates. In our view, however, that restriction would have been unconstitutional under Bellotti’s central principle: that the First Amendment does not allow political speech restrictions based on a speaker’s corporate identity. See ibid.
3
Thus the law stood until Austin. Austin “uph[eld] a direct restriction on the independent expenditure of funds for political speech for the first time in [this Court’s] history.” 494 U. S., at 695 (Kennedy, J., dissenting). There, the Michigan Chamber of Commerce sought to use general treasury funds to run a newspaper ad supporting a specific candidate. Michigan law, however, prohibited corporate independent expenditures that supported or opposed any candidate for state office. A violation of the law was punishable as a felony. The Court sustained the speech prohibition.
*348To bypass Buckley and Bellotti, the Austin Court identified a new governmental interest in limiting political speech: an antidistortion interest. Austin found a compelling governmental interest in preventing “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.” 494 U. S., at 660; see id., at 659 (citing MCFL, 479 U. S., at 257; NCPAC, 470 U. S., at 500-501).
B
The Court is thus confronted with conflicting lines of precedent: a pre-Austin line that forbids restrictions on political speech based on the speaker’s corporate identity and a post-Austin line that permits them. No case before Austin had held that Congress could prohibit independent expenditures for political speech based on the speaker’s corporate identity. Before Austin, Congress had enacted legislation for this purpose, and the Government urged the same proposition before this Court. See MCFL, supra, at 257 (FEC posited that Congress intended to “curb the political influence of ‘those who exercise control over large aggregations of capital’” (quoting Automobile Workers, 352 U. S., at 585)); California Medical Assn. v. Federal Election Comm’n, 453 U. S. 182, 201 (1981) (Congress believed that “differing structures and purposes” of corporations and unions “may require different forms of regulation in order to protect the integrity of the electoral process”). In neither of these cases did the Court adopt the proposition.
In its defense of the corporate-speech restrictions in § 441b, the Government notes the antidistortion rationale on which Austin and its progeny rest in part, yet it all but abandons reliance upon it. It argues instead that two other compelling interests support Austin’s holding that corporate expenditure restrictions are constitutional: an anticorruption interest, see 494 U. S., at 678 (Stevens, J., concurring), and *349a shareholder-protection interest, see id., at 674-675 (Brennan, J., concurring). We consider the three points in turn.
1
As for Austin’s antidistortion rationale, the Government does little to defend it. See Tr. of Oral Arg. 45-48 (Sept. 9, 2009). And with good reason, for the rationale cannot support §441b.
If the First Amendment has any force, it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech. If the antidistortion rationale were to be accepted, however, it would permit Government to ban political speech simply because the speaker is an association that has taken on the corporate form. The Government contends that Austin permits it to ban corporate expenditures for almost all forms of communication stemming from a corporation. See Part II-E, supra; Tr. of Oral Arg. 66 (Sept. 9,2009); see also id., at 26-81 (Mar. 24, 2009). If Austin were correct, the Government could prohibit a corporation from expressing political views in media beyond those presented here, such as by printing books. The Government responds “that the FEC has never applied this statute to a book,” and if it did, “there would be quite [a] good as-applied challenge.” Tr. of Oral Arg. 65 (Sept. 9,2009). This troubling assertion of brooding governmental power cannot be reconciled with the confidence and stability in civic discourse that the First Amendment must secure.
Political speech is “indispensable to decisionmaking in a democracy, and this is no less true because the speech comes from a corporation rather than an individual.” Bellotti, 435 U. S., at 777 (footnote omitted); see ibid, (the worth of speech “does not depend upon the identity of its source, whether corporation, association, union, or individual”); Buckley, 424 U. S., at 48-49 (“[T]he concept that government may restrict the speech of some elements of our society in order to en*350hance the relative voice of others is wholly foreign to the First Amendment”); Automobile Workers, supra, at 597 (Douglas, J., dissenting); CIO, 335 U. S., at 154-155 (Rutledge, J., concurring in result). This protection for speech is inconsistent with Austin’s antidistortion rationale. Austin sought to defend the antidistortion rationale as a means to prevent corporations from obtaining “'an unfair advantage in the political marketplace’ ” by using “ ‘resources amassed in the economic marketplace.’ ” 494 U. S., at 659 (quoting MCFL, supra, at 257). But Buckley rejected the premise that the Government has an interest “in equalizing the relative ability of individuals and groups to influence the outcome of elections.” 424 U. S., at 48; see Bellotti, supra, at 791, n. 30. Buckley was specific in stating that “the skyrocketing cost of political campaigns” could not sustain the governmental prohibition. 424 U. S., at 26. The First Amendment’s protections do not depend on the speaker’s “financial ability to engage in public discussion.” Id., at 49.
The Court reaffirmed these conclusions when it invalidated the BCRA provision that increased the cap on contributions to one candidate if the opponent made certain expenditures from personal funds. See Davis v. Federal Election Comm’n, 554 U. S. 724, 742 (2008) (“Leveling electoral opportunities means making and implementing judgments about which strengths should be permitted to contribute to the outcome of an election. The Constitution, however, confers upon voters, not Congress, the power to choose the Members of the House of Representatives, Art. I, § 2, and it is a dangerous business for Congress to use the election laws to influence the voters’ choices”). The rule that political speech cannot be limited based on a speaker’s wealth is a necessary consequence of the premise that the First Amendment generally prohibits the suppression of political speech based on the speaker’s identity.
Either as support for its antidistortion rationale or as a further argument, the Austin majority undertook to distin*351guish wealthy individuals from corporations on the ground that “[s]tate law grants corporations special advantages— such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets.” 494 U. S., at 658-659. This does not suffice, however, to allow laws prohibiting speech. “It is rudimentary that the State cannot exact as the price of those special advantages the forfeiture of First Amendment rights.” Id., at 680 (Scalia, J., dissenting).
It is irrelevant for purposes of the First Amendment that corporate funds may “have little or no correlation to the public’s support for the corporation’s political ideas.” Id., at 660 (majority opinion). All speakers, including individuals and the media, use money amassed from the economic marketplace to fund their speech. The First Amendment protects the resulting speech, even if it was enabled by economic transactions with persons or entities who disagree with the speaker’s ideas. See id., at 707 (Kennedy, J., dissenting) (“Many persons can trace their funds to corporations, if not in the form of donations, then in the form of dividends, interest, or salary”).
Austin’s antidistortion rationale would produce the dangerous, and unacceptable, consequence that Congress could ban political speech of media corporations. See McConnell, 540 U. S., at 283 (opinion of Thomas, J.) (“The chilling endpoint of the Court’s reasoning is not difficult to foresee: outright regulation of the press”). Cf. Tornillo, 418 U. S., at 250 (alleging the existence of “vast accumulations of unreviewable power in the modern media empires”). Media corporations are now exempt from §441b’s ban on corporate expenditures. See 2 U. S. C. §§ 431(9)(B)(i), 434(f)(3)(B)(i). Yet media corporations accumulate wealth with the help of the corporate form, the largest media corporations have “immense aggregations of wealth,” and the views expressed by media corporations often “have little or no correlation to the public’s support” for those views. Austin, 494 U. S., at 660. *352Thus, under the Government’s reasoning, wealthy media corporations could have their voices diminished to put them on par with other media entities. There is no precedent for permitting this under the First Amendment.
The media exemption discloses further difficulties with the law now under consideration. There is no precedent supporting laws that attempt to distinguish between corporations which are deemed to be exempt as media corporations and those which are not. “We have consistently rejected the proposition that the institutional press has any constitutional privilege beyond that of other speakers.” Id., at 691 (Scalia, J., dissenting) (citing Bellotti, 435 U. S., at 782); see Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U. S. 749, 784 (1985) (Brennan, J., joined by Marshall, Blackmun, and Stevens, JJ., dissenting); id., at 773 (White, J., concurring in judgment). With the advent of the Internet and the decline of print and broadcast media, moreover, the line between the media and others who wish to comment on political and social issues becomes far more blurred.
The law’s exception for media corporations is, on its own terms, all but an admission of the invalidity of the antidistortion rationale. And the exemption results in a further, separate reason for finding this law invalid: Again by its own terms, the law exempts some corporations but covers others, even though both have the need or the motive to communicate their views. The exemption applies-to media corporations owned or controlled by corporations that have diverse and substantial investments and participate in endeavors other than news. So even assuming the most doubtful proposition that a news organization has a right to speak when others do not, the exemption would allow a conglomerate that owns both a media business and ah unrelated business to influence or control the media in order to advance its overall business interest. At the same time, some other corporation, with an identical business interest but no media outlet in its ownership structure, would be forbidden to speak or *353inform the public about the same issue. This differential treatment cannot be squared with the First Amendment.
There is simply no support for the view that the First Amendment, as originally understood, would permit the suppression of political speech by media corporations. The Framers may not have anticipated modern business and media corporations. See McIntyre v. Ohio Elections Comm’n, 514 U. S. 334, 360-361 (1995) (Thomas, J., concurring in judgment). Yet television networks and maj or newspapers owned by media corporations have become the most important means of mass communication in modern times. The First Amendment was certainly not understood to condone the suppression of political speech in society’s most salient media. It was understood as a response to the repression of speech and the press that had existed in England and the heavy taxes on the press that were imposed in the Colonies. See McConnell, supra, at 252-253 (opinion of Scalia, J.); Grosjean, 297 U. S., at 245-248; Near, 283 U. S., at 713-714. The great debates between the Federalists and the Anti-Federalists over our founding document were published and expressed in the most important means of mass communication of that era — newspapers owned by individuals. See McIntyre, 514 U. S., at 341-343; id., at 367 (Thomas, J., concurring in judgment). At the founding, speech was open, comprehensive, and vital to society’s definition of itself; there were no limits on the sources of speech and knowledge. See B. Bailyn, Ideological Origins of the American Revolution 5 (1967) (“Any number of people could join in such proliferating polemics, and rebuttals could come from all sides”); G. Wood, Creation of the American Republic 1776-1787, p. 6 (1969) (“[I]t is not surprising that the intellectual sources of [the Americans’] Revolutionary thought were profuse and various”). The Framers may have been unaware of certain types of speakers or forms of communication, but that does not mean that those speakers and media are entitled to less First Amendment protection than those types of speakers *354and media that provided the means of communicating political ideas when the Bill of Rights was adopted.
Austin interferes with the “open marketplace” of ideas protected by the First Amendment. New York State Bd. of Elections v. Lopez Torres, 552 U. S. 196, 208 (2008); see ibid. (ideas “may compete” in this marketplace “without government interference”); McConnell, 540 U. S., at 274 (opinion of Thomas, J.). It permits the Government to ban the political speech of millions of associations of citizens. See Statistics of Income 2 (5.8 million for-profit corporations filed 2006 tax returns). Most of these are small corporations without large amounts of wealth. See Supp. Brief for Chamber of Commerce of the United States of America as Amicus Curiae 1, 3 (96% of the 3 million businesses that belong to the U. S. Chamber of Commerce have fewer than 100 employees); M. Keightley, Congressional Research Service Report for Congress, Business Organizational Choices: Taxation and Responses to Legislative Changes 10 (2009) (more than 75% of corporations whose income is taxed under federal law, see 26 U. S. C. § 301, have less than $1 million in receipts per year). This fact belies the Government’s argument that the statute is justified, on the ground that it prevents the “distorting effects of immense aggregations of wealth.” Austin, 494 U. S., at 660. It is not even aimed at amassed wealth.
The censorship we now confront is vast in its reach. The Government has “muffle[d] the voices that best represent the most significant segments of the economy.” McConnell, supra, at 257-258 (opinion of Scalia, J.). And “the electorate [has been] deprived of information, knowledge and opinion vital to its function.” CIO, 335 U. S., at 144 (Rutledge, J., concurring in result). By suppressing the speech of manifold corporations, both for-profit and nonprofit, the Government prevents their voices and viewpoints from reaching the public and advising voters on which persons or entities are hostile to their interests. Factions will necessarily form in our Republic, but the remedy of “destroying the liberty” of *355some factions is “worse than the disease.” The Federalist No. 10, p. 130 (B. Wright ed. 1961) (J. Madison). Factions should be checked by permitting them all to speak, see ibid., and by entrusting the people to judge what is true and what is false.
The purpose and effect of this law is to prevent corporations, including small and nonprofit corporations, from presenting both facts and opinions to the public. This makes Austin’s antidistortion rationale all the more an aberration. “[T]he First Amendment protects the right of corporations to petition legislative and administrative bodies.” Bellotti, 435 U. S., at 792, n. 31 (citing California Motor Transport Co. v. Trucking Unlimited, 404 U. S. 508, 510-511 (1972); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U. S. 127, 137-138 (1961)). Corporate executives and employees counsel Members of Congress and Presidential administrations on many issues, as a matter of routine and often in private. An amici brief filed on behalf of Montana and 25 other States notes that lobbying and corporate communications with elected officials occur on a regular basis. Brief for State of Montana et al. 19. When that phenomenon is coupled with § 441b, the result is that smaller or nonprofit corporations cannot raise a voice to object when other corporations, including those with vast wealth, are cooperating with the Government. That cooperation may sometimes be voluntary, or it may be at the demand of a Government official who uses his or her authority, influence, and power to threaten corporations to support the Government’s policies. Those kinds of interactions are often unknown and unseen. The speech that §441b forbids, though, is public, and all can judge its content and purpose. References to massive corporate treasuries should not mask the real operation of this law. Rhetoric ought not obscure reality.
Even if § 441b’s expenditure ban were constitutional, wealthy corporations could still lobby elected officials, al*356though smaller corporations may not have the resources to do so. And wealthy individuals and unincorporated associations can spend unlimited amounts on independent expenditures. See, e. g., WRTL, 551 U. S., at 503-504 (opinion of Scalia, J.) (“In the 2004 election cycle, a mere 24 individuals contributed an astounding total of $142 million to [26 U. S. C. §527 organizations]”). Yet certain disfavored associations of citizens — those that have taken on the corporate form— are penalized for engaging in the same political speech.
When Government seeks to use its full power, including the criminal law, to command where a person may get his or her information or what distrusted source he or she may not hear, it uses censorship to control thought. This is unlawful. The First Amendment confirms the freedom to think for ourselves.
2
What we have said also shows the invalidity of other arguments made by the Government. For the most part relinquishing the antidistortion rationale, the Government falls back on the argument that corporate political speech can be banned in order to prevent corruption or its appearance. In Buckley, the Court found this interest “sufficiently important” to allow limits on contributions but did not extend that reasoning to expenditure limits. 424 U. S., at 25. When Buckley examined an expenditure ban, it found “that the governmental interest in preventing corruption and the appearance of corruption [was] inadequate to justify [the ban] on independent expenditures.” Id., at 45.
With regard to large direct contributions, Buckley reasoned that they could be given “to secure a political quid pro quo,” id., at 26, and that “the scope of such pernicious practices can never be reliably ascertained,” id., at 27. The practices Buckley noted would be covered by bribery laws, see, e. g., 18 U. S. C. § 201, if a quid pro quo arrangement were proved. See Buckley, supra, at 27, and n. 28 (citing Buckley v. Valeo, 519 F. 2d 821, 839-840, and nn. 36-38 *357(CADC 1975) (en banc) (per curiam)). The Court, in consequence, has noted that restrictions on direct contributions are preventative, because few if any contributions to candidates will involve quid pro quo arrangements. MCFL, 479 U. S., at 260; NCPAC, 470 U. S., at 500; Federal Election Comm’n v. National Right to Work Comm., 459 U. S. 197, 210 (1982) (NRWC). The Buckley Court, nevertheless, sustained limits on direct contributions in order to ensure against the reality or appearance of corruption. That case did not extend this rationale to independent expenditures, and the Court does not do so here.
“The absence of prearrangement and coordination of an expenditure with the candidate or his agent not only undermines the value of the expenditure to the candidate, but also alleviates the danger that expenditures will be given as a quid pro quo for improper commitments from the candidate.” Buckley, 424 U. S., at 47; see ibid, (independent expenditures have a “substantially diminished potential for abuse”). Limits on independent expenditures, such as § 441b, have a chilling effect extending well beyond the Government’s interest in preventing quid pro quo corruption. The anticorruption interest is not sufficient to displace the speech here in question. Indeed, 26 States do not restrict independent expenditures by for-profit corporations. The Government does not claim that these expenditures have corrupted the political process in those States. See Supp. Brief for Appellee 18, n. 3; Supp. Brief for Chamber of Commerce of the United States of America as Amicus Curiae 8-9, n. 5.
A single footnote in Bellotti purported to leave open the possibility that corporate independent expenditures could be shown to cause corruption. 435 U. S., at 788, n. 26. For the reasons explained above, we now conclude that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption. Dicta in Bellotti’s footnote suggested that “a corporation’s right to speak on issues of general public interest implies no *358comparable right in the quite different context of participation in a political campaign for election to public office.” Ibid. Citing the portion of Buckley that invalidated the federal independent expenditure ban, 424 U. S., at 46, and a law review student comment, Bellotti surmised that “Congress might well be able to demonstrate the existence of a danger of real or apparent corruption in independent expenditures by corporations to influence candidate elections.” 435 U. S., at 788, n. 26. Buckley, however, struck down a ban on independent expenditures to support candidates that covered corporations, 424 U. S., at 23, 39, n. 45, and explained that “the distinction between discussion of issues and candidates and advocacy of election or defeat of candidates may often dissolve in practical application,” id., at 42. Bellotti’s dictum is thus supported only by a law review student comment, which misinterpreted Buckley. See Comment, The Regulation of Union Political Activity: Majority and Minority Rights and Remedies, 126 U. Pa. L. Rev. 386, 408 (1977) (suggesting that “corporations and labor unions should be held to different and more stringent standards than an individual or other associations under a regulatory scheme for campaign financing”).
Seizing on this aside in Bellotti’s footnote, the Court in NRWC did say there is a “sufficient” governmental interest in “ensuring] that substantial aggregations of wealth amassed” by corporations would not “be used to incur political debts from legislators who are aided by the contributions.” 459 U. S., at 207-208 (citing Automobile Workers, 352 U. S., at 579); see 459 U. S., at 210, and n. 7; NCPAC, supra, at 500-501 (NRWC suggested a governmental interest in restricting “the influence of political war chests funneled through the corporate form”). NRWC, however, has little relevance here. NRWC decided no more than that a restriction on a corporation’s ability to solicit funds for its segregated PAC, which made direct contributions to candidates, did not violate the First Amendment. 459 U. S., at *359206. NRWC thus involved contribution limits, see NCPAC, supra, at 495-496, which, unlike limits on independent expenditures, have been an accepted means to prevent quid pro quo corruption, see McConnell, 540 U. S., at 136-138, and n. 40; MCFL, supra, at 259-260. Citizens United has not made direct contributions to candidates, and it has not suggested that the Court should reconsider whether contribution limits should be subjected to rigorous First Amendment scrutiny.
When Buckley identified a sufficiently important governmental interest in preventing corruption or the appearance of corruption, that interest was limited to quid pro quo corruption. See McConnell, supra, at 296-298 (opinion of Kennedy, J.) (citing Buckley, supra, at 26-28, 30, 46-48); NCPAC, 470 U. S., at 497 (“The hallmark of corruption is the financial quid pro quo: dollars for political favors”); id., at 498. The fact that speakers may have influence over or access to elected officials does not mean that these officials are corrupt:
“Favoritism and influence are not... avoidable in representative politics. It is in the nature of an elected representative to favor certain policies, and, by necessary corollary, to favor the voters and contributors who support those policies. It is well understood that a substantial and legitimate reason, if not the only reason, to cast a vote for, or to make a contribution to, one candidate over another is that the candidate will respond by producing those political outcomes the supporter favors. Democracy is premised on responsiveness.” McConnell, 540 U. S., at 297 (opinion of Kennedy, J.).
Reliance on a “generic favoritism or influence theory ... is at odds with standard First Amendment analyses because it is unbounded and susceptible to no limiting principle.” Id., at 296.
*360The appearance of influence or access, furthermore, will not cause the electorate to lose faith in our democracy. By definition, an independent expenditure is political speech presented to the electorate that is not coordinated with a candidate. See Buckley, supra, at 46. The fact that a corporation, or any other speaker, is willing to spend money to try to persuade voters presupposes that the people have the ultimate influence over elected officials. This is inconsistent with any suggestion that the electorate will refuse “ ‘to take part in democratic governance’ ” because of additional political speech made by a corporation or any other speaker. McConnell, supra, at 144 (quoting Nixon v. Shrink Missouri Government PAC, 528 U. S. 377, 390 (2000)).
Caperton v. A. T. Massey Coal Co., 556 U. S. 868 (2009), is not to the contrary. Caperton held that a judge was required to recuse himself “when a person with a personal stake in a particular case had a significant and disproportionate influence in placing the judge on the case by raising funds or directing the judge’s election campaign when the case was pending or imminent.” Id., at 884. The remedy of recusal was based on a litigant’s due process right to a fair trial before an unbiased judge. See Withrow v. Larkin, 421 U. S. 35, 46 (1975). Caperton’s holding was limited to the rule that the judge must be recused, not that the litigant’s political speech could be banned.
The McConnell record was “over 100,000 pages” long, McConnell I, 251 F. Supp. 2d, at 209, yet it “does not have any direct examples of votes being exchanged for . . . expenditures,” id., at 560 (opinion of Kollar-Kotelly, J.). This confirms Buckley’s reasoning that independent expenditures do not lead to, or create the appearance of, quid pro quo corruption. In fact, there is only scant evidence that independent expenditures even ingratiate. See 251 F. Supp. 2d, at 555-557 (opinion of Kollar-Kotelly, J.). Ingratiation and access, in any event, are not corruption. The BCRA record establishes that certain donations to political parties, called “soft *361money,” were made to gain access to elected officials. McConnell, supra, at 125, 130-131, 146-152; see McConnell I, 251 F. Supp. 2d, at 471-481, 491-506 (opinion of Kollar-Kotelly, J.); id., at 842-843, 858-859 (opinion of Leon, J.). This case, however, is about independent expenditures, not soft money. When Congress finds that a problem exists, we must give that finding due deference; but Congress may not choose an unconstitutional remedy. If elected officials succumb to improper influences from independent expenditures; if they surrender their best judgment; and if they put expediency before principle, then surely there is cause for concern. We must give weight to attempts by Congress to seek to dispel either the appearance or the reality of these influences. The remedies enacted by law, however, must comply with the First Amendment; and it is our law and our tradition that more speech, not less, is the governing rule. An outright ban on corporate political speech during the critical preelection period is not a permissible remedy Here Congress has created categorical bans on speech that are asymmetrical to preventing quid pro quo corruption.
3
The Government contends further that corporate independent expenditures can be limited because of its interest in protecting dissenting shareholders from being compelled to fund corporate political speech. This asserted interest, like Austin’s antidistortion rationale, would allow the Government to ban the political speech even of media corporations. See supra, at 352-354. Assume, for example, that a shareholder of a corporation that owns a newspaper disagrees with the political views the newspaper expresses. See Austin, 494 U. S., at 687 (Scalia, J., dissenting). Under the Government’s view, that potential disagreement could give the Government the authority to restrict the media corporation’s political speech. The First Amendment does not allow that power. There is, furthermore, little evidence of *362abuse that cannot be corrected by shareholders “through the procedures of corporate democracy.” Bellotti, 435 U. S., at 794; see ibid., n. 34.
Those reasons are sufficient to reject this shareholder-protection interest; and, moreover, the statute is both under-inclusive and overinclusive. As to the first, if Congress had been seeking to protect dissenting shareholders, it would not have banned corporate speech in only certain media within 30 or 60 days before an election. A dissenting shareholder’s interests would be implicated by speech in any media at any time. As to the second, the statute is overinclusive because it covers all corporations, including nonprofit corporations and for-profit corporations with only single shareholders. As to other corporations, the remedy is not to restrict speech but to consider and explore other regulatory mechanisms. The regulatory mechanism here, based on speech, contravenes the First Amendment.
4
We need not reach the question whether the Government has a compelling interest in preventing foreign individuals or associations from influencing our Nation’s political process. Cf. 2 U. S. C. §441e (contribution and expenditure ban applied to “foreign nationals]”). Section 441b is not limited to corporations or associations that were created in foreign countries or funded predominantly by foreign shareholders. Section 441b therefore would be overbroad even if we assumed, arguendo, that the Government has a compelling interest in limiting foreign influence over our political process. See Broadrick, 413 U. S., at 615.
C
Our precedent is to be respected unless the most convincing of reasons demonstrates that adherence to it puts us on a course that is sure error. “Beyond workability, the relevant factors in deciding whether to adhere to the principle of stare *363decisis include the antiquity of the precedent, the reliance interests at stake, and of course whether the decision was well reasoned.” Montejo v. Louisiana, 556 U. S. 778, 792-793 (2009) (overruling Michigan v. Jackson, 475 U. S. 625 (1986)). We have also examined whether “experience has pointed up the precedent’s shortcomings.” Pearson v. Callahan, 555 U. S. 223, 233 (2009) (overruling Saucier v. Katz, 533 U. S. 194 (2001)).
These considerations counsel in favor of rejecting Austin, which itself contravened this Court’s earlier precedents in Buckley and Bellotti. “This Court has not hesitated to overrule decisions offensive to the First Amendment.” WRTL, 551 U. S., at 500 (opinion of Scalia, J.). “[S]tare decisis is a principle of policy and not a mechanical formula of adherence to the latest decision.” Helvering v. Hallock, 309 U. S. 106, 119 (1940).
For the reasons above, it must be concluded that Austin was not well reasoned. The Government defends Austin, relying almost entirely on “the quid pro quo interest, the corruption interest or the shareholder interest,” and not Austin’s expressed antidistortion rationale. Tr. of Oral Arg. 48 (Sept. 9, 2009); see id., at 45-46. When neither party defends the reasoning of a precedent, the principle of adhering to that precedent through stare decisis is diminished. Austin abandoned First Amendment principles, furthermore, by relying on language in some of our precedents that traces back to the Automobile Workers Court’s flawed historical account of campaign finance laws, see Brief for Campaign Finance Scholars as Amici Curiae; Hayward, 45 Harv. J. Legis. 421; R. Mutch, Campaigns, Congress, and Courts 33-35, 153-157 (1988). See Austin, supra, at 659 (citing MCFL, 479 U. S., at 257-258; NCPAC, 470 U. S., at 500-501); MCFL, supra, at 257 (citing Automobile Workers, 352 U. S., at 585); NCPAC, supra, at 500 (citing NRWC, 459 U. S., at 210); id., at 208 (“The history of the movement to regulate the political contributions and expenditures of corporations *364and labor unions is set forth in great detail in [Automobile Workers], supra, at 570-584, and we need only summarize the development here”).
Austin is undermined by experience since its announcement. Political speech is so ingrained in our culture that speakers find ways to circumvent campaign finance laws. See, e. g., McConnell, 540 U. S., at 176-177 (“Given BCRA’s tighter restrictions on the raising and spending of soft money, the incentives ... to exploit [26 U. S. C. § 527] organizations will only increase”). Our Nation’s speech dynamic is changing, and informative voices should not have to circumvent onerous restrictions to exercise their First Amendment rights. Speakers have become adept at presenting citizens with sound bites, talking points, and scripted messages that dominate the 24-hour news cycle. Corporations, like individuals, do not have monolithic views. On certain topics corporations may possess valuable expertise, leaving them the best equipped to point out errors or fallacies in speech of all sorts, including the speech of candidates and elected officials.
Rapid changes in technology — and the. creative dynamic inherent in the concept of free expression — counsel against upholding a law that restricts political speech in certain media or by certain speakers. See Part II-C, supra. Today, 30-second television ads may be the most effective way to convey a political message. See McConnell, supra, at 261 (opinion of SCALIA, J.). Soon, however, it may be that Internet sources, such as blogs and social networking Web sites, will provide citizens with significant information about political candidates and issues. Yet, §441b would seem to ban a blog post expressly advocating the election or defeat of a candidate if that blog were created with corporate funds. See 2 U. S. C. §441b(a); MCFL, supra, at 249. The First Amendment does not permit Congress to make these categorical distinctions based on the corporate identity of the speaker and the content of the political speech.
*365No serious reliance interests are at stake. As the Court stated in Payne v. Tennessee, 501 U. S. 808, 828 (1991), reliance interests are important considerations in property and contract cases, where parties may have acted in conformance with existing legal rules in order to conduct transactions. Here, though, parties, have been prevented from acting— corporations have been banned from making independent expenditures. Legislatures may have enacted bans on corporate expenditures believing that those bans were constitutional. This is not a compelling interest for stare decisis. If it were, legislative acts could prevent us from overruling our own precedents, thereby interfering with our duty “to say what the law is.” Marbury v. Madison, 1 Cranch 137, 177 (1803).
Due consideration leads to this conclusion: Austin, 494 U. S. 652, should be and now is overruled. We return to the principle established in Buckley and Bellotti that the Government may not suppress political speech on the basis of the speaker’s corporate identity. No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.
D
Austin is overruled, so it provides no basis for allowing the Government to limit corporate independent expenditures. As the Government appears to concede, overruling Austin “effectively invalidate[s] not only BCRA Section 203, but also 2 U. S. C. 441b’s prohibition on the use of corporate treasury funds for express advocacy.” Brief for Appellee 33, n. 12. Section 441b’s restrictions on corporate independent expenditures are therefore invalid and cannot be applied to Hillary.
Given our conclusion we are further required to overrule the part of McConnell that upheld BCRA §203’s extension of §441b’s restrictions on corporate independent expenditures. See 540 U. S., at 203-209. The McConnell Court relied on *366the antidistortion interest recognized in Austin to uphold a greater restriction on speech than the restriction upheld in Austin, see 540 U. S., at 205, and we have found this interest unconvincing and insufficient. This part of McConnell is now overruled.
IV
A
Citizens United next challenges BCRA’s disclaimer and disclosure provisions as applied to Hillary and the three advertisements for the movie. Under BCRA §311, televised electioneering communications funded by anyone other than a candidate must include a disclaimer that “‘-is responsible for the content of this advertising.’ ” 2 U. S. C. §441d(d)(2). The required statement must be made in a “clearly spoken manner,” and displayed on the screen in a “clearly readable manner” for at least four seconds. Ibid. It must state that the communication “is not authorized by any candidate or candidate’s committee”; it must also display the name and address (or Web site address) of the person or group that funded the advertisement. § 441d(a)(3). Under BCRA §201, any person who spends more than $10,000 on electioneering communications within a calendar year must file a disclosure statement with the FEC. 2 U. S. C. § 434(f)(1). That statement must identify the person making the expenditure, the amount of the expenditure, the election to which the communication was directed, and the names of certain contributors. § 434(f)(2).
Disclaimer and disclosure requirements may burden the ability to speak, but they “impose no ceiling on campaign-related activities,” Buckley, 424 U. S., at 64, and “do not prevent anyone from speaking,” McConnell, supra, at 201 (internal quotation marks and brackets omitted). The Court has subjected these requirements to “exacting scrutiny,” which requires a “substantial relation” between the disclosure requirement and a “sufficiently important” governmen*367tal interest. Buckley, supra, at 64, 66 (internal quotation marks omitted); see McConnell, supra, at 231-232.
In Buckley, the Court explained that disclosure could be justified based on a governmental interest in “provid[ing] the electorate with information” about the sources of election-related spending. 424 U. S., at 66. The McConnell Court applied this interest in rejecting facial challenges to BCRA §§201 and 311. 540 U. S., at 196. There was evidence in the record that independent groups were running election-related advertisements “'while hiding behind dubious and misleading names.’” Id., at 197 (quoting McConnell I, 251 F. Supp. 2d, at 237). The Court therefore upheld BCRA §§201 and 311 on the ground that they would help citizens “ 'make informed choices in the political marketplace.’ ” 540 U. S., at 197 (quoting McConnell I, supra, at 237); see 540 U. S., at 231.
Although both provisions were facially upheld, the Court acknowledged that as-applied challenges would be available if a group could show a “ 'reasonable probability’ ” that disclosure of its contributors’ names “ 'will subject them to threats, harassment, or reprisals from either Government officials or private parties.’” Id., at 198 (quoting Buckley, supra, at 74).
For the reasons stated below, we find the statute valid as applied to the ads for the movie and to the movie itself.
B
Citizens United sought to broadcast one 30-second and two 10-second ads to promote Hillary. Under FEC regulations, a communication that “[p]roposes a commercial transaction” was not subject to 2 U. S. C. §441b’s restrictions on corporate or union funding of electioneering communications. 11 CFR §114.15(b)(3)(ii). The regulations, however, do not exempt those communications from the disclaimer and disclosure requirements in BCRA §§201 and 311. See 72 Fed. Reg. 72901 (2007).
*368Citizens United argues that the disclaimer requirements in §311 are unconstitutional as applied to its ads. It contends that the governmental interest in providing information to the electorate does not justify requiring disclaimers for any commercial advertisements, including the ones at issue here. We disagree. The ads fall within BCRA’s definition of an “electioneering communication”: They referred to then-Senator Clinton by name shortly before a primary and contained pejorative references to her candidacy. See 530 F. Supp. 2d, at 276, nn. 2-4. The disclaimers required by §311 “provid[e] the electorate with information,” McConnell, supra, at 196, and “insure that the voters are fully informed” about the person or group who is speaking, Buckley, supra, at 76; see also Bellotti, 435 U. S., at 792, n. 32 (“Identification of the source of advertising may be required as a means of disclosure, so that the people will be able to evaluate the arguments to which they are being subjected”). At the very least, the disclaimers avoid confusion by making clear that the ads are not funded by a candidate or political party.
Citizens United argues that §311 is underinclusive because it requires disclaimers for broadcast advertisements but not for print or Internet advertising. It asserts that §311 decreases both the quantity and effectiveness of the group's speech by forcing it to devote four seconds of each advertisement to the spoken disclaimer. We rejected these arguments in McConnell, supra, at 230-231. And we now adhere to that decision as it pertains to the disclosure provisions.
As a final point, Citizens United claims that, in any event, the disclosure requirements in §201 must be confined to speech that is the functional equivalent of express advocacy. The principal opinion in WRTL limited 2 U. S. C. § 441b’s restrictions on independent expenditures to express advocacy and its functional equivalent. 551 U. S., at 469-476 (opinion of Roberts, C. J.). Citizens United seeks to import a simi*369lar distinction into BCRA’s disclosure requirements. We reject this contention.
The Court has explained that disclosure is a less restrictive alternative to more comprehensive regulations of speech. See, e. g., MCFL, 479 U. S., at 262. In Buckley, the Court upheld a disclosure requirement for independent expenditures even though it invalidated a provision that imposed a ceiling on those expenditures. 424 U. S., at 75-76. In McConnell, three Justices who would have found §441b to be unconstitutional nonetheless voted to uphold BCRA’s disclosure and disclaimer requirements. 540 U. S., at 321 (opinion of Kennedy, J., joined by Rehnquist, C. J, and Scalia, J.). And the Court has upheld registration and disclosure requirements on lobbyists, even though Congress has no power to ban lobbying itself. United States v. Harriss, 347 U. S. 612, 625 (1954) (Congress “has merely provided for a modicum of information from those who for hire attempt to influence legislation or who collect or spend funds for that purpose”). For these reasons, we reject Citizens United’s contention that the disclosure requirements must be limited to speech that is the functional equivalent of express advocacy.
Citizens United also disputes that an informational interest justifies the application of §201 to its ads, which only attempt to persuade viewers to see the film. Even if it disclosed the funding sources for the ads, Citizens United says, the information would not help viewers make informed choices in the political marketplace. This is similar to the argument rejected above with respect to disclaimers. Even if the ads only pertain to a commercial transaction, the public has an interest in knowing who is speaking about a candidate shortly before an election. Because the informational interest alone is sufficient to justify application of §201 to these ads, it is not necessary to consider the Government’s other asserted interests.
*370Last, Citizens United argues that disclosure requirements can chill donations to an organization by exposing donors to retaliation. Some amici point to recent events in which donors to certain causes were blacklisted, threatened, or otherwise targeted for retaliation. See Brief for Institute for Justice as Amicus Curiae, 13-16; Brief for Alliance Defense Fund as Amicus Curiae 16-22. In McConnell, the Court recognized that § 201 would be unconstitutional as applied to an organization if there were a reasonable probability that the group’s members would face threats, harassment, or reprisals if their names were disclosed. 540 U. S., at 198. The examples cited by amici are cause for concern. Citizens United, however, has offered no evidence that its members may faee similar threats or reprisals. To the contrary, Citizens United has been disclosing its donors for years and has identified no instance of harassment or retaliation.
Shareholder objections raised through the procedures of corporate democracy, see Bellotti, supra, at 794, and n. 34, can be more effective today because modern technology makes disclosures rapid and informative. A campaign finance system that pairs corporate independent expenditures with effective disclosure has not existed before today. It must be noted, furthermore, that many of Congress’ findings in passing BCRA were premised on a system without adequate disclosure. See McConnell, 540 U. S., at 128 (“[T]he public may not have been fully informed about the sponsorship of so-called issue ads”); id., at 196-197 (citing McConnell I, 251 F. Supp. 2d, at 237). With the advent of the Internet, prompt disclosure of expenditures can provide shareholders and citizens with the information needed to hold corporations and elected officials accountable for their positions and supporters. Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are “‘in the pocket’ of so-called moneyed interests.” 540 U. S., at 259 (opinion of Scalia, J.); see MCFL, supra, at *371261. The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
C
For the same reasons we uphold the application of BCRA §§201 and 311 to the ads, we affirm their application to Hillary. We find no constitutional impediment to the application of BCRA’s disclaimer and disclosure requirements to a movie broadcast via video-on-demand. And there has been no showing that, as applied in this case, these requirements would impose a chill on speech or expression.
V
When word concerning the plot of the movie Mr. Smith Goes to Washington reached the circles of Government, some officials sought, by persuasion, to discourage its distribution. See Smoodin, “Compulsory” Viewing for Every Citizen: Mr. Smith and the Rhetoric of Reception, 35 Cinema Journal 3, 19, and n. 52 (Winter 1996) (citing Mr. Smith Riles Washington, Time, Oct. 30, 1939, p. 49); Nugent, Capra’s Capitol Offense, N. Y. Times, Oct. 29, 1939, p. X5. Under Austin, though, officials could have done more than discourage its distribution — they could have banned the film. After all, it, like Hillary, was speech funded by a corporation that was critical of Members of Congress. Mr. Smith Goes to Washington may be fiction and caricature; but fiction and caricature can be a powerful force.
Modern day movies, television comedies, or skits on YouTube.com might portray public officials or public policies in unflattering ways. Yet if a covered transmission during the blackout period creates the background for candidate endorsement or opposition, a felony occurs solely because a corporation, other than an exempt media corporation, has made *372the “purchase, payment, distribution, loan, advance, deposit, or gift of money or anything of value” in order to engage in political speech. 2 U. S. C. § 431(9)(A)(i). Speech would be suppressed in the realm where its necessity is most evident: in the public dialogue preceding a real election. Governments are often hostile to speech, but under our law and our tradition it seems stranger than fiction for our Government to make this political speech a crime. Yet this is the statute’s purpose and design.
Some members of the public might consider Hillary to be insightful and instructive; some might find it to be neither high art nor a fair discussion on how to set the Nation’s course; still others simply might suspend judgment on these points but decide to think more about issues and candidates. Those choices and assessments, however, are not for the Government to make. “The First Amendment underwrites the freedom to experiment and to create in the realm of thought and speech. Citizens must be free to use new forms, and new forums, for the expression of ideas. The civic discourse belongs to the people, and the Government may not prescribe the means used to conduct it.” McConnell, supra, at 341 (opinion of Kennedy, J.).
The judgment of the District Court is reversed with respect to the constitutionality of 2 U. S. C. § 441b’s restrictions on corporate independent expenditures. The judgment is affirmed with respect to BCRA’s disclaimer and disclosure requirements. The case is remanded for further proceedings consistent with this opinion.
It is so ordered.
with whom Justice Alito joins, concurring.
The Government urges us in this case to uphold a direct prohibition on political speech. It asks us to embrace a theory of the First Amendment that would allow censorship not only of television and radio broadcasts, but of pamphlets, *373posters, the Internet, and virtually any other medium that corporations and unions might find useful in expressing their views on matters of public concern. Its theory, if accepted, would empower the Government to prohibit newspapers from running editorials or opinion pieces supporting or opposing candidates for office, so long as the newspapers were owned by corporations — as the major ones are. First Amendment rights could be confined to individuals, subverting the vibrant public discourse that is at the foundation of our democracy.
The Court properly rejects that theory, and I join its opinion in full. The First Amendment protects more than just the individual on a soapbox and the lonely pamphleteer. I write separately to address the important principles of judicial restraint and stare decisis implicated in this case.
I
Judging the constitutionality of an Act of Congress is “the gravest and most delicate duty that this Court is called on to perform.” Blodgett v. Holden, 275 U. S. 142, 147-148 (1927) (Holmes, J., concurring). Because the stakes are so high, our standard practice is to refrain from addressing constitutional questions except when necessary to rule on particular claims before us. See Ashwander v. TVA, 297 U. S. 288, 346-348 (1936) (Brandeis, J., concurring). This policy underlies both our willingness to construe ambiguous statutes to avoid constitutional problems and our practice “ ‘never to formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied.’” United States v. Raines, 362 U. S. 17, 21 (1960) (quoting Liverpool, New York & Philadelphia S. S. Co. v. Commissioners of Emigration, 113 U. S. 33, 39 (1885)).
The majority and dissent are united in expressing allegiance to these principles. Ante, at 329; post, at 405-406 (Stevens, J., concurring in part and dissenting in part). *374But I cannot agree with my dissenting colleagues on how these principles apply in this case.
The majority’s step-by-step analysis accords with our standard practice of avoiding broad constitutional questions except when necessary to decide the case before us. The majority begins by addressing — and quite properly rejecting — Citizens United’s statutory claim that 2 U. S. C. § 441b does not actually cover its production and distribution of Hillary: The Movie (hereinafter Hillary). If there were a valid basis for deciding this statutory claim in Citizens United’s favor (and thereby avoiding constitutional adjudication), it would be proper to do so. Indeed, that is precisely the approach the Court took just last Term in Northwest Austin Municipal Util. Dist. No. One v. Holder, 557 U. S. 193 (2009), when eight Members of the Court agreed to decide the case on statutory grounds instead of reaching the appellant’s broader argument that the Voting Rights Act is unconstitutional.
It is only because the majority rejects Citizens United’s statutory claim that it proceeds to consider the group’s various constitutional arguments, beginning with its narrowest claim (that Hillary is not the functional equivalent of express advocacy) and proceeding to its broadest claim (that Austin v. Michigan Chamber of Commerce, 494 U. S. 652 (1990), should be overruled). This is the same order of operations followed by the controlling opinion in Federal Election Comm’n v. Wisconsin Right to Life, Inc., 551 U. S. 449 (2007) (WRTL). There the appellant was able to prevail on its narrowest constitutional argument because its broadcast ads did not qualify as the functional equivalent of express advocacy; there was thus no need to go on to address the broader claim that McConnell v. Federal Election Comm’n, 540 U. S. 93 (2003), should be overruled. WRTL, 551 U. S., at 482; id., at 482-483 (Alito, J., concurring). This case is different — not, as the dissent suggests, because the approach taken in WRTL has been deemed a “failure,” post, at 402, *375but because, in the absence of any valid narrower ground of decision, there is no way to avoid Citizens United’s broader constitutional argument.
The dissent advocates an approach to addressing Citizens United’s claims that I find quite perplexing. It presumably agrees with the majority that Citizens United’s narrower statutory and constitutional arguments lack merit — otherwise its conclusion that the group should lose this case would make no sense. Despite agreeing that these narrower arguments fail, however, the dissent argues that the majority should nonetheless latch on to one of them in order to avoid reaching the broader constitutional question of whether Austin remains good law. It even suggests that the Court’s failure to adopt one of these concededly meritless arguments is a sign that the majority is not “serious about judicial restraint.” Post, at 408.
This approach is based on a false premise: that our practice of avoiding .unnecessary (and unnecessarily broad) constitutional holdings somehow trumps our obligation faithfully to interpret the law. It should go without saying, however, that we cannot embrace a narrow ground of decision simply because it is narrow; it must also be right. Thus while it is true that “[i]f it is not necessary to decide more, it is necessary not to decide more,” post, at 405 (internal quotation marks omitted), sometimes it is necessary to decide more. There is a difference between judicial restraint and judicial abdication. When constitutional questions are “indispensably necessary” to resolving the case at hand, “the court must meet and decide them.” Ex parte Randolph, 20 F. Cas. 242, 254 (No. 11,558) (CC Va. 1883) (Marshall, C. J.).
Because it is necessary to reach Citizens United’s broader argument that Austin should be overruled, the debate over whether to consider this claim on an as-applied or facial basis strikes me as largely beside the point. Citizens United has standing — it is being injured by the Government’s enforcement of the Act. Citizens United has a constitutional *376claim — the Act violates the First Amendment, because it prohibits political speech. The Government has a defense— the Act may be enforced, consistent with the First Amendment, against corporations. Whether the claim or the defense prevails is the question before us.
Given the nature of that claim and defense, it makes no difference of any substance whether this case is resolved by invalidating the statute on its face or only as applied to Citizens United. Even if considered in as-applied terms, a holding in this ease that the Act may not be applied to Citizens United — because corporations as well as individuals enjoy the pertinent First Amendment rights — would mean that any other corporation raising the same challenge would also win. Likewise, a conclusion that the Act may be applied to Citizens United — because it is constitutional to prohibit corporate political speech — would similarly govern future cases. Regardless whether we label Citizens United’s claim a “facial” or “as-applied” challenge, the consequences of the Court’s decision are the same.1
II
The text and purpose of the First Amendment point in the same direction: Congress may not prohibit political speech, even if the speaker is a corporation or union. What makes this case difficult is the need to confront our prior decision in Austin.
This is the first case in which we have been asked to overrule Austin, and thus it is also the first in which we have had reason to consider how much weight to give stare decisis in assessing its continued validity. The dissent erroneously *377declares that the Court “reaffirmed” Austin’s holding in subsequent cases — namely, Federal Election Comm’n v. Beaumont, 539 U. S. 146 (2003); McConnell; and WRTL. Post, at 439-441. Not so. Not a single party in any of those cases asked us to overrule Austin, and as the dissent points out, post, at 396-398, the Court generally does not consider constitutional arguments that have not properly been raised. Austin’s validity was therefore not directly at issue in the cases the dissent cites. The Court's unwillingness to overturn Austin in those eases cannot be understood as a reaffirmation of that decision.
A
Fidelity to precedent — the policy of stare decisis — is vital to the proper exercise of the judicial function. “Stare decisis is the preferred course because it promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.” Payne v. Tennessee, 501 U. S. 808, 827 (1991). For these reasons, we have long recognized that departures from precedent are inappropriate in the absence of a “special justification.” Arizona v. Rumsey, 467 U. S. 203, 212 (1984).
At the same time, stare decisis is neither an “inexorable command,” Lawrence v. Texas, 539 U. S. 558, 577 (2003), nor “a mechanical formula of adherence to the latest decision,” Helvering v. Hallock, 309 U. S. 106, 119 (1940), especially in constitutional cases, see United States v. Scott, 437 U. S. 82, 101 (1978). If it were, segregation would be legal, minimum wage laws would be unconstitutional, and the Government could wiretap ordinary criminal suspects without first obtaining warrants. See Plessy v. Ferguson, 163 U. S. 537 (1896), overruled by Brown v. Board of Education, 347 U. S. 483 (1954); Adkins v. Children’s Hospital of D. C., 261 U. S. 525 (1923), overruled by West Coast Hotel Co. v. Parrish, 300 U. S. 379 (1937); Olmstead v. United States, 277 U. S. 438 (1928), overruled by Katz v. United States, *378389 U. S. 347 (1967). As the dissent properly notes, none of us has viewed stare decisis in such absolute terms. Post, at 408; see also, e. g., Randall v. Sorrell, 548 U. S. 230, 274-281 (2006) (Stevens, J., dissenting) (urging the Court to overrule its invalidation of limits on independent expenditures on political speech in Buckley v. Valeo, 424 U. S. 1 (1976) (per curiam)).
Stare decisis is instead a “principle of policy.” Helvering, supra, at 119. When considering whether to reexamine a prior erroneous holding, we must balance the importance of having constitutional questions decided against the importance of having them decided right. As Justice Jackson explained, this requires a “sober appraisal of the disadvantages of the innovation as well as those of the questioned case, a weighing of practical effects of one against the other.” Jackson, Decisional Law and Stare Decisis, 30 A. B. A. J. 334 (1944).
In conducting this balancing, we must keep in mind that stare decisis is not an end in itself. It is instead “the means by which we ensure that the law will not merely change erratically, but will develop in a principled and intelligible fashion.” Vasquez v. Hillery, 474 U. S. 254, 265 (1986). Its greatest purpose is to serve a constitutional ideal — the rule of law. It follows that in the unusual circumstance when fidelity to any particular precedent does more to damage this constitutional ideal than to advance it, we must be more willing to depart from that precedent.
Thus, for example, if the precedent under consideration itself departed from the Court’s jurisprudence, returning to the “‘intrinsically sounder’ doctrine established in prior cases” may “better serv[e] the values of stare decisis than would following [the] more recently decided case inconsistent with the decisions that came before it.” Adarand Constructors, Inc. v. Peña, 515 U. S. 200, 231 (1995); see also Helvering, supra, at 119; Randall, supra, at 274 (Stevens, J., dissenting). Abrogating the errant precedent, rather than *379reaffirming or extending it, might better preserve the law’s coherence and curtail the precedent’s disruptive effects.
Likewise, if adherence to a precedent actually impedes the stable and orderly adjudication of future cases, its stare decisis effect is also diminished. This can happen in a number of circumstances, such as when the precedent’s validity is so hotly contested that it cannot reliably function as a basis for decision in future cases, when its rationale threatens to upend our settled jurisprudence in related areas of law, and when the precedent’s underlying reasoning has become so discredited that the Court cannot keep the precedent alive without jury-rigging new and different justifications to shore up the original mistake. See, e. g., Pearson v. Callahan, 555 U. S. 223, 235 (2009); Montejo v. Louisiana, 556 U. S. 778, 792 (2009) (stare decisis does not control when adherence to the prior decision requires “fundamentally revising its theoretical basis”).
B
These considerations weigh against retaining our decision in Austin. First, as the majority explains, that decision was an “aberration” insofar as it departed from the robust protections we had granted political speech in our earlier cases. Ante, at 355; see also Buckley, supra; First Nat. Bank of Boston v. Bellotti, 435 U. S. 765 (1978). Austin undermined the careful line that Buckley drew to distinguish limits on contributions to candidates from limits on independent expenditures on speech. Buckley rejected the asserted government interest in regulating independent expenditures, concluding that “restrict[ing] the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.” 424 U. S., at 48-49; see also Bellotti, supra, at 790-791; Citizens Against Rent Control/Coalition for Fair Housing v. Berkeley, 454 U. S. 290, 295 (1981). Austin, however, allowed the Government to prohibit these same expenditures out of concern for “the corrosive and distorting effects of immense aggrega*380tions of wealth” in the marketplace of ideas. 494 U. S., at 660. Austin's reasoning was — and remains — inconsistent with Buckley's explicit repudiation of any government interest in “equalizing the relative ability of individuals and groups to influence the outcome of elections.” 424 U. S., at 48-49.
Austin was also inconsistent with Bellotti’s clear rejection of the idea that “speech that otherwise would be within the protection of the First Amendment loses that protection simply because its source is a corporation.” 435 U. S., at 784. The dissent correctly points out that Bellotii involved a referendum rather than a candidate election, and that Bellota itself noted this factual distinction, id., at 788, n. 26; post, at 442-443. But this distinction does not explain why corporations may be subject to prohibitions on speech in candidate elections when individuals may not.
Second, the validity of Austin’s rationale — itself adopted over two “spirited dissents,” Payne, 501 U. S., at 829 — has proved to be the consistent subject of dispute among Members of this Court ever since. See, e. g., WRTL, 551 U. S., at 483 (Scalia, J., joined by Kennedy and Thomas, JJ., concurring in part and concurring in judgment); McConnell, 540 U. S., at 247, 264, 286 (opinions of Scalia, Thomas, and Kennedy, JJ.); Beaumont, 539 U. S., at 163, 164 (opinions of Kennedy and Thomas, JJ.). The simple fact that one of our decisions remains controversial is, of course, insufficient to justify overruling it. But it does undermine the precedent’s ability to contribute to the stable and orderly development of the law. In such circumstances, it is entirely appropriate for the Court — which in this case is squarely asked to reconsider Austin’s validity for the first time — to address the matter with a greater willingness to consider new approaches capable of restoring our doctrine to sounder footing.
Third, the Austin decision is uniquely destabilizing because it threatens to subvert our Court’s decisions even outside the particular context of corporate express advocacy. *381The First Amendment theory underlying Austin’s holding is extraordinarily broad. Austin’s logic would authorize government prohibition of political speech by a category of speakers in the name of equality — a point that most scholars acknowledge (and many celebrate), but that the dissent denies. Compare, e. g., Garrett, New Voices in Polities: Justice Marshall’s Jurisprudence on Law and Politics, 52 How. L. J. 655, 669 (2009) (Austin “has been understood by most commentators to be an opinion driven by equality considerations, albeit disguised in the language of ‘political corruption’ ”), with post, at 464 (Austin’s rationale “is manifestly not just an ‘equalizing’ ideal in disguise”).2
It should not be surprising, then, that Members of the Court have relied on Austin’s expansive logic to justify greater incursions on the First Amendment, even outside the original context of corporate advocacy on behalf of candidates running for office. See, e. g., Davis v. Federal Election Comm’n, 554 U. S. 724, 756 (2008) (Stevens, J., concurring in part and dissenting in part) (relying on Austin and other cases to justify restrictions on campaign spending by individual candidates, explaining that “there is no reason that their logic — specifically, their concerns about the corrosive and distorting effects of wealth on our political process — is not equally applicable in the context of individual wealth”); McConnell, supra, at 203-209 (extending Austin beyond its original context to cover not only the “functional equivalent” of express advocacy by corporations, but also *382electioneering speech conducted by labor unions). The dissent in this case succumbs to the same temptation, suggesting that Austin justifies prohibiting corporate speech because such speech might unduly influence “the market for legislation.” Post, at 471. The dissent reads Austin to permit restrictions on corporate speech based on nothing more than the fact that the corporate form may help individuals coordinate and present their views more effectively. Post, at 471-472. A speaker’s ability to persuade, however, provides no basis for government regulation of free and open public debate on what the laws should be.
If taken seriously, Austin’s logic would apply most directly to newspapers and other media corporations. They have a more profound impact on public discourse than most other speakers. These corporate entities are, for the time being, not subject to §441b’s otherwise generally applicable prohibitions on corporate political speech. But this is simply a matter of legislative grace. The fact that the law currently grants a favored position to media corporations is no reason to overlook the danger inherent in accepting a theory that would allow government restrictions on their political speech. See generally McConnell, supra, at 283-286 (Thomas, J., concurring in part, concurring in judgment in part, and dissenting in part).
These readings of Austin do no more than carry that decision’s reasoning to its logical endpoint. In doing so, they highlight the threat Austin poses to First Amendment rights generally, even outside its specific factual context of corporate express advocacy. Because Austin is so difficult to confine to its facts — and because its logic threatens to undermine our First Amendment jurisprudence and the nature of public discourse more broadly — the costs of giving it stare decisis effect are unusually high.
Finally and most importantly, the Government’s own effort to defend Austin — or, more accurately, to defend something that is not quite Austin — underscores its weakness as *383a precedent of the Court. The Government concedes that Austin “is not the most lucid opinion,” yet asks us to reaffirm its holding. Tr. of Oral Arg. 62 (Sept. 9, 2009). But while invoking stare decisis to support this position, the Government never once even mentions the compelling interest that Austin relied upon in the first place: the need to diminish “the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.” 494 U. S., at 660.
Instead of endorsing Austin on its own terms, the Government urges us to reaffirm Austin’s specific holding on the basis of two new and potentially expansive interests — the need to prevent actual or apparent quid pro quo corruption, and the need to protect corporate shareholders. See Supp. Brief for Appellee 8-10, 12-13. Those interests may or may not support the result in Austin, but they were plainly not part of the reasoning on which Austin relied.
To its credit, the Government forthrightly concedes that Austin did not embrace either of the new rationales it now urges upon us. See, e. g., Supp. Brief for Appellee 11 (“The Court did not decide in Austin .. . whether the compelling interest in preventing actual or apparent corruption provides a constitutionally sufficient justification for prohibiting the use of corporate treasury funds for independent electioneering”); Tr. of Oral Arg. 45 (Sept. 9, 2009) (“Austin did not articulate what we believe to be the strongest compelling interest”); id., at 61 (“[The Court:] I take it we have never accepted your shareholder protection interest. This is a new argument. [The Government:] I think that that’s fair”); id., at 64 (“[The Court:] In other words, you are asking us to uphold Austin on the basis of two arguments, two principles, two compelling interests we have never accepted, in [the context of limits on political expenditures]. [The Government:] [I]n this particular context, fair enough”).
*384To be clear: The Court in Austin nowhere relied upon the only arguments the Government now raises to support that decision. In fact, the only opinion in Austin endorsing the Government’s argument based on the threat of quid pro quo corruption was Justice Stevens’s concurrence. 494 U. S., at 678. The Court itself did not do so, despite the fact that the concurrence highlighted the argument. Moreover, the Court’s only discussion of shareholder protection in Austin appeared in a section of the opinion that sought merely to distinguish Austin’s facts from those of Federal Election Comm’n v. Massachusetts Citizens for Life, Inc., 479 U. S. 238 (1986). Austin, supra, at 663. Nowhere did Austin suggest that the goal of protecting shareholders is itself a compelling interest authorizing restrictions on First Amendment rights.
To the extent that the Government’s case for reaffirming Austin depends on radically reconceptualizing its reasoning, that argument is at odds with itself. Stare decisis is a doctrine of preservation, not transformation. It counsels deference to past mistakes, but provides no justification for making new ones. There is therefore no basis for the Court to give precedential sway to reasoning that it has never accepted, simply because that reasoning happens to support a conclusion reached on different grounds that have since been abandoned or discredited.
Doing so would undermine the rule-of-law values that justify stare decisis in the first place. It would effectively license the Court to invent and adopt new principles of constitutional law solely for the purpose of rationalizing its past errors, without a proper analysis of whether those principles have merit on their own. This approach would allow the Court’s past missteps to spawn future mistakes, undercutting the very rule-of-law values that stare decisis is designed to protect.
None of this is to say that the Government is barred from making new arguments to support the outcome in Austin. *385On the contrary, it is free to do so. And of course the Court is free to accept them. But the Government’s new arguments must stand or fall on their own; they are not entitled to receive the special deference we accord to precedent. They are, as grounds to support Austin, literally imprecedented. Moreover, to the extent the Government relies on new arguments — and declines to defend Austin on its own terms — we may reasonably infer that it lacks confidence in that decision’s original justification.
Because continued adherence to Austin threatens to subvert the “principled and intelligible” development of our First Amendment jurisprudence, Vasquez, 474 U. S., at 265, I support the Court’s determination to overrule that decision.
* * *
We have had two rounds of briefing in this case, two oral arguments, and 54 amicus briefs to help us carry out our obligation to decide the necessary constitutional questions according to law. We have also had the benefit of a comprehensive dissent that has helped ensure that the Court has considered all the relevant issues. This careful consideration convinces me that Congress violates the First Amendment when it decrees that some speakers may not engage in political speech at election time, when it matters most.
with whom Justice Alito joins, and with whom Justice Thomas joins in part, concurring.
I join the opinion of the Cotut.1
I write separately to address Justice Stevens' discussion of “Original Understandings,” post, at 425 (opinion concurring in part and dissenting in part) (hereinafter referred to as the dissent). This section of the dissent purports to show that today’s decision is not supported by the original understanding of the First Amendment. The dissent at*386tempts this demonstration, however, in splendid isolation from the text of the First Amendment. It never shows why “the freedom of speech” that was the right of Englishmen did not include the freedom to speak in association with other individuals, including association in the corporate form. To be sure, in 1791 (as now) corporations could pursue only the objectives set forth in their charters; but the dissent provides no evidence that their speech in the pursuit of those objectives could be censored.
Instead of taking this straightforward approach to determining the Amendment’s meaning, the dissent embarks on a detailed exploration of the Framers’ views about the “role of corporations in society.” Post, at 426. The Framers did not like corporations, the dissent concludes, and therefore it follows (as night the day) that corporations had no rights of free speech. Of course the Framers’ personal affection or disaffection for corporations is relevant only insofar as it can be thought to be reflected in the understood meaning of the text they enacted — not, as the dissent suggests, as a freestanding substitute for that text. But the dissent’s distortion of proper analysis is even worse than that. Though faced with a constitutional text that makes no distinction between types of speakers, the dissent feels no necessity to provide even an isolated statement from the founding era to the effect that corporations are not covered, but places the burden on appellant to bring forward statements showing that they are. Ibid. (“[T]here is not a scintilla of evidence to support the notion that anyone believed [the First Amendment] would preclude regulatory distinctions based on the corporate form”).
Despite the corporation-hating quotations the dissent has dredged up, it is far from clear that by the end of the 18th century corporations were despised. If so, how came there to be so many of them? The dissent’s statement that there were few business corporations during the 18th century— “only a few hundred during all of the 18th century” — is mis*387leading. Post, at 426, n. 53. There were approximately 335 charters issued to business corporations in the United States by the end of the 18th century.2 See 2 J. Davis, Essays in the Earlier History of American Corporations 24 (1917) (reprinted 2006) (hereinafter Davis). This was a “considerable extension of corporate enterprise in the field of business,” id., at 8, and represented “unprecedented growth,” id., at 309. Moreover, what seems like a small number by today’s standards surely does not indicate the relative importance of corporations when the Nation was considerably smaller. As I have previously noted, “[b]y the end of the eighteenth century the corporation was a familiar figure in American economic life.” McConnell v. Federal Election Comm’n, 540 U. S. 93, 256 (2003) (Scalia, J., concurring in part, concurring in judgment in part, and dissenting in part) (quoting C. Cooke, Corporation Trust and Company 92 (1951) (hereinafter Cooke); internal quotation marks omitted).
Even if we thought it proper to apply the dissent’s approach of excluding from First Amendment coverage what the Founders disliked, and even if we agreed that the Founders disliked founding-era corporations, modern corporations might not qualify for exclusion. Most of the Founders’ resentment toward corporations was directed at the state-granted monopoly privileges that individually chartered corporations enjoyed.3 Modern corporations do not have such *388privileges, and would probably have been favored by most of our enterprising Founders — excluding, perhaps, Thomas Jefferson and others favoring perpetuation of an agrarian society. Moreover, if the Founders’ specific intent with re-speet to corporations is what matters, why does the dissent ignore the Founders’ views about other legal entities that have more in common with modern business corporations than the founding-era corporations? At the time of the founding, religious, educational, and literary corporations were incorporated under general incorporation statutes, much as business corporations are today.4 See Davis 16-17; R. Seavoy, Origins of the American Business Corporation, 1784-1855, p. 5 (1982); Cooke 94. There were also small unincorporated business associations, which some have argued were the “‘true progenitors’” of today’s business corporations. Friedman 200 (quoting S. Livermore, Early American Land Companies: Their Influence on Corporate Development 216 (1939)); see also Davis 33. Were all of these silently excluded from the protections of the First Amendment?
The lack of a textual exception for speech by corporations cannot be explained on the ground that such organizations did not exist or did not speak. To the contrary, colleges, towns and cities, religious institutions, and guilds had long been organized as corporations at common law and under the King’s charter, see 1 W. Blackstone, Commentaries on the Laws of England 455-473 (1765); 1 S. Kyd, A Treatise on the Law of Corporations 1-32, 63 (1793) (reprinted 2006), and as *389I have discussed, the practice of incorporation only expanded in the United States. Both corporations and voluntary associations actively petitioned the Government and expressed their views in newspapers and pamphlets. For example: An antislavery Quaker corporation petitioned the First Congress, distributed pamphlets, and communicated through the press in 1790. W. diGiacomantonio, “For the Gratification of a Volunteering Society”: Antislavery and Pressure Group Politics in the First Federal Congress, 15 J. Early Republic 169 (1995). The New York Sons of Liberty sent a circular to Colonies farther south in 1766. P. Maier, From Resistance to Revolution 79-80 (1972). And the Society for the Relief and Instruction of Poor Germans circulated a biweekly paper from 1755 to 1757. Adams, The Colonial German-language Press and the American Revolution, in The Press & the American Revolution 151, 161-162 (B. Bailyn & J. Hench eds. 1980). The dissent offers no evidence— none whatever — that the First Amendment’s unqualified text was originally understood to exclude such associational speech from its protection.5
*390Historical evidence relating to the textually similar clause “the freedom of. . . the press” also provides no support for the proposition that the First Amendment excludes conduct of artificial legal entities from the scope of its protection. The freedom of “the press” was widely understood to protect the publishing activities of individual editors and printers. See McIntyre v. Ohio Elections Comm’n, 514 U. S. 334, 360 (1995) (Thomas, J., concurring in judgment); see also McConnell, 540 U. S., at 252-253 (opinion of Scalia, J.). But these individuals often acted through newspapers, which (much like corporations) had their own names, outlived the individuals who had founded them, could be bought and sold, were sometimes owned by more than one person, and were operated for profit. See generally F. Mott, American Journalism: A History of Newspapers in the United States Through 250 Years 3-164 (1941); J. Smith, Freedom’s Fetters (1956). Their activities were not stripped of First Amendment protection simply because they were carried out under the banner of an artificial legal entity. And the notion which follows from the dissent’s view, that modern newspapers, since they are incorporated, have free-speech rights only at the sufferance of Congress, boggles the mind.6
*391In passing, the dissent also claims that the Court’s conception of corruption is unhistorical. The Framers “would have been appalled,” it says, by the evidence of corruption in the congressional findings supporting the Bipartisan Campaign Reform Act of 2002. Post, at 451-452. For this proposition, the dissent cites a law-review article arguing that “corruption” was originally understood to include “moral decay” and even actions taken by citizens in pursuit of private rather than public ends. Teachout, The Anti-Corruption Principle, 94 Cornell L. Rev. 341, 373, 378 (2009). It is hard to see how this has anything to do with what sort of corruption can be combated by restrictions on political speech. Moreover, if speech can be prohibited because, in the view of the Government, it leads to “moral decay” or does not serve “public ends,” then there is no limit to the Government’s censorship power.
The dissent says that when the Framers “constitutionalized the right to free speech in the First Amendment, it was the free speech of individual Americans that they had in mind.” Post, at 428. That is no doubt true. All the provisions of the Bill of Rights set forth the rights of individual *392men and women — not, for example, of trees or polar bears. But the individual person’s right to speak includes the right to speak in association with other individual persons. Surely the dissent does not believe that speech by the Republican Party or the Democratic Party can be censored because it is not the speech of “an individual American.” It is the speech of many individual Americans, who have associated in a common cause, giving the leadership of the party the right to speak on their behalf. The association of individuals in a business corporation is no different — or at least it cannot be denied the right to speak on the simplistic ground that it is not “an individual American.”7
But to return to, and summarize, my principal point, which is the conformity of today’s opinion with the original meaning of the First Amendment. The Amendment is written in terms of “speech,” not speakers. Its text offers no foothold *393for excluding any category of speaker, from single individuals to partnerships of individuals, to unincorporated associations of individuals, to incorporated associations of individuals — and the dissent offers no evidence about the original meaning of the text to support any such exclusion. We are therefore simply left with the question whether the speech at issue in this case is “speech” covered by the First Amendment. No one says otherwise. A documentary film critical of a potential Presidential candidate is core political speech, and its nature as such does not change simply because it was funded by a corporation. Nor does the character of that funding produce any reduction whatever in the “inherent worth of the speech” and “its capacity for informing the public,” First Nat. Bank of Boston v. Bellotti, 435 U. S. 765, 777 (1978). Indeed, to exclude or impede corporate speech is to muzzle the principal agents of the modern free economy. We should celebrate rather than condemn the addition of this speech to the public debate.
with whom Justice Ginsbueg, Justice Breyer, and Justice Sotomayor join, concurring in part and dissenting in part.
The real issue in this case concerns how, not if, the appellant may finance its electioneering. Citizens United is a wealthy nonprofit corporation that runs a political action committee (PAC) with millions of dollars in assets. Under the Bipartisan Campaign Reform Act of 2002 (BCRA), it could have used those assets to televise and promote Hillary: The Movie wherever and whenever it wanted to. It also could have spent unrestricted sums to broadcast Hillary at any time other than the 30 days before the last primary election. Neither Citizens United’s nor any other corporation’s speech has been “banned,” ante, at 319. All that the parties dispute is whether Citizens United had a right to use the funds in its general treasury to pay for broadcasts during the 30-day period. The notion that the First Amendment *394dictates an affirmative answer to that question is, in my judgment, profoundly misguided. Even more misguided is the notion that the Court must rewrite the law relating to campaign expenditures by for-profit corporations and unions to decide this case.
The basic premise underlying the Court’s ruling is its iteration, and constant reiteration, of the proposition that the First Amendment bars regulatory distinctions based on a speaker’s identity, including its “identity” as a corporation. While that glittering generality has rhetorical appeal, it is not a correct statement of the law. Nor does it tell us when a corporation may engage in electioneering that some of its shareholders oppose. It does not even resolve the specific question whether Citizens United may be required to finance some of its messages with the money in its PAC. The conceit that corporations must be treated identically to natural persons in the political sphere is not only inaccurate but also inadequate to justify the Court’s disposition of this case.
In the context of election to public office, the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, corporations are not actually members of it. They cannot vote or run for office. Because they may be managed and controlled by nonresidents, their interests may conflict in fundamental respects with the interests of eligible voters. The financial resources, legal structure, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process. Our lawmakers have a compelling constitutional basis, if not also a democratic duty, to take measures designed to guard against the potentially deleterious effects of corporate spending in local and national races.
The majority’s approach to corporate electioneering marks a dramatic break from our past. Congress has placed special limitations on campaign spending by corporations ever since the passage of the Tillman Act in 1907, ch. 420, 34 Stat. 864. We have unanimously concluded that this “reflects a *395permissible assessment of the dangers posed by those entities to the electoral process,” FEC v. National Right to Work Comm., 459 U. S. 197, 209 (1982) (NRWC), and have accepted the “legislative judgment that the special characteristics of the corporate structure require particularly careful regulation,” id., at 209-210. The Court today rejects a century of history when it treats the distinction between corporate and individual campaign spending as an invidious novelty born of Austin v. Michigan Chamber of Commerce, 494 U. S. 652 (1990). Relying largely on individual dissenting opinions, the majority blazes through our precedents, overruling or disavowing a body of case law including FEC v. Wisconsin Right to Life, Inc., 551 U. S. 449 (2007) (WRTL), McConnell v. FEC, 540 U. S. 93 (2003), FEC v. Beaumont, 539 U. S. 146 (2003), FEC v. Massachusetts Citizens for Life, Inc., 479 U. S. 238 (1986) (MCFL), NRWC, 459 U. S. 197, and California Medical Assn. v. FEC, 453 U. S. 182 (1981).
In his landmark concurrence in Ashwander v. TVA, 297 U. S. 288, 346 (1936), Justice Brandéis stressed the importance of adhering to rules the Court has “developed ... for its own governance” when deciding constitutional questions. Because departures from those rules always enhance the risk of error, I shall review the background of this case in some detail before explaining why the Court’s analysis rests on a faulty understanding of Austin and McConnell and of our campaign finance jurisprudence more generally.1 I regret the length of what follows, but the importance and novelty of the Court’s opinion require a full response. Although *396I concur in the Court’s decision to sustain BCRA’s disclosure provisions and join Part IV of its opinion, I emphatically dissent from its principal holding.
I
The Court’s ruling threatens to undermine the integrity of elected institutions across the Nation. The path it has taken to reach its outcome will, I fear, do damage to this institution. Before turning to the question whether to overrule Austin and part of McConnell, it is important to explain why the Court should not be deciding that question.
Scope of the Case
The first reason is that the question was not properly brought before us. In declaring § 203 of BCRA facially unconstitutional on the ground that corporations’ electoral expenditures may not be regulated any more stringently than those of individuals, the majority decides this case on a basis relinquished below, not included in the questions presented to us by the litigants, and argued here only in response to the Court’s invitation. This procedure is unusual and inadvisable for a court.2 Our colleagues’ suggestion that “we are asked to reconsider Austin and, in effect, McConnell,” ante, at 319, would be more accurate if rephrased to state that “we have asked ourselves” to reconsider those cases.
In the District Court, Citizens United initially raised a facial challenge to the constitutionality of §203. App. 23a-*39724a. In its motion for summary judgment, however, Citizens United expressly abandoned its facial challenge, 1:07-cv-2240-RCL-RWR, Docket Entry No. 52, pp. 1-2 (May 16, 2008), and the parties stipulated to the dismissal of that claim, id., Nos. 53 (May 22,2008), 54 (May 23, 2008), App. 6a. The District Court therefore resolved the case on alternative grounds,3 and in its jurisdictional statement to this Court, Citizens United properly advised us that it was raising only “an as-applied challenge to the constitutionality of... BCRA §203.” Juris. Statement 5. The jurisdictional statement never so much as cited Austin, the key case the majority today overrules. And not one of the questions presented suggested that Citizens United was surreptitiously raising the facial challenge to § 203 that it previously agreed to dismiss. In fact, not one of those questions raised an issue based on Citizens United’s corporate status. Juris. Statement (i). Moreover, even in its merits briefing, when Citizens United injected its request to overrule Austin, it never sought a declaration that § 203 was facially unconstitutional as to all corporations and unions; instead it argued only that the statute could not be applied to it because it was “fimded overwhelmingly by individuals. ” Brief for Appellant 29; see also id., at 10, 12, 16, 28 (affirming “as applied” character of challenge to §203); Tr. of Oral Arg. 4-9 (Mar. 24, 2009) (coun*398sel for Citizens United conceding that § 203 could be applied to General Motors); id., at 55 (counsel for Citizens United stating that “we accept the Court’s decision in [WRTL]”).
“ ‘It is only in exceptional cases coming here from the federal courts that questions not pressed or passed upon below are reviewed,’ ” Youakim v. Miller, 425 U. S. 231, 234 (1976) (per curiam) (quoting Duignan v. United States, 274 U. S. 195, 200 (1927)), and it is “only in the most exceptional cases” that we will consider issues outside the questions presented, Stone v. Powell, 428 U. S. 465, 481, n. 15 (1976). The appellant in this case did not so much as assert an exceptional circumstance, and one searches the majority opinion in vain for the mention of any. That is unsurprising, for none exists.
Setting the case for reargument was a constructive step, but it did not cure this fundamental problem. Essentially, five Justices were unhappy with the limited nature of the case before us, so they changed the case to give themselves an opportunity to change the law.
As-Applied and Facial Challenges
This Court has repeatedly emphasized in recent years that “[fjacial challenges are disfavored.” Washington State Grange v. Washington State Republican Party, 552 U. S. 442, 450 (2008); see also Ayotte v. Planned Parenthood of Northern New Eng., 546 U. S. 320, 329 (2006) (“[T]he ‘normal rule’ is that ‘partial, rather .than facial, invalidation is the required course,’ such that a ‘statute may ... be declared invalid to the extent that it reaches too far, but otherwise left intact’ ” (quoting Brockett v. Spokane Arcades, Inc., 472 U. S. 491, 504 (1985); alteration in original)). By declaring § 203 facially unconstitutional, our colleagues have turned an as-applied challenge into a facial challenge, in defiance of this principle.
This is not merely a technical defect in the Court’s decision. The unnecessary resort to a facial inquiry “run[s] con*399trary to the fundamental principle of judicial restraint that courts should neither anticipate a question of constitutional law in advance of the necessity of deciding it nor formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied.” Washington State Grange, 552 U. S., at 450 (internal quotation marks omitted). Scanting that principle “threaten[s] to short circuit the democratic process by preventing laws embodying the will of the people from being implemented in a manner consistent with the Constitution.” Id., at 451. These concerns are heightened when judges overrule settled doctrine upon which the legislature has relied. The Court operates with a sledge hammer rather than a scalpel when it strikes down one of Congress’ most significant efforts to regulate the role that corporations and unions play in electoral polities. It compounds the offense by implicitly striking down a great many state laws as well.
The problem goes still deeper, for the Court does all of this on the basis of pure speculation. Had Citizens United maintained a facial challenge, and thus argued that there are virtually no circumstances in which BCRA §203 can be applied constitutionally, the parties could have developed, through the normal process of litigation, a record about the actual effects of § 203, its actual burdens and its actual benefits, on all manner of corporations and unions.4 “Claims of facial invalidity often rest on speculation,” and consequently “raise the risk of premature interpretation of statutes on the *400basis of factually barebones records.” Id., at 450 (internal quotation marks omitted). In this case, the record is not simply incomplete or unsatisfactory; it is nonexistent. Congress crafted BCRA in response to a virtual mountain of research on the corruption that previous legislation had failed to avert. The Court now negates Congress’ efforts without a shred of evidence on how §203 or its state-law counterparts have been affecting any entity other than Citizens United.5
Faced with this gaping empirical hole, the majority throws up its hands. Were we to confine our inquiry to Citizens United’s as-applied challenge, it protests, we would commence an “extended” process of “draw[ing], and then redrawing], constitutional lines based on the particular media or technology used to disseminate political speech from a particular speaker.” Ante, at 326. While tacitly acknowledging that some applications of § 203 might be found constitutional, the majority thus posits a future in which novel First Amendment standards must be devised on an ad hoc basis, and then leaps from this unfounded prediction to the unfounded conclusion that such complexity counsels the abandonment of all normal restraint. Yet it is a pervasive *401feature of regulatory systems that unanticipated events, such as new technologies, may raise some unanticipated difficulties at the margins. The fluid nature of electioneering communications does not make this case special. The fact that a Court can hypothesize situations in which a statute might, at some point down the line, pose some unforeseen as-applied problems, does not come close to meeting the standard for a facial challenge.6
The majority proposes several other justifications for the sweep of its ruling. It suggests that a facial ruling is necessary because, if the Court were to continue on its normal course of resolving as-applied challenges as they present themselves, that process would itself run afoul of the First Amendment. See, e. g., ante, at 326 (as-applied review process “would raise questions as to the courts’ own lawful authority”); ibid. (“Courts, too, are bound by the First Amendment”). This suggestion is perplexing. Our colleagues elsewhere trumpet “our duty ‘to say what the law is,’ ” even when our predecessors on the bench and our counterparts in Congress have interpreted the law differently. Ante, at 365 (quoting Marbury v. Madison, 1 Cranch 137, 177 (1803)). We do not typically say what the law is not as a hedge against future judicial error. The possibility that later courts will misapply a constitutional provision does not give
*402us a basis for pretermitting litigation relating to that provision.7
The majority suggests that a facial ruling is necessary because anything less would chill too much protected speech. See ante, at 326-327, 329, 333-336. In addition to begging the question what types of corporate spending are constitutionally protected and to what extent, this claim rests on the assertion that some significant number of corporations have been cowed into quiescence by FEC “ ‘censorship].’ ” Ante, at 335. That assertion is unsubstantiated, and it is hard to square with practical experience. It is particularly hard to square with the legal landscape following WRTL, which held that a corporate communication could be regulated under §203 only if it was “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.” 551 U. S., at 470 (opinion of Roberts, C. J.) (emphasis added). The whole point of this test was to make §203 as simple and speech-protective as possible. The Court does not explain how, in the span of a single election cycle, it has determined The Chief Justice’s project to be a failure. In this respect, too, the majority’s critique of line-drawing collapses into a critique of the as-applied review method generally.8
*403The majority suggests that, even though it expressly dismissed its facial challenge, Citizens United nevertheless preserved it — not as a freestanding “claim,” but as a potential argument in support of “a claim that the FEC has violated its First Amendment right to free speech.” Ante, at 330; see also ante, at 376 (Roberts, C. J., concurring) (describing Citizens United’s claim as: “[T]he Act violates the First Amendment”). By this novel logic, virtually any submission could be reconceptualized as “a claim that the Government has violated my rights,” and it would then be available to the Court to entertain any conceivable issue that might be relevant to that claim’s disposition. Not only the as-applied/facial distinction, but the basic relationship between litigants and courts, would be upended if the latter had free rein to construe the former’s claims at such high levels of generality. There would be no need for plaintiffs to argue their case; they could just cite the constitutional provisions they think relevant, and leave the rest to us.9
Finally, the majority suggests that though the scope of Citizens United’s claim may be narrow, a facial ruling is necessary as a matter of remedy. Relying on a law review article, it asserts that Citizens United’s dismissal of the facial challenge does not prevent us “ ‘from making broader pronouncements of invalidity in properly “as-applied” cases.’” Ante, at 331 (quoting Fallon, As-Applied and Facial Challenges and *404Third-Party Standing, 113 Harv. L. Rev. 1321, 1339 (2000) (hereinafter Fallon)); accord, ante, at 376 (opinion of Roberts, C. J.) (“Regardless whether we label Citizens United’s claim a ‘facial’ or ‘as-applied’ challenge, the consequences of the Court’s decision are the same”). The majority is on firmer conceptual ground here. Yet even if one accepts this part of Professor Fallon’s thesis, one must proceed to ask which as-applied challenges, if successful, will “properly” invite or entail invalidation of the underlying statute.10 The paradigmatic case is a judicial determination that the legislature acted with an impermissible purpose in enacting a provision, as this carries the necessary implication that all fiiture as-applied challenges to the provision must prevail. See Fallon 1339-1340.
Citizens United’s as-applied challenge was not of this sort. Until this Court ordered reargument, its contention was that BCRA § 208 could not lawfully be applied to a feature-length video-on-demand film (such as Hillary) or to a nonprofit corporation exempt from taxation under 26 U. S. C. § 501(c)(4)11 and funded overwhelmingly by individuals (such as itself). See Brief for Appellant 16-41. Success on either of these claims would not necessarily carry any implications for the validity of § 203 as applied to other types of broadcasts, other *405types of corporations, or unions. It certainly would not invalidate the statute as applied to a large for-profit corporation. See Tr. of Oral Arg. 8, 4 (Mar. 24, 2009) (counsel for Citizens United emphasizing that appellant is “a small, nonprofit organization, which is very much like [an MCFL corporation],” and affirming that its argument “definitely would not be the same” if Hillary were distributed by General Motors).12 There is no legitimate basis for resurrecting a facial challenge that dropped out of this case 20 months ago.
Narrower Grounds
It is all the more distressing that our colleagues have manufactured a facial challenge, because the parties have advanced numerous ways to resolve the case that would facilitate electioneering by nonprofit advocacy corporations such as Citizens United, without toppling statutes and precedents. Which is to say, the majority has transgressed yet another “cardinal” principle of the judicial process: “[I]f it is not necessary to decide more, it is necessary not to decide more,” PDK Labs. Inc. v. Drug Enforcement Admin., 362 F. 3d 786, *406799 (CADC 2004) (Roberts, J., concurring in part and concurring in judgment).
Consider just three of the narrower grounds of decision that the majority has bypassed. First, the Court eould have ruled, on statutory grounds, that a feature-length film distributed through video-on-demand does not qualify as an “electioneering communication” under §203 of BCRA, 2 U. S. C. § 441b. BCRA defines that term to encompass certain communications transmitted by “broadcast, cable, or satellite.” § 434(f)(3)(A). When Congress was developing BCRA, the video-on-demand medium was still in its infancy, and legislators were focused on a very different sort of programming: short advertisements run on television or radio. See McConnell, 540 U. S., at 207. The sponsors of BCRA acknowledge that the FEC’s implementing regulations do not clearly apply to video-on-demand transmissions. See Brief for Senator John McCain et al. as Amici Curiae 17-18. In light of this ambiguity, the distinctive characteristics of video-on-demand, and “[t]he elementary rule . . . that every reasonable construction must be resorted to, in order to save a statute from unconstitutionality,” Hooper v. California, 155 U. S. 648, 657 (1895), the Court could have reasonably ruled that §203 does not apply to Hillary.13
Second, the Court could have expanded the MCFL exemption to cover § 501(c)(4) nonprofits that accept only a de minimis amount of money from for-profit corporations. Citizens United professes to be such a group: Its brief says it “is funded predominantly by donations from individuals who support [its] ideological message.” Brief for Appellant 5. Numerous Courts of Appeals have held that de minimis business support does not, in itself, remove an otherwise *407qualifying organization from the ambit of MCFL.14 This Court could have simply followed their lead.15
Finally, let us not forget Citizens United’s as-applied constitutional challenge. Precisely because Citizens United looks so much like the MCFL organizations we have exempted from regulation, while a feature-length video-on-demand film looks so unlike the types of electoral advocacy Congress has found deserving of regulation, this challenge is a substantial one. As the appellant’s own arguments show, the Court could have easily limited the breadth of its constitutional holding had it declined to adopt the novel notion that speakers and speech acts must always be treated identically — and always spared expenditures restrictions — in the political realm. Yet the Court nonetheless turns its back on the as-applied review process that has been a staple of campaign finance litigation since Buckley v. Valeo, 424 U. S. 1 *408(1976) (per curiam), and that was affirmed and expanded just two Terms ago in WRTL, 551 U. S. 449.
This brief tour of alternative grounds on which the ease could have been decided is not meant to show that any of these grounds is ideal, though each is perfectly “valid,” ante, at 329 (majority opinion).16 It is meant to show that there were principled, narrower paths that a Court that was serious about judicial restraint could have taken. There was also the straightforward path: applying Austin and McConnell, just as the District Court did in holding that the funding of Citizens United's film can be regulated under them. The only thing preventing the majority from affirming the District Court, or adopting a narrower ground that would retain Austin, is its disdain for Austin.
II
The final principle of judicial process that the majority violates is the most transparent: stare decisis. I am not an absolutist when it comes to stare decisis, in the campaign finance area or in any other. No one is. But if this principle is to do any meaningful work in supporting the rule of law, it must at least demand a significant justification, beyond the preferences of five Justices, for overturning settled doctrine. “[A] decision to overrule should rest on some special reason *409over and above the belief that a prior case was wrongly decided.” Planned Parenthood of Southeastern Pa. v. Casey, 505 U. S. 833, 864 (1992). No such justification exists in this case, and to the contrary there are powerful prudential reasons to keep faith with our precedents.17
The Court’s central argument for why stare decisis ought to be trumped is that it does not like Austin. The opinion “was not well reasoned,” our colleagues assert, and it conflicts with First Amendment principles. Ante, at 363. This, of course, is the Court’s merits argument, the many defects in which we will soon consider. I am perfectly willing to concede that if one of our precedents were dead wrong in its reasoning or irreconcilable with the rest of our doctrine, there would be a compelling basis for revisiting it. But neither is true of Austin, as I explain at length in Parts III and IV, infra, at 414-478, and restating a merits argument with additional vigor does not give it extra weight in the stare decisis calculus.
Perhaps in recognition of this point, the Court supplements its merits case with a smattering of assertions. The Court proclaims that “Austin is undermined by experience since its announcement.” Ante, at 364. This is a curious claim to make in a case that lacks a developed record. The majority has no empirical evidence with which to substantiate the claim; we just have its ipse dixit that the real world has not been kind to Austin. Nor does the majority bother to specify in what sense Austin has been “undermined. ” Instead it treats the reader to a string of non sequiturs: “Our Nation’s speech dynamic is changing,” ante, at 364; “[speakers have become adept at presenting citizens with sound bites, talking points, and scripted messages,” ibid.; “[corporations ... do not have monolithic views,” ibid. How any *410of these ruminations weakens the force of stare decisis escapes my comprehension.18
The majority also contends that the Government’s hesitation to rely on Austin’s antidistortion rationale “diminished]” “the principle of adhering to that precedent.” Ante, at 363; see also ante, at 382 (opinion of Roberts, C. J.) (Government’s litigating position is “most importan[t]” factor undermining Austin). Why it diminishes the value of stare decisis is left unexplained. We have never thought fit to overrule a precedent because a litigant has taken any particular tack. Nor should we. Our decisions can often be defended on multiple grounds, and a litigant may have strategic or case-specific reasons for emphasizing only a subset of them. Members of the public, moreover, often rely on our bottom-line holdings far more than our precise legal arguments; surely this is true for the legislatures that have been regulating corporate electioneering since Austin. The task of evaluating the continued viability of precedents falls to this Court, not to the parties.19
*411Although the majority opinion spends several pages making these surprising arguments, it says almost nothing about the standard considerations we have used to determine stare decisis value, such as the antiquity of the precedent, the workability of its legal rule, and the reliance interests at stake. It is also conspicuously silent about McConnell, even though the McConnell Court’s decision to uphold BCRA § 203 relied not only on the antidistortion logic of Austin but also on the statute’s historical pedigree, see, e. g., 540 U. S., at 115-132, 223-224, and the need to preserve the integrity of federal campaigns, see id., at 126-129, 205-208, and n. 88.
We have recognized that “[s]tare decisis has special force when legislators or citizens ‘have acted in reliance on a previous decision, for in this instance overruling the decision would dislodge settled rights and expectations or require an extensive legislative response.’ ” Hubbard v. United States, 514 U. S. 695, 714 (1995) (plurality opinion) (quoting Hilton v. South Carolina Public Railways Comm’n, 502 U. S. 197, 202 (1991)). Stare decisis protects not only personal rights involving property or contract but also the ability of the elected branches to shape their laws in an effective and coherent fashion. Today’s decision takes away a power that we have long permitted these branches to exercise. State legislatures have relied on their authority to regulate corporate electioneering, confirmed in Austin, for more than a century.20 The Federal Congress has relied on this authority for a comparable stretch of time, and it specifically relied on Austin throughout the years it spent developing and de*412bating BCR A. The total record it compiled was 100,000 pages long.21 Pulling out the rug beneath Congress after affirming the constitutionality of §203 six years ago show's great disrespect for a coequal branch.
By removing one of its central components, today’s ruling makes a hash out of BCRA’s “delicate and interconnected regulatory scheme.” McConnell, 540 U. S., at 172. Consider just one example of the distortions that will follow: Political parties are barred under BCRA from soliciting or spending “soft money,” funds that are not subject to the statute’s disclosure requirements or its source and amount limitations. 2 U. S. C. § 441i; McConnell, 540 U. S., at 122-126. Going forward, corporations and unions will be free to spend as much general treasury money as they wish on ads that support or attack specific candidates, whereas national parties will not be able to spend a dime of soft money on ads of any kind. The Court’s ruling thus dramatically enhances the role of corporations and unions — and the narrow interests they represent — vis-a-vis the role of political parties— and the broad coalitions they represent — in determining who will hold public office.22
Beyond the reliance interests at stake, the other stare decisis factors also cut against the Court. Considerations of antiquity are significant for similar reasons. McConnell is only six years old, but Austin has been on the books for two decades, and many of the statutes called into question by today’s opinion have been on the books for a half century or more. The Court points to no intervening change in circumstances that warrants revisiting Austin. Certainly nothing *413relevant has changed since we decided WRTL two Terms ago. And the Court gives no reason to think that Austin and McConnell are unworkable.
In fact, no one has argued to us that Austin’s rule has proved impracticable, and not a single for-profit corporation, union, or State has asked us to overrule it. Quite to the contrary, leading groups representing the business community,23 organized labor,24 and the nonprofit sector,25 together with more than half of the States26 urge that we preserve Austin. As for McConnell, the portions of BCR A it upheld may be prolix, but all three branches of Government have worked to make §203 as user-friendly as possible. For instance, Congress established a special mechanism for expedited review of constitutional challenges, see note following 2 U. S. C. §437h; the FEC has established a standardized process, with clearly defined safe harbors, for corporations to claim that a particular electioneering communication is permissible under WRTL, see 11 CFR §114.15 (2009);27 and, as noted above, The Chief Justice crafted his controlling opinion in WRTL with the express goal of maximizing clarity and administrability, 551 U. S., at 469-470, 473-474. The case for stare decisis may be bolstered, we have said, when *414subsequent rulings “have reduced the impact” of a precedent “while reaffirming the decision’s core ruling.” Dickerson v. United States, 530 U. S. 428, 443 (2000).28
In the end, the Court’s rejection of Austin and McConnell comes down to nothing more than its disagreement with their results. Virtually every one of its arguments was made and rejected in those cases, and the majority opinion is essentially an amalgamation of resuscitated dissents. The only relevant thing that has changed since Austin and McConnell is the composition of this Court. Today’s ruling thus strikes at the vitals of stare decisis, “the means by which we ensure that the law will not merely change erratically, but will develop in a principled and intelligible fashion” that “permits society to presume that bedrock principles are founded in the law rather than in the proclivities of individuals.” Vasquez v. Hillery, 474 U. S. 254, 265 (1986).
III
The novelty of the Court’s procedural dereliction and its approach to stare decisis is matched by the novelty of its ruling on the merits. The ruling rests on several premises. First, the Court claims that Austin and McConnell have “banned” corporate speech. Second, it claims that the First Amendment precludes regulatory distinctions based on speaker identity, including the speaker’s identity as a corpo*415ration. Third, it claims that Austin and McConnell were radical outliers in our First Amendment tradition and our campaign finance jurisprudence. Each of these claims is wrong.
The So-Called “Ban”
Pervading the Court’s analysis is the ominous image of a “categorical ba[n]” on corporate speech. Ante, at 361. Indeed, the majority invokes the specter of a “ban” on nearly every page of its opinion. Ante, at 319, 321, 324, 327, 328, 329, 330, 333, 337, 339, 340, 343, 344, 345, 346, 347, 349, 351, 354, 355, 358, 360, 361, 362, 364, 369. This characterization is highly misleading, and needs to be corrected.
In fact it already has been. Our cases have repeatedly pointed out that, “[c]ontrary to the [majority’s] critical assumptions,” the statutes upheld in Austin and McConnell do “not impose an absolute ban on all forms of corporate political spending.” Austin, 494 U. S., at 660; see also McConnell, 540 U. S., at 203-204; Beaumont, 539 U. S., at 162-163. For starters, both statutes provide exemptions for PACs, separate segregated funds established by a corporation for political purposes. See 2 U. S. C. § 441b(b)(2)(C); Mich. Comp. Laws Ann. §169.255 (West 2005). “The ability to form and administer separate segregated funds,” we observed in McConnell, “has provided corporations and unions with a constitutionally sufficient opportunity to engage in express advocacy. That has been this Court’s unanimous view.” 540 U. S., at 203.
Under BCRA, any corporation’s “stockholders and their families and its executive or administrative personnel and their families” can pool their resources to finance electioneering communications. 2 U. S. C. § 441b(b)(4)(A)(i). A significant and growing number of corporations avail themselves of this option;29 during the most recent election cycle, *416corporate and union PACs raised nearly a billion dollars.30 Administering a PAC entails some administrative burden, but so does complying with the disclaimer, disclosure, and reporting requirements that the Court today upholds, see ante, at 366-367, and no one has suggested that the burden is severe for a sophisticated for-profit corporation. To the extent the majority is worried about this issue, it is important to keep in mind that we have no record to show how substantial the burden really is, just the majority’s own unsupported factfinding, see ante, at 337-339. Like all other natural persons, every shareholder of every corporation remains entirely free under Austin and McConnell to do however much electioneering she pleases outside of the corporate form. The owners of a “mom & pop” store can simply place ads in their own names, rather than the store’s. If ideologically aligned individuals wish to make unlimited expenditures through the corporate form, they may utilize an MCFL organization that has policies in place to avoid becoming a conduit for business or union interests. See MCFL, 479 U. S., at 263-264.
The laws upheld in Austin and McConnell leave open many additional avenues for corporations’ political speech. Consider the statutory provision we are ostensibly evaluating in this case, BCRA § 203. It has no application to genuine issue advertising — a category of corporate speech Congress found to be far more substantial than election-related advertising, see McConnell, 540 U. S., at 207 — or to Internet, *417telephone, and print advocacy.31 Like numerous statutes, it exempts media companies' news stories, commentaries, and editorials from its electioneering restrictions, in recognition of the unique role played by the institutional press in sustaining public debate.32 See 2 U. S. C. § 434(f)(3)(B)(i); McConnell, 540 U. S., at 208-209; see also Austin, 494 U. S., at 666-668. It also allows corporations to spend unlimited sums on political communications with their executives and shareholders, § 441b(b)(2)(A); 11 CFR § 114.3(a)(1), to fund additional PAC activity through trade associations, 2 U. S. C. § 441b(b)(4)(D), to distribute voting guides and voting records, 11 CFR §§ 114.4(c)(4)-(5), to underwrite voter registration and voter turnout activities, § 114.3(c)(4); § 114.4(c)(2), to host fundraising events for candidates within certain limits, *418§ 114.4(c); § 114.2(f)(2), and to publicly endorse candidates through a press release and press conference, § 114.4(c)(6).
At the time Citizens United brought this lawsuit, the only types of speech that could be regulated under §203 were: (1) broadcast, cable, or satellite communications;33 (2) capable of reaching at least 50,000 persons in the relevant electorate;34 (3) made within 30 days of a primary or 60 days of a general federal election;35 (4) by a labor union or a nonMCFL, nonmedia corporation;36 (5) paid for with general treasury funds;37 and (6) “susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.”38 The category of communications meeting all of these criteria is not trivial, but the notion that corporate political speech has been “suppressfed] . . . altogether,” ante, at 319, that corporations have been “exelu[ded] . . . from the general public dialogue,” ante, at 341, or that a work of fiction such as Mr. Smith Goes to Washington might be covered, ante, at 371-372, is nonsense.39 Even the plaintiffs in McConnell, who had every incentive to depict BORA as negatively as possible, declined to argue that § 203’s prohibition on certain uses of general treasury funds amounts to a complete ban. See 540 U. S., at 204.
*419In many ways, then, §203 functions as a source restriction or a time, place, and manner restriction. It applies in a viewpoint-neutral fashion to a narrow subset of advocacy messages about clearly identified candidates for federal office, made during discrete time periods through discrete channels. In the case at hand, all Citizens United needed to do to broadcast Hillary right before the primary was to abjure business contributions or use the funds in its PAC, which by its own account is “one of the most active conservative PACs in America,” Citizens United Political Victory Fund, http://www.cupvf.org/.40
So let us be clear: Neither Austin nor McConnell held or implied that corporations may be silenced; the FEC is not a “censor”; and in the years since these cases were decided, corporations have continued to play a major role in the national dialogue. Laws such as §203 target a class of communications that is especially likely to corrupt the political process, that is at least one degree removed from the views of individual citizens, and that may not even reflect the views of those who pay for it. Such laws burden political speech, and that is always a serious matter, demanding careful scrutiny. But the majority’s incessant talk of a “ban” aims at a straw man.
Identity-Based Distinctions
The second pillar of the Court’s opinion is its assertion that “the Government cannot restrict political speech based on the speaker’s . . . identity.” Ante, at 346; accord, ante, at 319, 340-341, 342-343, 346-347, 347, 348, 349, 350, 364, 365. *420The case on which it relies for this proposition is First Nat. Bank of Boston v. Bellotti, 435 U. S. 765 (1978). As I shall explain, infra, at 442-446, the holding in that case was far narrower than the Court implies. Like its paeans to unfettered discourse, the Court’s denunciation of identity-based distinctions may have rhetorical appeal but it obscures reality.
“Our jurisprudence over the past 216 years has rejected an absolutist interpretation” of the First Amendment. WRTL, 551 U. S., at 482 (opinion of Roberts, C. J.). The First Amendment provides that “Congress shall make no law ... abridging the freedom of speech, or of the press.” Apart perhaps from measures designed to protect the press, that text might seem to permit no distinctions of any kind. Yet in a variety of contexts, we have held that speech can be regulated differentially on account of the speaker’s identity, when identity is understood in categorical or institutional terms. The Government routinely places special restrictions on the speech rights of students,41 prisoners,42 members of the Armed Forces,43 foreigners,44 and its own employees.45 *421When such restrictions are justified by a legitimate governmental interest, they do not necessarily raise constitutional problems.46 In contrast to the blanket rule that the majority espouses, our cases recognize that the Government’s interests may be more or less compelling with respect to different classes of speakers,47 cf. Minneapolis Star & Tribune Co. v. Minnesota Comm’r of Revenue, 460 U. S. 575, 585 (1983) (“[Djifferential treatment” is constitutionally suspect “unless justified by some special characteristic” of the regulated class of speakers (emphasis added)), and that the constitutional rights of certain categories of speakers, in certain contexts, “‘are not automatically coextensive with the rights’ ” that are normally accorded to members of our soci*422ety, Morse v. Frederick, 551 U. S. 393, 396-397, 404 (2007) (quoting Bethel School Dist. No. 403 v. Fraser, 478 U. S. 675, 682 (1986)).
The free speech guarantee thus does not render every other public interest an illegitimate basis for qualifying a speaker’s autonomy; society could scarcely function if it did. It is fair to say that our First Amendment doctrine has “frowned on” certain identity-based distinctions, Los Angeles Police Dept. v. United Reporting Publishing Corp., 528 U. S. 32, 47, n. 4 (1999) (Stevens, J., dissenting), particularly those that may reflect invidious discrimination or preferential treatment of a politically powerful group. But it is simply incorrect to suggest that we have prohibited all legislative distinctions based on identity or content. Not even close.
The election context is distinctive in many ways, and the Court, of course, is right thát the First Amendment closely guards political speech. But in this context, too, the authority of legislatures to enact viewpoint-neutral regulations based on content and identity is well settled. We have, for example, allowed state-run broadcasters to exclude independent candidates from televised debates. Arkansas Ed. Television Comm’n v. Forbes, 523 U. S. 666 (1998).48 We have upheld statutes that prohibit the distribution or display of campaign materials near a polling place. Burson v. Freeman, 504 U. S. 191 (1992).49 Although we have not reviewed *423them directly, we have never cast doubt on laws that place special restrictions on campaign spending by foreign nationals. See, e. g., 2 U. S. C. § 441e(a)(1). And we have consistently approved laws that bar Government employees, but not others, from contributing to or participating in political activities. See n. 45, supra. These statutes burden the political expression of one class of speakers, namely, civil servants. Yet we have sustained them on the basis of longstanding practice and Congress’ reasoned judgment that certain regulations which leave “untouched full participation ... in political decisions at the ballot box,” Civil Service Comm’n v. Letter Carriers, 413 U. S. 548, 556 (1973) (internal quotation marks omitted), help ensure that public officials are “sufficiently free from improper influences,” id., at 564, and that “confidence in the system of representative Government is not... eroded to a disastrous extent,” id., at 565.
The same logic applies to this case with additional force because it is the identity of corporations, rather than individuals, that the Legislature has taken into account. As we have unanimously observed, legislatures are entitled to decide “that the special characteristics of the corporate structure require particularly careful regulation” in an electoral context. NRWC, 459 U. S., at 209-210.50 Not only has the distinctive potential of corporations to corrupt the electoral process long been recognized, but within the area of campaign finance, corporate spending is also “furthest from the core of political expression, since corporations’ First Amendment speech and association interests are derived largely *424from those of their members and of the public in receiving information,” Beaumont, 539 U. S., at 161, n. 8 (citation omitted). Campaign finance distinctions based on corporate identity tend to be less worrisome, in other words, because the “speakers” are not natural persons, much less members of our political community, and the governmental interests are of the highest order. Furthermore, when corporations, as a class, are distinguished from noncorporations, as a class, there is a lesser risk that regulatory distinctions will reflect invidious discrimination or political favoritism.
If taken seriously, our colleagues’ assumption that the identity of a speaker has no relevance to the Government’s ability to regulate political speech would lead to some remarkable conclusions. Such an assumption would have accorded the propaganda broadcasts to our troops by “Tokyo Rose” during World War II the same protection as speech by Allied commanders. More pertinently, it would appear to afford the same protection to multinational corporations controlled by foreigners as to individual Americans: To do otherwise, after all, could “ ‘enhance the relative voice’ ” of some (i. e., humans) over others (i. e., nonhumans). Ante, at 349-350 (quoting Buckley, 424 U. S., at 49).51 Under the *425majority’s view, I suppose it may be a First Amendment problem that corporations are not permitted to vote, given that voting is, among other things, a form of speech.52
In short, the Court dramatically overstates its critique of identity-based distinctions, without ever explaining why corporate identity demands the same treatment as individual identity. Only the most wooden approach to the First Amendment could justify the unprecedented line it seeks to draw.
Our First Amendment Tradition
A third fulcrum of the Court’s opinion is the idea that Austin and McConnell are radical outliers, “aberration[s],” in our First Amendment tradition. Ante, at 355; see also ante, at 361, 372 (professing fidelity to “our law and our tradition”). The Court has it exactly backwards. It is today’s holding that is the radical departure from what had been settled First Amendment law. To see why, it is useful to take a long view.
1. Original Understandings
Let us start from the beginning. The Court invokes “ancient First Amendment principles,” ante, at 319 (internal quotation marks omitted), and original understandings, ante, at 353-354, to defend today’s ruling, yet it makes only a perfunctory attempt to ground its analysis in the principles or *426understandings of those who drafted and ratified the Amendment. Perhaps this is because there is not a scintilla of evidence to support the notion that anyone believed it would preclude regulatory distinctions based on the corporate form. To the extent that the Framers’ views are discernible and relevant to the disposition of this case, they would appear to cut strongly against the majority’s position.
This is not only because the Framers and their contemporaries conceived of speech more narrowly than we now think of it, see Bork, Neutral Principles and Some First Amendment Problems, 47 Ind. L. J. 1, 22 (1971), but also because they held very different views about the nature of the First Amendment right and the role of corporations in society. Those few corporations that existed at the founding were authorized by grant of a special legislative charter.53 Corporate sponsors would petition the legislature, and the legislature, if amenable, would issue a charter that specified the corporation’s powers and purposes and “authoritatively fixed *427the scope and content of corporate organization,” including “the internal structure of the corporation.” J. Hurst, The Legitimacy of the Business Corporation in the Law of the United States 1780-1970, pp. 15-16 (1970) (reprinted 2004). Corporations were created, supervised, and conceptualized as quasi-public entities, “designed to serve a social function for the state.” Handlin & Handlin, Origins of the American Business Corporation, 5 J. Econ. Hist. 1, 22 (1945). It was “assumed that [they] were legally privileged organizations that had to be closely scrutinized by the legislature because their purposes had to be made consistent with public welfare.” R. Seavoy, Origins of the American Business Corporation, 1784-1855, p. 5 (1982).
The individualized charter mode of incorporation reflected the “cloud of disfavor under which corporations labored” in the early years of this Nation. 1 W. Fletcher, Cyclopedia of the Law of Corporations §2, p. 8 (rev. ed. 2006); see also Louis K. Liggett Co. v. Lee, 288 U. S. 517, 548-549 (1933) (Brandeis, J., dissenting) (discussing fears of the “evils” of business corporations); L. Friedman, A History of American Law 194 (2d ed. 1985) (“The word 'soulless’ constantly recurs in debates over corporations.... Corporations, it was feared, could concentrate the worst urges of whole groups of men”). Thomas Jefferson famously fretted that corporations would subvert the Republic.54 General incorporation statutes, and widespread acceptance of business corporations as socially useful actors, did not emerge until the 1800’s. See Hansmann & Kraakman, The End of History for Corporate Law, 89 Geo. L. J. 439, 440 (2001) (hereinafter Hansmann & Kraakman) (“[A]ll general business corporation statutes appear to date from well after 1800”).
*428The Framers thus took it as a given that corporations could be comprehensively regulated in the service of the public welfare. Unlike our colleagues, they had little trouble distinguishing corporations from human beings, and when they constitutionalized the right to free speech in the First Amendment, it was the free speech of individual Americans that they had in mind.55 While individuals might join together to exercise their speech rights, business corporations, at least, were plainly not seen as facilitating such assoeiational or expressive ends. Even “the notion that business corporations could invoke the First Amendment would probably have been quite a novelty,” given that “at the time, the legitimacy of every corporate activity was thought to rest entirely in a concession of the sovereign.” Shelledy, Autonomy, Debate, and Corporate Speech, 18 Hastings Const. L. Q. 541, 578 (1991); cf. Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 636 (1819) (Marshall, *429C. J.) (“A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it”); Eule, Promoting Speaker Diversity: Austin and Metro Broadcasting, 1990 S. Ct. Rev. 105, 129 (“The framers of the First Amendment could scarcely have anticipated its application to the corporation form. That, of course, ought not to be dispositive. What is compelling, however, is an understanding of who was supposed to be the beneficiary of the free speech guaranty — the individual”). In light of these background practices and understandings, it seems to me implausible that the Framers believed “the freedom of speech” would extend equally to all corporate speakers, much less that it would preclude legislatures from taking limited measures to guard against corporate capture of elections.
The Court observes that the Framers drew on diverse intellectual sources, communicated through newspapers, and aimed to provide greater freedom of speech than had existed in England. Ante, at 353. From these (accurate) observations, the Court concludes that “[t]he First Amendment was certainly not understood to condone the suppression of political speech in society’s most salient media.” Ibid. This conclusion is far from certain, given that many historians believe the Framers were focused on prior restraints on publication and did not -understand the First Amendment to “prevent the subsequent punishment of such [publications] as may be deemed contrary to the public welfare.” Near v. Minnesota ex rel. Olson, 283 U. S. 697, 714 (1931) (internal quotation marks omitted). Yet, even if the majority’s conclusion were correct, it would tell us only that the First Amendment was understood to protect political speech in certain media. It would tell us little about whether the Amendment was understood to protect general treasury electioneering expenditures by corporations, and to what extent.
*430As a matter of original expectations, then, it seems absurd to think that the First Amendment prohibits legislatures from taking into account the corporate identity of a sponsor of electoral advocacy. As a matter of original meaning, it likewise seems baseless — unless one evaluates the First Amendment’s “principles,” ante, at 319, 363, or its “purpose,” ante, at 376 (opinion of Roberts, C. J.), at such a high level of generality that the historical understandings of the Amendment cease to be a meaningful constraint on the judicial task. This case sheds a revelatory light on the assumption of some that an impartial judge’s application of an originalist methodology is likely to yield more determinate answers, or to play a more decisive role in the decisional process, than his or her views about sound policy.
Justice Scalia criticizes the foregoing discussion for failing to adduce statements from the founding era showing that corporations were understood to be excluded from the First Amendment’s free speech guarantee. Ante, at 386, 393. Of course, Justice Scalia adduces no statements to suggest the contrary proposition, or even to suggest that the contrary proposition better reflects the kind of right that the drafters and ratiflers of the Free Speech Clause thought they were enshrining. Although Justice Scalia makes a perfectly sensible argument that an individual’s right to speak entails a right to speak with others for a common cause, cf. MCFL, 479 U. S. 238, he does not explain why those two rights must be precisely identical, or why that principle applies to electioneering by corporations that serve no “common cause.” Ante, at 392. Nothing in his account dislodges my basic point that members of the founding generation held a cautious view of corporate power and a narrow view of corporate rights (not that they “despised” corporations, ante, at 386), and that they conceptualized speech in individualistic terms. If no prominent Framer bothered to articulate that corporate speech would have lesser status than individual speech, that may well be because the contrary proposition— *431if not also the very notion of “corporate speech” — was inconceivable.56
Justice Scalia also emphasizes the unqualified nature of the First Amendment text. Ante, at 386, 392-393. Yet he would seemingly read out the Free Press Clause: How else could he claim that my purported views on newspapers must track my views on corporations generally? Ante, at 390.57 Like virtually all modern lawyers, Justice Scalia presumably believes that the First Amendment restricts the Executive, even though its language refers to Congress alone. In any event, the text only leads us back to the questions who or what is guaranteed “the freedom of speech,” and, just as critically, what that freedom consists of and under what circumstances it may be limited. Justice Scalia appears to believe that because corporations are created and utilized by individuals, it follows (as night the day) that their electioneering must be equally protected by the First Amendment *432and equally immunized from expenditure limits. See ante, at 391-392. That conclusion certainly does not follow as a logical matter, and Justice Scalia fails to explain why the original public meaning leads it to follow as a matter of interpretation.
The truth is we cannot be certain how a law such as BCR A § 203 meshes with the original meaning of the First Amendment.58 I have given several reasons why I believe the Constitution would have been understood then, and ought to be understood now, to permit reasonable restrictions on corporate electioneering, and I will give many more reasons in the pages to come. The Court enlists the Framers in its defense without seriously grappling with their understandings of corporations or the free speech right, or with the republican principles that underlay those understandings.
In fairness, our campaign finance jurisprudence has never attended very closely to the views of the Framers, see Randall v. Sorrell, 548 U. S. 230, 280 (2006) (Stevens, J., dissenting), whose political universe differed profoundly from that of today. We have long since held that corporations are covered by the First Amendment, and many legal scholars have long since rejected the concession theory of the corporation. But “historical context is usually relevant,” ibid, (internal quotation marks omitted), and in light of the Court’s effort to cast itself as guardian of ancient values, it pays to remember that nothing in our constitutional history dictates today’s outcome. To the contrary, this history helps illuminate just how extraordinarily dissonant the decision is.
2. Legislative and Judicial Interpretation
A century of more recent history puts to rest any notion that today’s ruling is faithful to our First Amendment tradi*433tion. At the federal level, the express distinction between corporate and individual political spending on elections stretches back to 1907, when Congress passed the Tillman Act, ch. 420, 34 Stat. 864, banning all corporate contributions to candidates. The Senate Report on the legislation observed that “[t]he evils of the use of [corporate] money in connection with political elections are so generally recognized that the committee deems it unnecessary to make any argument in favor of the general purpose of this measure. It is in the interest of good government and calculated to promote purity in the selection of public officials.” S. Rep. No. 3056, 59th Cong., 1st Sess., 2 (1906). President Roosevelt, in his 1905 annual message to Congress, declared:
“ ‘All contributions by corporations to any political committee or for any political purpose should be forbidden by law; directors should not be permitted to use stockholders’ money for such purposes; and, moreover, a prohibition of this kind would be, as far as it went, an effective method of stopping the evils aimed at in corrupt practices acts.’ ” United States v. Automobile Workers, 352 U. S. 567, 572 (1957) (quoting 40 Cong. Rec. 96).
The Court has surveyed the history leading up to the Tillman Act several times, see WRTL, 551 U. S., at 508-510 (Souter, J., dissenting); McConnell, 540 U. S., at 115; Automobile Workers, 352 U. S., at 570-575, and I will refrain from doing so again. It is enough to say that the Act was primarily driven by two pressing concerns: first, the enormous power corporations had come to wield in federal elections, with the accompanying threat of both actual corruption and a public perception of corruption; and second, a respect for the interest of shareholders and members in preventing the use of their money to support candidates they opposed. See ibid.; United States v. CIO, 335 U. S. 106, 113 (1948); Winkler, “Other People’s Money”: Corporations, Agency Costs, and Campaign Finance Law, 92 Geo. L. J. 871 (2004).
*434Over the years, the limitations on corporate political spending have been modified in a number of ways, as Congress responded to changes in the American economy and political practices that threatened to displace the commonweal. Justice Souter recently traced these developments at length.59 WRTL, 551 U. S., at 507-519 (dissenting opinion); see also McConnell, 540 U. S., at 115-133; McConnell, 251 F. Supp. 2d, at 188-205. The Taft-Hartley Act of 1947 is of special significance for this case. In that Act passed more than 60 years ago, Congress extended the prohibition on corporate support of candidates to cover not only direct contributions, but independent expenditures as well. Labor Management Relations Act, 1947, § 304, 61 Stat. 159. The bar on contributions “was being so narrowly construed” that corporations were easily able to defeat the purposes of the Act by supporting candidates through other means. WRTL, 551 U. S., at 511 (Souter, J., dissenting) (citing S. Rep. No. 1, 80th Cong., 1st Sess., 38-39 (1947)).
Our colleagues emphasize that in two cases from the middle of the 20th century, several Justices wrote separately to criticize the expenditure restriction as applied to unions, even though the Court declined to pass on its constitutionality. Ante, at 343-344. Two features of these cases are of far greater relevance. First, those Justices were writing separately; which is to say, their position failed to command a majority. Prior to today, this was a fact we found signifi*435cant in evaluating precedents. Second, each case in this line expressed support for the principle that corporate and union political speech financed with PAC funds, collected voluntarily from the organization’s stockholders or members, receives greater protection than speech financed with general treasury funds.60
This principle was carried forward when Congress enacted comprehensive campaign finance reform in the Federal Election Campaign Act of 1971 (FECA), 86 Stat. 3, which retained the restriction on using general treasury funds for contributions and expenditures, 2 U. S. C. § 441b(a). FECA *436codified the option for corporations and unions to create PACs to finance contributions and expenditures forbidden to the corporation or union itself. § 441b(b).
By the time Congress passed FECA in 1971, the bar on corporate contributions and expenditures had become such an accepted part of federal campaign finance regulation that when a large number of plaintiffs, including several nonprofit corporations, challenged virtually every aspect of FECA in Buckley, 424 U. S. 1, no one even bothered to argue that the bar as such was unconstitutional. Buckley famously (or infamously) distinguished direct contributions from independent expenditures, id., at 58-59, but its silence on corporations only reinforced the understanding that corporate expenditures could be treated differently from individual expenditures. “Since our decision in Buckley, Congress’ power to prohibit corporations and unions from using funds in their treasuries to finance advertisements expressly advocating the election or defeat of candidates in federal elections has been firmly embedded in our law.” McConnell, 540 U. S., at 203.
Thus, it was unremarkable, in a 1982 case holding that Congress could bar nonprofit corporations from soliciting nonmembers for PAC funds, that then-justice Rehnquist wrote for a unanimous Court that Congress’ “careful legislative adjustment of the federal electoral laws, in a cautious advance, step by step, to account for the particular legal and economic attributes of corporations . . . warrants considerable deference,” and “reflects a permissible assessment of the dangers posed by those entities to the electoral process.” NRWC, 459 U. S., at 209 (internal quotation marks and citation omitted). “The governmental interest in preventing both actual corruption and the appearance of corruption of elected representatives has long been recognized,” the unanimous Court observed, “and there is no reason why it may not ... be accomplished by treating . . . corporations . . . differently from individuals.” Id., at 210-211.
*437The corporate/individual distinction was not questioned by the Court’s disposition, in 1986, of a challenge to the expenditure restriction as applied to a distinctive type of nonprofit corporation. In MCFL, 479 U. S. 238, we stated again “that ‘the special characteristics of the corporate structure require particularly careful regulation,’ ” id., at 256 (quoting NRWC, 459 U. S., at 209-210), and again we acknowledged that the Government has a legitimate interest in “regulat[ing] the substantial aggregations of wealth amassed by the special advantages which go with the corporate form,” 479 U. S., at 257 (internal quotation marks omitted). Those aggregations can distort the “free trade in ideas” crucial to candidate elections, ibid, (internal quotation marks omitted), at the expense of members or shareholders who may disagree with the object of the expenditures, id., at 260. What the Court held by a 5-to-4 vote was that a limited class of corporations must be allowed to use their general treasury funds for independent expenditures, because Congress’ interests in protecting shareholders and “restriet[ing] ‘the influence of political war chests funneled through the corporate form,’ ” id., at 257 (quoting FEC v. National Conservative Political Action Comm., 470 U. S. 480, 501 (1985) (NCPAC), did not apply to corporations that were structurally insulated from those concerns.61
It is worth remembering for present purposes that the four MCFL dissenters, led by Chief Justice Rehnquist, thought the Court was carrying the First Amendment too *438far. They would have recognized congressional authority to bar general treasury electioneering expenditures even by this class of nonprofits; they acknowledged that “the threat from corporate political activity will vary depending on the particular characteristics of a given corporation,” but believed these “distinctions among corporations” were “distinctions in degree,” not “in kind,” and thus “more properly drawn by the Legislature than by the Judiciary.” 479 U. S., at 268 (opinion of Rehnquist, C. J.) (internal quotation marks omitted). Not a single Justice suggested that regulation of corporate political speech could be no more stringent than of speech by an individual.
Four years later, in Austin, 494 U. S. 652, we considered whether corporations falling outside the MCFL exception could be barred from using general treasury funds to make independent expenditures in support of, or in opposition to, candidates. We held they could be. Once again recognizing the importance of “the integrity of the marketplace of political ideas” in candidate elections, MCFL, 479 U. S., at 257, we noted that corporations have “special advantages — such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets,” 494 U. S., at 658-659 — that allow them to spend prodigious general treasury sums on campaign messages that have “little or no correlation” with the beliefs held by actual persons, id., at 660. In light of the corrupting effects such spending might have on the political process, ibid., we permitted the State of Michigan to limit corporate expenditures on candidate elections to corporations’ PACs, which rely on voluntary contributions and thus “reflect actual public support for the political ideas espoused by corporations,” ibid. Notwithstanding our colleagues’ insinuations that Austin deprived the public of general “ideas,” “facts,” and “ ‘knowledge,’ ” ante, at 354, 355, the decision addressed only candidate-focused expenditures and gave the State no license to regulate corporate spending on other matters.
*439In the 20 years since Austin, we have reaffirmed its holding and rationale a number of times, see, e. g., Beaumont, 539 U. S., at 153-156, most importantly in McConnell, 540 U. S. 93, where we upheld the provision challenged here, § 203 of BCRA.62 Congress crafted § 203 in response to a problem created by Buckley. The Buckley Court had construed FECA’s definition of prohibited “expenditures” narrowly to avoid any problems of constitutional vagueness, holding it applicable only to “communications that expressly advocate the election or defeat of a clearly identified candidate,” 424 U. S., at 80, i. e., statements containing so-called “magic words” like “ ‘vote for,’ ‘elect,’ ‘support,’ ‘cast your ballot for,’ ‘Smith for Congress,’ ‘vote against,’ ‘defeat,’ [or] ‘reject,’” id., at 43-44, and n. 52. After Buckley, corporations and unions figured out how to circumvent the limits on express advocacy by using sham “issue ads” that “eschewed the use of magic words” but nonetheless “advocatefd] the election or defeat of clearly identified federal candidates.” McConnell, 540 U. S., at 126. “Corporations and unions spent hundreds *440of millions of dollars of their general funds to pay for these ads.” Id., at 127. Congress passed § 203 to address this circumvention, prohibiting corporations and unions from using general treasury funds for electioneering communications that “refe[r] to a clearly identified candidate,” whether or not those communications use the magic words. 2 U. S. C. § 434(f)(3)(A)(i)(I).
When we asked in McConnell “whether a compelling governmental interest justifie[d]” §203, we found the question “easily answered”: “We have repeatedly sustained legislation aimed at 'the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.’” 540 U. S., at 205 (quoting Austin, 494 U. S., at 660). These precedents “represent respect for the legislative judgment that the special characteristics of the corporate structure require particularly careful regulation.” 540 U. S., at 205 (internal quotation marks omitted). “Moreover, recent cases have recognized that certain restrictions on corporate electoral involvement permissibly hedge against' “circumvention of [valid] contribution limits.””’ Ibid, (quoting Beaumont, 539 U. S., at 155, in turn quoting FEC v. Colorado Republican Federal Campaign Comm., 533 U. S. 431, 456, and n. 18 (2001) (Colorado II); alteration in original). BCR A, we found, is faithful to the compelling governmental interests in “ ‘preserving the integrity of the electoral process, preventing corruption,... sustaining the active, alert responsibility of the individual citizen in a democracy for the wise conduct of the government,’ ” and maintaining “ 'the individual citizen’s confidence in government.’” 540 U. S., at 206-207, n. 88 (quoting Bellotti, 435 U. S., at 788-789; some internal quotation marks and brackets omitted). What made the answer even easier than it might have been otherwise was the option to form PACs, which give corporations, at the least, *441“a constitutionally sufficient opportunity to engage in” independent expenditures. 540 U. S., at 203.
3. Buckley and Bellotti
Against this extensive background of congressional regulation of corporate campaign spending, and our repeated affirmation of this regulation as constitutionally sound, the majority dismisses Austin as “a significant departure from ancient First Amendment principles,” ante, at 319 (internal quotation marks omitted). How does the majority attempt to justify this claim? Selected passages from two cases, Buckley, 424 U. S. 1, and Bellotti, 435 U. S. 765, do all of the work. In the Court’s view, Buckley and Bellotti decisively rejected the possibility of distinguishing corporations from natural persons in the 1970’s; it just so happens that in every single case in which the Court has reviewed campaign finance legislation in the decades since, the majority failed to grasp this truth. The Federal Congress and dozens of state legislatures, we now know, have been similarly deluded.
The majority emphasizes Buckley’s statement that “ ‘[t]he concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.’” Ante, at 349-350 (quoting 424 U. S., at 48-49); ante, at 379 (opinion of Roberts, C. J.). But this elegant phrase cannot bear the weight that our colleagues have placed on it. For one thing, the Constitution does, in fact, permit numerous “restrictions on the speech of some in order to prevent a few from drowning out the many”: for example, restrictions on ballot access and on legislators’ floor time. Nixon v. Shrink Missouri Government PAC, 528 U. S. 377, 402 (2000) (Breyer, J., concurring). For another, the Buckley Court used this line in evaluating “the ancillary governmental interest in equalizing the relative ability of individuals and groups to influence the outcome of elections.” 424 U. S., at 48. It is not apparent why this is relevant to the case *442before us. The majority suggests that Austin rests on the foreign concept of speech equalization, ante, at 350; ante, at 379-381 (opinion of ROBERTS, C. J.), but we made it clear in Austin (as in several cases before and since) that a restriction on the way corporations spend their money is no mere exercise in disfavoring the voice of some elements of our society in preference to others. Indeed, we expressly ruled that the compelling interest supporting Michigan’s statute was not one of “ ‘equalizing] the relative influence of speakers on elections,’ ” Austin, 494 U. S., at 660 (quoting id., at 705 (Kennedy, J., dissenting)), but rather the need to confront the distinctive corrupting potential of corporate electoral advocacy financed by general treasury dollars, id., at 659-660.
For that matter, it should go without saying that when we made this statement in Buckley, we could not have been casting doubt on the restriction on corporate expenditures in candidate elections, which had not been challenged as “foreign to the First Amendment,” ante, at 350 (quoting Buckley, 424 U. S., at 49), or for any other reason. Buckley’s independent expenditure analysis was focused on a very different statutory provision, 18 U. S. C. § 608(e)(1) (1970 ed., Supp. V). It is implausible to think, as the majority suggests, ante, at 346, that Buckley covertly invalidated FECA’s separate corporate and union campaign expenditure restriction, §610 (now codified at 2 U. S. C. §441b), even though that restriction had been on the books for decades before Buckley and would remain on the books, undisturbed, for decades after.
The case on which the majority places even greater weight than Buckley, however, is Bellotti, 435 U. S. 765, claiming it “could not have been clearer” that Bellotti’s holding forbade distinctions between corporate and individual expenditures like the one at issue here, ante, at 346. The Court’s reliance is odd. The only thing about Bellotti that could not be clearer is that it declined to adopt the majority’s position. Bellotti ruled, in an explicit limitation on the scope of its holding, that “our consideration of a corporation’s right to *443speak on issues of general public interest implies no comparable right in the quite different context of participation in a political campaign for election to public office.” 435 U. S., at 788, n. 26; see also id., at 787-788 (acknowledging that the interests in preserving public confidence in Government and protecting dissenting shareholders may be “weighty ... in the context of partisan candidate elections”). Bellotti, in other words, did not touch the question presented in Austin and McConnell, and the opinion squarely disavowed the proposition for which the majority cites it.
The majority attempts to explain away the distinction Bellotti drew — between general corporate speech and campaign speech intended to promote or prevent the election of specific candidates for office — as inconsistent with the rest of the opinion and with Buckley. Ante, at 347, 357-360. Yet the basis for this distinction is perfectly coherent: The anticorruption interests that animate regulations of corporate participation in candidate elections, the “importance” of which “has never been doubted,” 435 U. S., at 788, n. 26, do not apply equally to regulations of corporate participation in referenda. A referendum cannot owe a political debt to a corporation, seek to curry favor with a corporation, or fear the corporation’s retaliation. Cf. Austin, 494 U. S., at 678 (Stevens, J., concurring); Citizens Against Rent Control/Coalition for Fair Housing v. Berkeley, 454 U. S. 290, 299 (1981). The majority likewise overlooks the fact that, over the past 30 years, our cases have repeatedly recognized the candidate/issue distinction. See, e. g., Austin, 494 U. S., at 659; NCPAC, 470 U. S., at 495-496; FCC v. League of Women Voters of Cal., 468 U. S. 364, 371, n. 9 (1984); NRWC, 459 U. S., at 210, n. 7. The Court’s critique of Bellotti’s footnote 26 puts it in the strange position of trying to elevate Bellotti to canonical status, while simultaneously disparaging a critical piece of its analysis as unsupported and irreconcilable with Buckley. Bellotti, apparently, is both the font of all wisdom and internally incoherent.
*444The Bellotti Court confronted a dramatically different factual situation from the one that confronts us in this case: a state statute that barred business corporations’ expenditures on some referenda but not others. Specifically, the statute barred a business corporation “from making contributions or expenditures ‘for the purpose of . . . influencing or affecting the vote on any question submitted to the voters, other than one materially affecting any of the property, business or assets of the corporation,’ ” 435 U. S., at 768 (quoting Mass. Gen. Laws Ann., ch. 55, § 8 (West Supp. 1977); alteration in original), and it went so far as to provide that referenda related to income taxation would not “ ‘be deemed materially to affect the property, business or assets of the corporation,’ ” 435 U. S., at 768. As might be guessed, the legislature had enacted this statute in order to limit corporate speech on a proposed state constitutional amendment to authorize a graduated income tax. The statute was a transparent attempt to prevent corporations from spending money to defeat this amendment, which was favored by a majority of legislators but had been repeatedly rejected by the voters. See id., at 769-770, and n. 3. We said that “where, as here, the legislature’s suppression of speech suggests an attempt to give one side of a debatable public question an advantage in expressing its views to the people, the First Amendment is plainly offended.” Id., at 785-786 (footnote omitted).
Bellotti thus involved a viewpoint-discriminatory statute, created to effect a particular policy outcome. Even Justice Rehnquist, in dissent, had to acknowledge that “a very persuasive argument could be made that the [Massachusetts Legislature], desiring to impose a personal income tax but more than once defeated in that desire by the combination of the Commonwealth’s referendum provision and corporate expenditures in opposition to such a tax, simply decided to muzzle corporations on this sort of issue so that it could succeed in its desire.” Id., at 827, n. 6. To make matters *445worse, the law at issue did not make any allowance for corporations to spend money through PACs. Id., at 768, n. 2 (opinion of the Court). This really was a complete ban on a specific, preidentified subject. See MCFL, 479 U. S., at 259, n. 12 (stating that 2 U. S. C. §441b’s expenditure restriction “is of course distinguishable from the complete foreclosure of any opportunity for political speech that we invalidated in the state referendum context in . . . Bellotti” (emphasis added)).
The majority grasps a quotational straw from Bellotti, that speech does not fall entirely outside the protection of the First Amendment merely because it comes from a corporation. Ante, at 346-347. Of course not, but no one suggests the contrary, and neither Austin nor McConnell held otherwise. They held that even though the expenditures at issue were subject to First Amendment scrutiny, the restrictions on those expenditures were justified by a compelling state interest. See McConnell, 540 U. S., at 205; Austin, 494 U. S., at 658, 660. We acknowledged in Bellotti that numerous “interests of the highest importance” can justify campaign finance regulation. 435 U. S., at 788-789. But we found no evidence that these interests were served by the Massachusetts law. Id., at 789. We left open the possibility that our decision might have been different if there had been “record or legislative findings that corporate advocacy threatened imminently to undermine democratic processes, thereby denigrating rather than serving First Amendment interests.” Ibid.
Austin and McConnell, then, sit perfectly well with Bellotti. Indeed, all six Members of the Austin majority had been on the Court at the time of Bellotti, and none so much as hinted in Austin that they saw any tension between the decisions. The difference between the cases is not that Austin and McConnell rejected First Amendment protection for corporations whereas Bellotti accepted it. The difference is that the statute at issue in Bellotti smacked of viewpoint *446discrimination, targeted one class of corporations, and provided no PAC option; and the State has a greater interest in regulating independent corporate expenditures on candidate elections than on referenda, because in a functioning democracy the public must have faith that its representatives owe their positions to the people, not to the corporations with the deepest pockets.
* * *
In sum, over the course of the past century Congress has demonstrated a recurrent need to regulate corporate participation in candidate elections to “ ‘[p]reserv[e] the integrity of the electoral process, preven[t] corruption, . . . sustai[n] the active, alert responsibility of the individual citizen,’” protect the expressive interests of shareholders, and “ ‘[p]reserv[e] . . . the individual citizen’s confidence in government.’” McConnell, 540 U. S., at 206-207, n. 88 (quoting Bellotti, 435 U. S., at 788-789; first alteration in original). These understandings provided the combined impetus behind the Tillman Act in 1907, see Automobile Workers, 352 U. S., at 570-575, the Taft-Hartley Act in 1947, see WRTL, 551 U. S., at 511 (Souter, J., dissenting), FECA in 1971, see NRWC, 459 U. S., at 209-210, and BCRA in 2002, see McConnell, 540 U. S., at 126-132. Continuously for over 100 years, this line of “[c]ampaign finance reform has been a series of reactions to documented threats to electoral integrity obvious to any voter, posed by large sums of money from corporate or union treasuries.” WRTL, 551 U. S., at 522 (Souter, J., dissenting). Time and again, we have recognized these realities in approving measures that Congress and the States have taken. None of the cases the majority cites is to the contrary. The only thing new about Austin was the dissent, with its stunning failure to appreciate the legitimacy of interests recognized in the name of democratic integrity since the days of the Progressives.
*447IV
Having explained why this is not an appropriate case in which to revisit Austin and McConnell and why these decisions sit perfectly well with “First Amendment principles,” ante, at 319, 363, I come at last to the interests that are at stake. The majority recognizes that Austin and McConnell may be defended on anticorruption, antidistortion, and shareholder protection, rationales. Ante, at 348-362. It badly errs both in explaining the nature of these rationales, which overlap and complement each other, and in applying them to the ease at hand.
The Anticorruption Interest
Undergirding the majority’s approach to the merits is the claim that the only “sufficiently important governmental interest in preventing corruption or the appearance of corruption” is one that is “limited to quid pro quo corruption.” Ante, at 359. This is the same “crabbed view of corruption” that was espoused by Justice Kennedy in McConnell and squarely rejected by the Court in that case. 540 U. S., at 152. While it is true that we have not always spoken about corruption in a clear or consistent voice, the approach taken by the majority cannot be right, in my judgment. It disregards our constitutional history and the fundamental demands of a democratic society.
On numerous occasions we have recognized Congress’ legitimate interest in preventing the money that is spent on elections from exerting an “‘undue influence on an officeholder’s judgment’ ” and from creating “ ‘the appearance of such influence,’” beyond the sphere of quid pro quo relationships. Id., at 150; see also, e.g., id., at 143-144, 152-154; Colorado II, 533 U. S., at 441; Shrink Missouri, 528 U. S., at 389. Corruption can take many forms. Bribery may be the paradigm case. But the difference between selling a vote and selling access is a matter of degree, not kind. And sell*448ing access is not qualitatively different from giving special preference to those who spent money on one's behalf. Corruption operates along a spectrum, and the majority’s apparent belief that quid pro quo arrangements can be neatly demarcated from other improper influences does not accord with the theory or reality of politics. It certainly does not accord with the record Congress developed in passing BCRA, a record that stands as a remarkable testament to the energy and ingenuity with which corporations, unions, lobbyists, and politicians may go about scratching each other’s backs — and which amply supported Congress’ determination to target a limited set of especially destructive practices.
The District Court that adjudicated the initial challenge to BCRA pored over this record. In a careful analysis, Judge Kollar-Kotelly made numerous findings about the corrupting consequences of corporate and union independent expenditures in the years preceding BCRA’s passage. See McConnell, 251 F. Supp. 2d, at 555-560, 622-625; see also id., at 804-805, 813, n. 143 (Leon, J.) (indicating agreement). As summarized in her own words:
“The factual findings of the Court illustrate that corporations and labor unions routinely notify Members of Congress as soon as they air electioneering communications relevant to the Members’ elections. The record also indicates that Members express appreciation to organizations for the airing of these election-related advertisements. Indeed, Members of Congress are particularly grateful when negative issue advertisements are run by these organizations, leaving the candidates free to run positive advertisements and be seen as 'above the fray.’ Political consultants testify that campaigns are quite aware of who is running advertisements on the candidate’s behalf, when they are being run, and where they are being run. Likewise, a prominent lob*449byist testifies that these organizations use issue advocacy as a means to influence various Members of Congress.
“The Findings also demonstrate that Members of Congress seek to have corporations and unions run these advertisements on their behalf. The Findings show that Members suggest that corporations or individuals make donations to interest groups with the understanding that the money contributed to these groups will assist the Member in a campaign. After the election, these organizations often seek credit for their support----Finally, a large majority of Americans (80%) are of the view that corporations and other organizations that engage in electioneering communications, which benefit specific elected officials, receive special consideration from those officials when matters arise that affect these corporations and organizations.” Id., at 623-624 (citations and footnote omitted).
Many of the relationships of dependency found by Judge Kollar-Kotelly seemed to have a quid pro quo basis, but other arrangements were more subtle. Her analysis shows the great difficulty in delimiting the precise scope of the quid pro quo category, as well as the adverse consequences that all such arrangements may have. There are threats of corruption that are far more destructive to a democratic society than the odd bribe. Yet the majority’s understanding of corruption would leave lawmakers impotent to address all but the most discrete abuses.
Our “undue influence” cases have allowed the American people to cast a wider net through legislative experiments designed to ensure, to some minimal extent, “that officeholders will decide issues ... on the merits or the desires of their constituencies,” and not “according to the wishes of those who have made large financial contributions” — or expenditures — “valued by the officeholder.” McConnell, 540 *450U. S., at 153.63 When private interests are seen to exert outsized control over officeholders solely on account of the money spent on (or withheld from) their campaigns, the result can depart so thoroughly “from what is pure or correct” in the conduct of Government, Webster’s Third New International Dictionary 512 (1966) (defining “corruption”), that it amounts to a “subversion ... of the . . . electoral process,” Automobile Workers, 352 U. S., at 575. At stake in the legislative efforts to address this threat is therefore not only the legitimacy and quality of Government but also the public’s faith therein, not only “the capacity of this democracy to represent its constituents [but also] the confidence of its citizens in their capacity to govern themselves,” WRTL, 551 U. S., at 507 (Souter, J., dissenting). “Take away Congress’ authority to regulate the appearance of undue influence and ‘the cynical assumption that large donors call the tune could jeopardize the willingness of voters to take part in democratic governance.’ ” McConnell, 540 U. S., at 144 (quoting Shrink Missouri, 528 U. S., at 390).64
*451The cluster of interrelated interests threatened by such undue influence and its appearance has been well captured under the rubric of “democratic integrity.” WRTL, 551 U. S., at 522 (Souter, J., dissenting). This value has underlined a century of state and federal efforts to regulate the role of corporations in the electoral process.65
Unlike the majority’s myopic focus on quid pro quo scenarios and the free-floating “First Amendment principles” on which it rests so much weight, ante, at 319, 363, this broader understanding of corruption has deep roots in the Nation’s history. “During debates on the earliest [campaign finance] reform acts, the terms ‘corruption’ and ‘undue influence’ were used nearly interchangeably.” Pasquale, Reclaiming Egalitarianism in the Political Theory of Campaign Finance Reform, 2008 U. Ill. L. Rev. 599, 601. Long before Buckley, we appreciated that “[t]o say that Congress is without power to pass appropriate legislation to safeguard ... an election from the improper use of money to influence the result is to deny to the nation in a vital particular the power of self protection.” Burroughs v. United States, 290 U. S. 534, 545 (1934). And whereas we have no evidence to support the notion that the Framers would have wanted corporations to have the same rights as natural persons in the electoral context, we have ample evidence to suggest that they would *452have been appalled by the evidence of corruption that Congress unearthed in developing BCRA and that the Court today discounts to irrelevance. It is fair to say that “[t]he Framers were obsessed with corruption,” Teachout 348, which they understood to encompass the dependency of public officeholders on private interests, see id., at 373-374; see also Randall, 548 U. S., at 280 (Stevens, J., dissenting). They discussed corruption “more often in the Constitutional Convention than factions, violence, or instability.” Teachout 352. When they brought our constitutional order into being, the Framers had their minds trained on a threat to republican self-government that this Court has lost sight of.
Quid Pro Quo Corruption
There is no need to take my side in the debate over the scope of the anticorruption interest to see that the Court’s merits holding is wrong. Even under the majority’s “crabbed view of corruption,” McConnell, 540 U. S., at 152, the Government should not lose this case.
“The importance of the governmental interest in preventing [corruption through the creation of political debts] has never been doubted.” Bellotti, 435 U. S., at 788, n. 26. Even in the eases that have construed the anticorruption interest most narrowly, we have never suggested that such quid pro quo debts must take the form of outright vote buying or bribes, which have long been distinct crimes. Rather, they encompass the myriad ways in which outside parties may induce an officeholder to confer a legislative benefit in direct response to, or anticipation of, some outlay of money the parties have made or will make on behalf of the officeholder. See McConnell, 540 U. S., at 143 (“We have not limited [the anticorruption] interest to the elimination of cash-for-votes exchanges. In Buckley, we expressly rejected the argument that antibribery laws provided a less restrictive alternative to FECA’s contribution limits, noting that such laws ‘deal[t] with only the most blatant and specific attempts *453of those with money to influence governmental action’” (quoting 424 U. S., at 28; alteration in original)).. It has likewise never been doubted that “[o]f almost equal concern as the danger of actual quid pro quo arrangements is the impact of the appearance of corruption.” Id., at 27. Congress may “legitimately conclude that the avoidance of the appearance of improper influence is also critical... if confidence in the system of representative Government is not to be eroded to a disastrous extent.” Ibid, (internal quotation marks omitted; alteration in original). A democracy cannot function effectively when its constituent members believe laws are being bought and sold.
In theory, our colleagues accept this much. As applied to BCRA §203, however, they conclude “[t]he anticorruption interest is not sufficient to displace the speech here in question.” Ante, at 357.
Although the Court suggests that Buckley compels its conclusion, ante, at 356-360, Buckley cannot sustain this reading. It is true that, in evaluating FECA's ceiling on independent expenditures by all persons, the Buckley Court found the governmental interest in preventing corruption “inadequate.” 424 U. S., at 45. But Buckley did not evaluate corporate expenditures specifically, nor did it rule out the possibility that a future Court might find otherwise. The opinion reasoned that an expenditure limitation covering only express advocacy (i e., magic words) would likely be ineffectual, ibid., a problem that Congress tackled in BCRA, and it concluded that “the independent advocacy restricted by [FECA § 608(e)(1)] does not presently appear to pose dangers of real or apparent corruption comparable to those identified with large campaign contributions,” id., at 46 (emphasis added). Buckley expressly contemplated that an anticorruption rationale might justify restrictions on independent expenditures at a later date, “because it may be that, in some circumstances, ‘large independent expenditures pose the same dangers of actual or apparent quid pro quo *454arrangements as do large contributions.’ ” WRTL, 551 U. S., at 478 (opinion of Roberts, C. J.) (quoting Buckley, 424 U. S., at 45). Certainly Buckley did not foreclose this possibility with respect to electioneering communications made with corporate general treasury funds, an issue the Court had no occasion to consider.
The Austin Court did not rest its holding on quid pro quo corruption, as it found the broader corruption implicated by the antidistortion and shareholder protection rationales a sufficient basis for Michigan’s restriction on corporate electioneering. 494 U. S., at 658-660. Concurring in that opinion, I took the position that “the danger of either the fact, or the appearance, of quid pro quo relationships [also] provides an adequate justification for state regulation” of these independent expenditures. Id., at 678. I did not see this position as inconsistent with Buckley’s analysis of individual expenditures. Corporations, as a class, tend to be more attuned to the complexities of the legislative process and more directly affected by tax and appropriations measures that receive little public scrutiny; they also have vastly more money with which to try to buy access and votes. See Supp. Brief for Appellee 17 (stating that the Fortune 100 companies earned revenues of $13.1 trillion during the last election cycle). Business corporations must engage the political process in instrumental terms if they are to maximize shareholder value. The unparalleled resources, professional lobbyists, and single-minded focus they bring to this effort, I believed, make quid pro quo corruption and its appearance inherently more likely when they (or their conduits or trade groups) spend unrestricted sums on elections.
It is with regret rather than satisfaction that I can now say that time has borne out my concerns. The legislative and judicial proceedings relating to BCRA generated a substantial body of evidence suggesting that, as corporations grew more and more adept at crafting “issue ads” to help *455or harm a particular candidate, these nominally independent expenditures began to corrupt the political process in a very direct sense. The sponsors of these ads were routinely granted special access after the campaign was over; “candidates and officials knew who their friends were,” McConnell, 540 U. S., at 129. Many corporate independent expenditures, it seemed, had become essentially interchangeable with direct contributions in their capacity to generate quid pro quo arrangements. In an age in which money and television ads are the coin of the campaign realm, it is hardly surprising that corporations deployed these ads to curry favor with, and to gain influence over, public officials.
The majority appears to think it decisive that the BCR A record does not contain “direct examples of votes being exchanged for... expenditures.” Ante, at 360 (internal quotation marks omitted). It would have been quite remarkable if Congress had created a record detailing such behavior by its own Members. Proving that a specific vote was exchanged for a specific expenditure has always been next to impossible: Elected officials have diverse motivations, and no one will acknowledge that he sold a vote. Yet, even if “[i]ngratiation and access . . . are not corruption” themselves, ibid., they are necessary prerequisites to it; they can create both the opportunity for, and the appearance of, quid pro quo arrangements. The influx of unlimited corporate money into the electoral realm also creates new opportunities for the mirror image of quid pro quo deals: threats, both explicit and implicit. Starting today, corporations with large war chests to deploy on electioneering may find democratically elected bodies becoming much more attuned to their interests. The majority both misreads the facts and draws the wrong conclusions when it suggests that the BCRA record provides “only scant evidence that independent expenditures . .. ingratiate,” and that, “in any event,” none of it matters. Ibid.
*456In her analysis of the record, Judge Kollar-Kotelly documented the pervasiveness of this ingratiation and explained its significance under the majority’s own touchstone for defining the scope of the antieorruption rationale, Buckley. See McConnell, 251 F. Supp. 2d, at 555-560, 622-625. Witnesses explained how political parties and candidates used corporate independent expenditures to circumvent FECA’s “hard-money” limitations. See, e. g., id., at 478-479. One former Senator candidly admitted to the District Court that “‘[candidates whose campaigns benefit from [phony “issue ads”] greatly appreciate the help of these groups. In fact, Members will also be favorably disposed to those who finance these groups when they later seek access to discuss pending legislation.’” Id., at 556 (quoting declaration of Sen. Dale Bumpers). One prominent lobbyist went so far as to state, in uncontroverted testimony, that “‘unregulated expenditures — whether soft money donations to the parties or issue ad campaigns — can sometimes generate far more influence than direct campaign contributions.’ ” Ibid, (quoting declaration of Wright Andrews; emphasis added). In sum, Judge Kollar-Kotelly found, “[t]he record powerfully demonstrates that electioneering communications paid for with the general treasury funds of labor unions and corporations endears those entities to elected officials in a way that could be perceived by the public as corrupting.” Id., at 622-623. She concluded that the Government’s interest in preventing the appearance of corruption, as that concept was defined in Buckley, was itself sufficient to uphold BCRA §203. 251 F. Supp. 2d, at 622-625. Judge Leon agreed. See id., at 804-805 (dissenting only with respect to the Wellstone Amendment’s coverage of MCFL corporations).
When the McConnell Court affirmed the judgment of the District Court regarding § 203, we did not rest our holding on a narrow notion of quid pro quo corruption. Instead we relied on the governmental interest in combating the unique forms of corruption threatened by corporations, as recog*457nized in Austin’s antidistortion and shareholder protection rationales, 540 U. S., at 205 (citing Austin, 494 U. S., at 660), as well as the interest in preventing circumvention of contribution limits, 540 U. S., at 128-129, 205, 206, n. 88. Had we felt constrained by the view of today’s Court that quid pro quo corruption and its appearance are the only interests that count in this field, ante, at 348-362, we of course would have looked closely at that issue. And as the analysis by Judge Kollar-Kotelly reflects, it is a very real possibility that we would have found one or both of those interests satisfied and §203 appropriately tailored to them.
The majority’s rejection of the Buckley anticorruption rationale on the ground that independent corporate expenditures “do not give rise to [quid pro quo] corruption or the appearance of corruption,” ante, at 357, is thus unfair as well as unreasonable. Congress and outside experts have generated significant evidence corroborating this rationale, and the only reason we do not have any of the relevant materials before us is that the Government had no reason to develop a record at trial for a facial challenge the plaintiff had abandoned. The Court cannot both sua sponte choose to relitigate McConnell on appeal and then complain that the Government has failed to substantiate its case. If our colleagues were really serious about the interest in preventing quid pro quo corruption, they would remand to the District Court with instructions to commence evidentiary proceedings.66
*458The insight that even technically independent expenditures can be corrupting in much the same way as direct contributions is bolstered by our decision last year in Caperton v. A. T. Massey Coal Co., 556 U. S. 868 (2009). In that case, Don Blankenship, the chief executive officer of a corporation with a lawsuit pending before the West Virginia high court, spent large sums on behalf of a particular candidate, Brent Benjamin, running for a seat on that court. “In addition to contributing the $1,000 statutory maximum to Benjamin’s campaign committee, Blankenship donated almost $2.5 million to ‘And For The Sake Of The Kids,’ ” a § 527 corporation that ran ads targeting Benjamin’s opponent. Id., at 873. “This was not all. Blankenship spent, in addition, just over $500,000 on independent expenditures . . . ‘ “to support. . . Brent Benjamin.””’ Ibid, (second alteration in original). Applying its common sense, this Court accepted petitioners’ argument that Blankenship’s “pivotal role in getting Justice Benjamin elected created a constitutionally intolerable probability of actual bias” when Benjamin later declined to recuse himself from the appeal by Blankenship’s corporation. Id., at 882. “Though n[o] . . . bribe or criminal influence” was involved, we recognized that “Justice Benjamin would nevertheless feel a debt of gratitude to Blankenship for his extraordinary efforts to get him elected.” Ibid. “The difficulties of inquiring into actual bias,” we further noted, “simply underscore the need for objective rules,” id., at 883 — rules which will perforce turn on the appearance of bias rather than its actual existence.
In Caperton, then, we accepted the premise that, at least in some circumstances, independent expenditures on candidate elections will raise an intolerable specter of quid pro quo corruption. Indeed, this premise struck the Court as so intuitive that it repeatedly referred to Blankenship’s spending on behalf of Benjamin — spending that consisted of *45999.97% independent expenditures ($3 million) and 0.03% direct contributions ($1,000) — as a “contribution.” See, e.g., id., at 872 (“The basis for the [recusal] motion was that the justice had received campaign contributions in an extraordinary amount from” Blankenship); id., at 873 (referencing “Blankenship’s $3 million in contributions”); id., at 884 (“Blankenship contributed some $3 million to unseat the incumbent and replace him with Benjamin”); id., at 885 (“Blankenship’s campaign contributions . . . had a significant and disproportionate influence on the electoral outcome”). The reason the Court so thoroughly conflated expenditures and contributions, one assumes, is that it realized that some expenditures may be functionally equivalent to contributions in the way they influence the outcome of a race, the way they are interpreted by the candidates and the public, and the way they taint the decisions that the officeholder thereafter takes.
Caperton is illuminating in several additional respects. It underscores the old insight that, on account of the extreme difficulty of proving corruption, “prophylactic measures, reaching some [campaign spending] not corrupt in purpose or effect, [may be] nonetheless required to guard against corruption.” Buckley, 424 U. S., at 30; see also Shrink Missouri, 528 U. S., at 392, n. 5. It underscores that “certain restrictions on corporate electoral involvement” may likewise be needed to “hedge against circumvention of valid contribution limits.” McConnell, 540 U. S., at 205 (internal quotation marks and brackets omitted); see also Colorado II, 533 U. S., at 456 (“[A]ll Members of the Court agree that circumvention is a valid theory of corruption”). It -underscores that for-profit corporations associated with electioneering communications will often prefer to use nonprofit conduits with “misleading names,” such as And For The Sake Of The Kids, “to conceal their identity” as the sponsor of those communications, thereby frustrating the utility of dis*460closure laws. McConnell, 540 U. S., at 128; see also id., at 196-197.
And it underscores that the consequences of today’s holding will not be limited to the legislative or executive context. The majority of the States select their judges through popular elections. At a time when concerns about the conduct of judicial elections have reached a fever pitch, see, e. g., O’Connor, Justice for Sale, Wall St. Journal, Nov. 15, 2007, p. A25; Brief for Justice at Stake et al. as Amici Curiae 2, the Court today unleashes the floodgates of corporate and union general treasury spending in these races. Perhaps “Caperton motions” will catch some of the worst abuses. This will be small comfort to those States that, after today, may no longer have the ability to place modest limits on corporate electioneering even if they believe such limits to be critical to maintaining the integrity of their judicial systems.
Deference and Incumbent Self-Protection
Rather than show any deference to a coordinate branch of Government, the majority thus rejects the anticorruption rationale without serious analysis.67 Today’s opinion provides no clear rationale for’being so dismissive of Congress, but the prior individual opinions on which it relies have offered one: the incentives of the legislators who passed BCRA. Section 203, our colleagues have suggested, may be little more than “an incumbency protection plan,” McConnell, 540 U. S., at 306 (Kennedy, J., concurring in judgment in part and dissenting in part); see also id., at 249-250, 260-263 (Scalia, J., concurring in part, concurring in judgment in part, and dissenting in part), a disreputable attempt at legislative self-dealing rather than an earnest effort to facilitate First Amendment values and safeguard the legitimacy *461of our political system. This possibility, the Court apparently believes, licenses it to run roughshod over Congress’ handiwork.
In my view, we should instead start by acknowledging that “Congress surely has both wisdom and experience in these matters that is far superior to ours.” Colorado Republican Federal Campaign Comm. v. FEC, 518 U. S. 604, 650 (1996) (Stevens, J., dissenting). Many of our campaign finance precedents explicitly and forcefully affirm the propriety of such presumptive deference. See, e. g., McConnell, 540 U. S., at 158; Beaumont, 539 U. S., at 155-156; NRWC, 459 U. S., at 209-210. Moreover, “[j]udicial deference is particularly warranted where, as here, we deal with a congressional judgment that has remained essentially unchanged throughout a century of careful legislative adjustment.” Beaumont, 539 U. S., at 162, n. 9 (internal quotation marks omitted); cf. Shrink Missouri, 528 U. S., at 391 (“The quantum of empirical evidence needed to satisfy heightened judicial scrutiny of legislative judgments will vary up or down with the novelty and plausibility of the justification raised”). In America, incumbent legislators pass the laws that govern campaign finance, just like all other laws. To apply a level of scrutiny that effectively bars them from regulating electioneering whenever there is the faintest whiff of self-interest, is to deprive them of the ability to regulate electioneering.
This is not to say that deference would be appropriate if there were a solid basis for believing that a legislative action was motivated by the desire to protect incumbents or that it will degrade the competitiveness of the electoral process.68 *462See League of United Latin American Citizens v. Perry, 548 U. S. 399, 447 (2006) (Stevens, J., concurring in part and dissenting in part); Vieth v. Jubelirer, 541 U. S. 267, 317 (2004) (Stevens, J., dissenting). Along with our duty to balance competing constitutional concerns, we have a vital role to play in ensuring that elections remain at least minimally open, fair, and competitive. But it is the height of recklessness to dismiss Congress’ years of bipartisan deliberation and its reasoned judgment on this basis, without first confirming that the statute in question was intended to be, or will function as, a restraint on electoral competition. “Absent record evidence of invidious discrimination against challengers as a class, a court should generally be hesitant to invalidate legislation which on its face imposes evenhanded restrictions.” Buckley, 424 U. S., at 31.
We have no record evidence from which to conclude that BCRA § 203, or any of the dozens of state laws that the Court today calls into question, reflects or fosters such invidious discrimination. Our colleagues have opined that “ ‘any restriction upon a type of campaign speech that is equally available to challengers and incumbents tends to favor incumbents.’” McConnell, 540 U. S., at 249 (opinion of SCALIA, J.). This kind of airy speculation could easily be turned on its head. The electioneering prohibited by § 203 might well tend to favor incumbents, because incumbents have pre-existing relationships with corporations and unions, and groups that wish to procure legislative benefits may tend to support the candidate who, as a sitting officeholder, is already in a position to dispense benefits and is statistically likely to retain office. If a corporation’s goal is to induce officeholders to do its bidding, the corporation would do well to cultivate stable, long-term relationships of dependency.
So we do not have a solid theoretical basis for condemning §203 as a front for incumbent self-protection, and it seems equally if not more plausible that restrictions on corporate electioneering will be self-denying. Nor do we have a good *463empirical case for skepticism, as the Court’s failure to cite any empirical research attests. Nor does the legislative history give reason for concern. Congress devoted years of careful study to the issues underlying BCRA; “[f]ew legislative proposals in recent years have received as much sustained public commentary or news coverage”; “[political scientists and academic experts . . . with no self-interest in incumbent protectio[n] were central figures in pressing the case for BCRA”; and the legislation commanded bipartisan support from the outset. Pildes, The Supreme Court 2003 Term Foreword: The Constitutionalization of Democratic Politics, 118 Harv. L. Rev. 28, 137 (2004). Finally, it is important to remember just how incumbent-friendly congressional races were prior to BCRA’s passage. As the Solicitor General aptly remarked at the time, “the evidence supports overwhelmingly that incumbents were able to get re-elected under the old system just fine.” Tr. of Oral Arg. in McConnell v. FEC, O. T. 2003, No. 02-1674, p. 61. “It would be hard to develop a scheme that could be better for incumbents.” Id., at 63.
In this case, then, “there is no convincing evidence that th[e] important interests favoring expenditure limits are fronts for incumbency protection.” Randall, 548 U. S., at 279 (Stevens, J., dissenting). “In the meantime, a legislative judgment that ‘enough is enough’ should command the greatest possible deference from judges interpreting a constitutional provision that, at best, has an indirect relationship to activity that affects the quantity ... of repetitive speech in the marketplace of ideas.” Id., at 279-280. The majority cavalierly ignores Congress’ factual findings and its constitutional judgment: It acknowledges the validity of the interest in preventing corruption, but it effectively discounts the value of that interest to zero. This is quite different from conscientious policing for impermissibly anticompetitive motive or effect in a sensitive First Amendment context. *464It is the denial of Congress’ authority to regulate corporate spending on elections.
Austin and Corporate Expenditures
Just as the majority gives short shrift to the general societal interests at stake in campaign finance regulation, it also overlooks the distinctive considerations raised by the regulation of corporate expenditures. The majority fails to appreciate that Austin’s antidistortion rationale is itself an anticorruption rationale, see 494 U. S., at 660 (describing “a different type of corruption”), tied to the special concerns raised by corporations. Understood properly, “antidistortion” is simply a variant on the classic governmental interest in protecting against improper influences on officeholders that debilitate the democratic process. It is manifestly not just an “ ‘equalizing’ ” ideal in disguise. Ante, at 350 (quoting Buckley, 424 U. S., at 48).69
*4651. Antidistortion
The fact that corporations are different from human beings might seem to need no elaboration, except that the majority opinion almost completely elides it. Austin set forth some of the basic differences. Unlike natural persons, corporations have “limited liability” for their owners and managers, “perpetual life,” separation of ownership and control, “and favorable treatment of the accumulation and distribution of assets ... that enhance their ability to attract capital and to deploy their resources in ways that maximize the return on their shareholders’ investments.” 494 U. S., at 658-659. Unlike voters in U. S. elections, corporations may be foreign controlled.70 Unlike other interest groups, business corporations have been “effectively delegated responsibility for ensuring society’s economic welfare”;71 they inescapably structure the life of every citizen. “ ‘[T]he resources in the treasury of a business corporation,’ ” furthermore, “ ‘are not an indication of popular support for the corporation’s political ideas.’” Id., at 659 (quoting MCFL, 479 U. S., at 258). “ ‘They reflect instead the economically motivated decisions of investors and customers. The availability of these resources may make a corporation a formidable political presence, even though the power of the corporation may be no reflection of the power of its ideas.’ ” 494 U. S., at 659 (quoting MCFL, 479 U. S., at 258).72
*466It might also be added that corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their “personhood” often serves as a useful legal fiction. But they are not themselves members of “We the People” by whom and for whom our Constitution was established.
These basic points help explain why corporate electioneering is not only more likely to impair compelling governmental interests, but also why restrictions on that electioneering are less likely to encroach upon First Amendment freedoms. One fundamental concern of the First Amendment is to “protec[t] the individual’s interest in self-expression.” Consolidated Edison Co. of N. Y. v. Public Serv. Comm’n of N. Y., 447 U. S. 530, 534, n. 2 (1980); see also Bellotti, 435 U. S., at 777, n. 12. Freedom of speech helps “make men free to develop their faculties,” Whitney v. California, 274 U. S. 357, 375 (1927) (Brandéis, J., concurring), it respects their “dignity and choice,” Cohen v. California, 403 U. S. 15, 24 (1971), and it facilitates the value of “individual self-realization,” Redish, The Value of Free Speech, 130 U. Pa. L. Rev. 591, 594 (1982). Corporate speech, however, is derivative speech, speech by proxy. A regulation such as BCRA § 203 may affect the way in which individuals disseminate certain messages through the corporate form, but it does not prevent anyone from speaking in his or her own voice. “Within the realm of [campaign spending] generally,” corporate *467spending is “furthest from the core of political expression.” Beaumont, 539 U. S., at 161, n. 8.
It is an interesting question “who” is even speaking when a business corporation places an advertisement that endorses or attacks a particular candidate. Presumably it is not the customers or employees, who typically have no say in such matters. It cannot realistically be said to be the shareholders, who tend to be far removed from the day-to-day decisions of the firm and whose political preferences may be opaque to management. Perhaps the officers or directors of the corporation have the best claim to be the ones speaking, except their fiduciary duties generally prohibit them from using corporate funds for personal ends. Some individuals associated with the corporation must make the decision to place the ad, but the idea that these individuals are thereby fostering their self-expression or cultivating their critical faculties is fanciful. It is entirely possible that the corporation’s electoral message will conflict with their personal convictions. Take away the ability to use general treasury funds for some of those ads, and no one’s autonomy, dignity, or political equality has been impinged upon in the least.
Corporate expenditures are distinguishable from individual expenditures in this respect. I have taken the view that a legislature may place reasonable restrictions on individuals’ electioneering expenditures in the service of the governmental interests explained above, and in recognition of the fact that such restrictions are not direct restraints on speech but rather on its financing. See, e. g., Randall, 548 U. S., at 273 (dissenting opinion). But those restrictions concededly present a tougher case, because the primary conduct of actual, flesh-and-blood persons is involved. Some of those individuals might feel that they need to spend large sums of money on behalf of a particular candidate to vindicate the intensity of their electoral preferences. This is obviously not the situation with business corporations, as their routine practice of giving “substantial sums to both major national *468parties” makes pellucidly clear. McConnell, 540 U. S., at 148. “[Co]rporate participation” in elections, any business executive will tell you, “is more transactional than ideological.” Supp. Brief for Committee for Economic Development as Amicus Curiae 10.
In this transactional spirit, some corporations have affirmatively urged Congress to place limits on their electioneering communications. These corporations fear that officeholders will shake them down for supportive ads, that they will have to spend increasing sums on elections in an ever-escalating arms race with their competitors, and that public trust in business will be eroded. See id., at 10-19. A system that effectively forces corporations to use their shareholders’ money both to maintain access to, and to avoid retribution from, elected officials may ultimately prove more harmful than beneficial to many corporations. It can impose a kind of implicit tax.73
In short, regulations such as § 203 and the statute upheld in Austin impose only a limited burden on First Amendment freedoms not only because they target a narrow subset of expenditures and leave untouched the broader “public dialogue,” ante, at 341, but also because they leave untouched *469the speech of natural persons. Recognizing the weakness of a speaker-based critique of Austin, the Court places primary emphasis not on the corporation’s right to electioneer, but rather on the listener’s interest in hearing what every possible speaker may have to say. The Court’s central argument is that laws such as § 203 have “ ‘deprived [the electorate] of information, knowledge and opinion vital to its function,’” ante, at 354 (quoting CIO, 335 U. S., at 144 (Rutledge, J., concurring in result)), and this, in turn, “interferes with the ‘open marketplace’ of ideas protected by the First Amendment,” ante, at 354 (quoting New York State Bd. of Elections v. Lopez Torres, 552 U. S. 196, 208 (2008)).
There are many flaws in this argument. If the overriding concern depends on the interests of the audience, surely the public’s perception of the value of corporate speech should be given important weight. That perception today is the same as it was a century ago when Theodore Roosevelt delivered the speeches to Congress that, in time, led to the limited prohibition on corporate campaign expenditures that is overruled today. See WRTL, 551 U. S., at 509-510 (Souter, J., dissenting) (summarizing President Roosevelt’s remarks). The distinctive threat to democratic integrity posed by corporate domination of politics was recognized at “the inception of the republic” and “has been a persistent theme in American political life” ever since. Regan 302. It is only certain Members of this Court, not the listeners themselves, who have agitated for more corporate electioneering.
Austin recognized that there are substantial reasons why a legislature might conclude that unregulated general treasury expenditures will give corporations “unfai[r] influence” in the electoral process, 494 U. S., at 660, and distort public debate in ways that undermine rather than advance the interests of listeners. The legal structure of corporations allows them to amass and deploy financial resources on a scale few natural persons can match. The structure of a business corporation, furthermore, draws a line between the *470corporation’s economic interests and the political preferences of the individuals associated with the corporation; the corporation must engage the electoral process with the aim “to enhance the profitability of the company, no matter how persuasive the arguments for a broader or conflicting set of priorities,” Brief for American Independent Business Alliance as Amicus Curiae 11; see also ALI, Principles of Corporate Governance: Analysis and Recommendations § 2.01(a), p. 55 (1992) (“[A] corporation . . . should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain”). In a state election such as the one at issue in Austin, the interests of nonresident corporations may be fundamentally adverse to the interests of local voters. Consequently, when corporations grab up the prime broadcasting slots on the eve of an election, they can flood the market with advocacy that bears “little or no correlation” to the ideas of natural persons or to any broader notion of the public good, 494 U. S., at 660. The opinions of real people may be marginalized. “The expenditure restrictions of [2 U. S. C.] § 441b are thus meant to ensure that competition among actors in the political arena is truly competition among ideas.” MCFL, 479 U. S., at 259.
In addition to this immediate drowning out of noncorporate voices, there may be deleterious effects that follow soon thereafter. Corporate “domination” of electioneering, Austin, 494 U. S., at 659, can generate the impression that corporations dominate our democracy. When citizens turn on their televisions and radios before an election and hear only corporate electioneering, they may lose faith in their capacity, as citizens, to influence public policy. A Government captured by corporate interests, they may come to believe, will be neither responsive to their needs nor willing to give their views a fair hearing. The predictable result is cynicism and disenchantment: an increased perception that large spenders “ ‘call the tune’ ” and a reduced “ ‘willingness of voters to take part in democratic governance.’” McConnell, *471540 U. S., at 144 (quoting Shrink Missouri, 528 U. S., at 390). To the extent that corporations are allowed to exert undue influence in electoral races, the speech of the eventual winners of those races may also be chilled. Politicians who fear that a certain corporation can make or break their reelection chances may be cowed into silence about that corporation. On a variety of levels, unregulated corporate electioneering might diminish the ability of citizens to “hold officials accountable to the people,” ante, at 339, and disserve the goal of a public debate that is “uninhibited, robust, and wide-open,” New York Times Co. v. Sullivan, 376 U. S. 254, 270 (1964). At the least, I stress again, a legislature is entitled to credit these concerns and to take tailored measures in response.
The majority’s unwillingness to distinguish between corporations and humans similarly blinds it to the possibility that corporations’ “war chests” and their special “advantages” in the legal realm, Austin, 494 U. S., at 659 (internal quotation marks omitted), may translate into special advantages in the market for legislation. When large numbers of citizens have a common stake in a measure that is under consideration, it may be very difficult for them to coordinate resources on behalf of their position. The corporate form, by contrast, “provides a simple way to channel rents to only those who have paid their dues, as it were. If you do not own stock, you do not benefit from the larger dividends or appreciation in the stock price caused by the passage of private interest legislation.” Sitkoff, Corporate Political Speech, Political Extortion, and the Competition for Corporate Charters, 69 U. Chi. L. Rev. 1103, 1113 (2002). Corporations, that is, are uniquely equipped to seek laws that favor their owners, not simply because they have a lot of money but because of their legal and organizational structure. Remove all restrictions on their electioneering, and the door may be opened to a type of rent seeking that is “far more destructive” than what noncorporations are capable of. *472Ibid. It is for reasons such as these that our campaign finance jurisprudence has long appreciated that “the ‘differing structures and purposes’ of different entities ‘may require different forms of regulation in order to protect the integrity of the electoral process.’ ” NRWC, 459 U. S., at 210 (quoting California Medical Assn., 453 U. S., at 201).
The Court’s facile depiction of corporate electioneering assumes away all of these complexities. Our colleagues ridicule the idea of regulating expenditures based on “nothing more” than a fear that corporations have a special “ability to persuade,” ante, at 382 (opinion of Roberts, C. J.), as if corporations were our society’s ablest debaters and viewpoint-neutral laws such as §203 were created to suppress their best arguments. In their haste to knock down yet another straw man, our colleagues simply ignore the fundamental concerns of the Austin Court and the legislatures that have passed laws like § 203: to safeguard the integrity, competitiveness, and democratic responsiveness of the electoral process. All of the majority’s theoretical arguments turn on a proposition with undeniable surface appeal but little grounding in evidence or experience, “that there is no such thing as too much speech,” Austin, 494 U. S., at 695 (Scalia, J., dissenting).74 If individuals in our society had infinite free time to listen to and contemplate every last bit of speech uttered by anyone, anywhere; and if broadcast advertisements had no special ability to influence elections apart from the merits of their arguments (to the extent they make any); and if legislators always operated with nothing less than perfect virtue; then I suppose the majority’s premise would be sound. In the real world, we have seen, corporate domination of the airwaves prior to an election may decrease the average listener’s exposure to relevant viewpoints, and it may diminish citizens’ willingness and capacity to participate in the democratic process.
*473None of this is to suggest that corporations can or should be denied an opportunity to participate in election campaigns or in any other public forum (much less that a work of art such as Mr. Smith Goes to Washington may be banned), or to deny that some corporate speech may contribute significantly to public debate. What it shows, however, is that Austin’s “concern about corporate domination of the political process,” id., at 659, reflects more than a concern to protect governmental interests outside of the First Amendment. It also reflects a concern to facilitate First Amendment values by preserving some breathing room around the electoral “marketplace” of ideas, ante, at 335, 350, 354, 367, 369, the marketplace in which the actual people of this Nation determine how they will govern themselves. The majority seems oblivious to the simple truth that laws such as §203 do not merely pit the anticorruption interest against the First Amendment, but also pit competing First Amendment values against each other. There are, to be sure, serious concerns with any effort to balance the First Amendment rights of speakers against the First Amendment rights of listeners. But when the speakers in question are not real people and when the appeal to “First Amendment principles” depends almost entirely on the listeners’ perspective, ante, at 319, 363, it becomes necessary to consider how listeners will actually be affected.
In critiquing Austin’s antidistortion rationale and campaign finance regulation more generally, our colleagues place tremendous weight on the example of media corporations. See ante, at 351-354, 361-362; ante, at 372-373, 382 (opinion of Roberts, C. J.); ante, at 390 (opinion of Scalia, J.). Yet it is not at all clear that Austin would permit § 203 to be applied to them. The press plays a unique role not only in the text, history, and structure of the First Amendment but also in facilitating public discourse; as the Austin Court explained, “media corporations differ significantly from other corporations in that their resources are devoted to the collec*474tion of information and its dissemination to the public,” 494 U. S., at 667. Our colleagues have raised some interesting and difficult questions about Congress’ authority to regulate electioneering by the press, and about how to define what constitutes the press. But that is not the case before us. Section 203 does not apply to media corporations, and even if it did, Citizens United is not a media corporation. There would be absolutely no reason to consider the issue of media corporations if the majority did not, first, transform Citizens United's as-applied challenge into a facial challenge and, second, invent the theory that legislatures must eschew all “identity”-based distinctions and treat a local nonprofit news outlet exactly the same as General Motors.75 This calls to mind George Berkeley’s description of philosophers: “[W]e have first raised a dust, and then complain we cannot see.” Principles of Human Knowledge/Three Dialogues 38, ¶ 3 (R. Woolhouse ed. 1988).
It would be perfectly understandable if our colleagues feared that a campaign finance regulation such as § 203 may be counterproductive or self-interested, and therefore attended carefully to the choices the Legislature has made. But the majority does not bother to consider such practical matters, or even to consult a record; it simply stipulates that “enlightened self-government” can arise only in the absence of regulation. Ante, at 339. In light of the distinctive features of corporations identified in Austin, there is no valid basis for this assumption. The marketplace of ideas is not actually a place where items — or laws — are meant to be bought and sold, and when we move from the realm of eco*475nomics to the realm of corporate electioneering, there may be no “reason to think the market ordering is intrinsically good at all,” Strauss 1386.
The Court’s blinkered and aphoristic approach to the First Amendment may well promote corporate power at the cost of the individual and collective self-expression the Amendment was meant to serve. It will undoubtedly cripple the ability of ordinary citizens, Congress, and the States to adopt even limited measures to protect against corporate domination of the electoral process. Americans may be forgiven if they do not feel the Court has advanced the cause of self-government today.
2. Shareholder Protection
There is yet another way in which laws such as § 203 can serve First Amendment values. Interwoven with Austin’s concern to protect the integrity of the electoral process is a concern to protect the rights of shareholders from a kind of coerced speech: electioneering expenditures that do not “reflee[t] [their] support.” 494 U. S., at 660-661. When corporations use general treasury funds to praise or attack a particular candidate for office, it is the shareholders, as the residual claimants, who are effectively footing the bill. Those shareholders who disagree with the corporation’s electoral message may find their financial investments being used to undermine their political convictions.
The PAC mechanism, by contrast, helps ensure that those who pay for an electioneering communication actually support its content and that managers do not use general treasuries to advance personal agendas. Ibid. It “ ‘allows corporate political participation without the temptation to use corporate funds for political influence, quite possibly at odds with the sentiments of some shareholders or members.’” McConnell, 540 U. S., at 204 (quoting Beaumont, 539 U. S., at 163). A rule that privileges the use of PACs thus does more than facilitate the political speech of like-minded share*476holders; it also curbs the rent seeking behavior of executives and respects the views of dissenters. Austin’s acceptance of restrictions on general treasury spending “simply allows people who have invested in the business corporation for purely economic reasons” — the vast majority of investors, one assumes — “to avoid being taken advantage of, without sacrificing their economic objectives.” Winkler, Beyond Bellotti, 32 Loyola (LA) L. Rev. 133, 201 (1998).
The concern to protect dissenting shareholders and union members has a long history in campaign finance reform. It provided a central motivation for the Tillman Act in 1907 and subsequent legislation, see Pipefitters v. United States, 407 U. S. 385, 414-415 (1972); Winkler, 92 Geo. L. J., at 887-900, and it has been endorsed in a long line of our cases, see, e. g., McConnell, 540 U. S., at 204-205; Beaumont, 539 U. S., at 152-154; MCFL, 479 U. S., at 258; NRWC, 459 U. S., at 207-208; Pipefitters, 407 U. S., at 414-416; see also n. 60, supra. Indeed, we have unanimously recognized the governmental interest in “proteet[ing] the individuals who have paid money into a corporation or union for purposes other than the support of candidates from having that money used to support political candidates to whom they may be opposed.” NRWC, 459 U. S., at 207-208.
The Court dismisses this interest on the ground that abuses of shareholder money can be corrected “through the procedures of corporate democracy,” ante, at 362 (internal quotation marks omitted), and, it seems, through Internet-based disclosures, ante, at 370-371.76 I fail to understand *477how this addresses the concerns of dissenting union members, who will also be affected by today’s ruling, and I fail to understand why the Court is so confident in these mechanisms. By “corporate democracy,” presumably the Court means the rights of shareholders to vote and to bring derivative suits for breach of fiduciary duty. In practice, however, many corporate lawyers will tell you that “these rights are so limited as to be almost nonexistent,” given the internal authority wielded by boards and managers and the expansive protections afforded by the business judgment rule. Blair & Stout 320; see also id., at 298-315; Winkler, 32 Loyola (LA) L. Rev., at 165-166, 199-200. Modern technology may help make it easier to track corporate activity, including electoral advocacy, but it is utopian to believe that it solves the problem. Most American households that own stock do so through intermediaries such as mutual funds and pension plans, see Evans, A Requiem for the Retail Investor? 95 Va. L. Rev. 1105 (2009), which makes it more difficult both to monitor and to alter particular holdings. Studies show that a majority of individual investors make no trades at all during a given year. Id., at 1117. Moreover, if the corporation in question operates a PAC, an investor who sees the company’s ads may not know whether they are being funded through the PAC or through the general treasury.
If and when shareholders learn that a corporation has been spending general treasury money on objectionable electioneering, they can divest. Even assuming that they reliably learn as much, however, this solution is only partial. The injury to the shareholders’ expressive rights has already occurred; they might have preferred to keep that corporation’s stock in their portfolio for any number of economic reasons; and they may incur a capital gains tax or other penalty from selling their shares, changing their pension plan, or the like. The shareholder protection rationale has been criticized as underinclusive, in that corporations also spend money on lobbying and charitable contributions in ways that any particu*478lar shareholder might disapprove. But those expenditures do not implicate the selection of public officials, an area in which “the interests of unwilling... corporate shareholders [in not being] forced to subsidize that speech” “are at their zenith.” Austin, 494 U. S., at 677 (Brennan, J., concurring). And in any event, the question is whether shareholder protection provides a basis for regulating expenditures in the weeks before an election, not whether additional types of corporate communications might similarly be conditioned on voluntariness.
Recognizing the limits of the shareholder- protection rationale, the Austin Court did not hold it out as an adequate and independent ground for sustaining the statute in question. Rather, the Court applied it to reinforce the anti-distortion rationale, in two main ways. First, the problem of dissenting shareholders shows that even if electioneering expenditures can advance the political views of some members of a corporation, they will often compromise the views of others. See, e. g., id., at 663 (discussing risk that corporation’s “members may be ... reluctant to withdraw as members even if they disagree with [its] political expression”). Second, it provides an additional reason, beyond the distinctive legal attributes of the corporate form, for doubting that these “expenditures reflect actual public support for the political ideas espoused,” id., at 660. The shareholder protection rationale, in other words, bolsters the conclusion that restrictions on corporate electioneering can serve both speakers’ and listeners’ interests, as well as the anticorruption interest. And it supplies yet another reason why corporate expenditures merit less protection than individual expenditures.
V
Today’s decision is backwards in many senses. It elevates the majority’s agenda over the litigants’ submissions, facial attacks over as-applied claims, broad constitutional theories *479over narrow statutory grounds, individual dissenting opinions over precedential holdings, assertion over tradition, absolutism over empiricism, rhetoric over reality. Our colleagues have arrived at the conclusion that Austin must be overruled and that §203 is facially unconstitutional only after mischaracterizing both the reach and rationale of those authorities, and after bypassing or ignoring rules of judicial restraint used to cabin the Court’s lawmaking power. Their conclusion that the societal interest in avoiding corruption and the appearance of corruption does not provide an adequate justification for regulating corporate expenditures on candidate elections relies on an incorrect description of that interest, along with a failure to acknowledge the relevance of established facts and the considered judgments of state and federal legislatures over many decades.
In a democratic society, the longstanding consensus on the need to limit corporate campaign spending should outweigh the wooden application of judge-made rules. The majority’s rejection of this principle “elevate[s] corporations to a level of deference which has not been seen at least since the days when substantive due process was regularly used to invalidate regulatory legislation thought to unfairly impinge upon established economic interests.” Bellotti, 435 U. S., at 817, n. 13 (White, J., dissenting). At bottom, the Court’s opinion is thus a rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self-government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt. It is a strange time to repudiate that common sense. While American democracy is imperfect, few outside the majority of this Court would have thought its flaws included a dearth of corporate money in politics.
I would affirm the judgment of the District Court.
concurring in part and dissenting in part.
I join all but Part IV of the Court’s opinion.
Political speech is entitled to robust protection under the First Amendment. Section 203 of the Bipartisan Campaign Reform Act of 2002 (BCRA) has never been reconcilable with that protection. By striking down §203, the Court takes an important first step toward restoring full constitutional protection to speech that is “indispensable to the effective and intelligent use of the processes of popular government.” McConnell v. Federal Election Comm’n, 540 U. S. 93, 265 (2003) (Thomas, J., concurring in part, concurring in judgment in part, and dissenting in part) (internal quotation marks omitted). I dissent from Part IV of the Court’s opinion, however, because the Court’s constitutional analysis does not go far enough. The disclosure, disclaimer, and reporting requirements in BCRA §§201 and 311 are also unconstitutional. See id., at 275-277, and n. 10.
Congress may not abridge the “right to anonymous speech” based on the “ ‘simple interest in providing voters with additional relevant information,’” id., at 276 (quoting McIntyre v. Ohio Elections Comm’n, 514 U. S. 334, 348 (1995)). In continuing to hold otherwise, the Court misapprehends the import of “recent events” that some amici describe “in which donors to certain causes were blacklisted, threatened, or otherwise targeted for retaliation.” Ante, at 370. The Court properly recognizes these events as “cause for concern,” ibid., but fails to acknowledge their constitutional significance. In my view, amici’s submissions show why the Court’s insistence on upholding §§201 and 311 will ultimately prove as misguided (and ill fated) as was its prior approval of § 203.
Amici’s examples relate principally to Proposition 8, a state ballot proposition that California voters narrowly passed in the 2008 general election. Proposition 8 amended *481California’s Constitution to provide that “[o]nly marriage between a man and a woman is valid or recognized in California.” Cal. Const., Art. I, §7.5. Any donor who gave more than $100 to any committee supporting or opposing Proposition 8 was required to disclose his full name, street address, occupation, employer’s name (or business name, if self-employed), and the total amount of his contributions.1 See Cal. Govt. Code Ann. § 84211(f) (West 2005). The California Secretary of State was then required to post this information on the Internet. See §§84600-84601; §§84602-84602.1 (West Supp. 2010); §§84602.5-84604 (West 2005); §85605 (West Supp. 2010); §§84606-84609 (West 2005).
Some opponents of Proposition 8 compiled this information and created Web sites with maps showing the locations of homes or businesses of Proposition 8 supporters. Many supporters (or their customers) suffered property damage, or threats of physical violence or death, as a result. They cited these incidents in a complaint they filed after the 2008 election, seeking to invalidate California’s mandatory disclosure laws. Supporters recounted being told: “ ‘Consider yourself lucky. If I had a gun I would have gunned you down along with each and every other supporter,’ ” or, “ ‘we have plans for you and your friends.’ ” Complaint in ProtectMarriage.com—Yes on 8 v. Bowen, Case No. 2:09-cv-00058-MCE-DAD (ED Cal.), ¶ 31. Proposition 8 opponents also allegedly harassed the measure’s supporters by defacing or damaging their property. Id., ¶ 32. Two religious organizations supporting Proposition 8 reportedly received through the mail envelopes containing a white powdery substance. Id., ¶ 33.
*482Those accounts are consistent with media reports describing Proposition 8-related retaliation. The director of the nonprofit California Musical Theater gave $1,000 to support the initiative; he was forced to resign after artists complained to his employer. Lott & Smith, Donor Disclosure Has Its Downsides, Wall Street Journal, Dec. 26, 2008, p. A1B. The director of the Los Angeles Film Festival was forced to resign after giving $1,500 because opponents threatened to boycott and picket the next festival. Ibid. And a woman who had managed her popular, family-owned restaurant for 26 years was forced to resign after she gave $100, because “throngs of [angry] protesters” repeatedly arrived at the restaurant and “shout[ed] ‘shame on you’ at customers.” Lopez, Prop. 8 Stance Upends Her Life, Los Angeles Times, Dec. 14, 2008, p. Bl. The police even had to “arriv[e] in riot gear one night to quell the angry mob” at the restaurant. Ibid. Some supporters of Proposition 8 engaged in similar tactics; one real estate businessman in San Diego who had donated to a group opposing Proposition 8 “received a letter from the Prop. 8 Executive Committee threatening to publish his company’s name if he didn’t also donate to the ‘Yes on 8’ campaign.” Donor Disclosure, supra, at A13.
The success of such intimidation tactics has apparently spawned a cottage industry that uses forcibly disclosed donor information to pre-empt citizens’ exercise of their First Amendment rights. Before the 2008 Presidential election, a “newly formed nonprofit group ... plannfed] to confront donors to conservative groups, hoping to create a chilling effect that will dry up contributions.” Luo, Group Plans Campaign Against G.O.P. Donors, N. Y. Times, Aug. 8, 2008, p. A15. Its leader, “who described his effort as ‘going for the jugular,’ ” detailed the group’s plan to send a “warning letter... alerting donors who might be considering giving to right-wing groups to a variety of potential dangers, including *483legal trouble, public exposure and watchdog groups digging through their lives.” Ibid.
These instances of retaliation sufficiently demonstrate why this Court should invalidate mandatory disclosure and reporting requirements. But amici present evidence of yet another reason to do so — the threat of retaliation from elected officials. As amici’s submissions make clear, this threat extends far beyond a single ballot proposition in California. For example, a candidate challenging an incumbent state attorney general reported that some members of the State’s business community feared donating to his campaign because they did not want to cross the incumbent; in his words, “T go to so many people and hear the same thing: “I sure hope you beat [the incumbent], but I can’t afford to have my name on your records. He might come after me next. ” ’ ” Strassel, Challenging Spitzerism at the Polls, Wall Street Journal, Aug. 1, 2008, p. All. The incumbent won reelection in 2008.
My point is not to express any view on the merits of the political controversies I describe. Rather, it is to demonstrate — using real-world, recent examples — the fallacy in the Court’s conclusion that “[disclaimer and disclosure requirements . . . impose no ceiling on campaign-related activities, and do not prevent anyone from speaking.” Ante, at 366 (internal quotation marks and citation omitted). Of course they do. Disclaimer and disclosure requirements enable private citizens and elected officials to implement political strategies specifically calculated to curtail campaign-related activity and prevent the lawful, peaceful exercise of First Amendment rights.
The Court nevertheless insists that as-applied challenges to disclosure requirements will suffice to vindicate those speech rights, as long as potential plaintiffs can “show a reasonable probability that disclosure . . . will subject them to threats, harassment, or reprisals from either Government of*484ficials or private parties.” Ante, at 367 (internal quotation marks omitted). But the Court’s opinion itself proves the irony in this compromise. In correctly explaining why it must address the facial constitutionality of § 203, see ante, at 322-336, the Court recognizes that “[t]he First Amendment does not permit laws that force speakers to ... seek declaratory rulings before discussing the most salient political issues of our day,” ante, at 324; that as-applied challenges to §203 “would require substantial litigation over an extended time” and result in an “interpretive process [that] itself would create an inevitable, pervasive, and serious risk of chilling protected speech pending the drawing of fine distinctions that, in the end, would themselves be questionable,” ante, at 326-327; that “a court would be remiss in performing its duties were it to accept an unsound principle merely to avoid the necessity of making a broader ruling,” ante, at 329; and that avoiding a facial challenge to § 203 “would prolong the substantial, nationwide chilling effect” that § 203 causes, ante, at 333. This logic, of course, applies equally to as-applied challenges to §§201 and 311.
Irony aside, the Court’s promise that as-applied challenges will adequately protect speech is a hollow assurance. Now more than ever, §§201 and 311 will chill protected speech because — as California voters can attest — “the advent of the Internet” enables “prompt disclosure of expenditures,” which “provide [s]” political opponents “with the information needed” to intimidate and retaliate against their foes. Ante, at 370. Thus, “disclosure permits citizens ... to react to the speech of [their political opponents] in a proper” — or undeniably improper — “way” long before a plaintiff could prevail on an as-applied challenge.2 Ante, at 371.
*485I cannot endorse a view of the First Amendment that subjects citizens of this Nation to death threats, ruined careers, damaged or defaced property, or pre-emptive and threatening warning letters as the price for engaging in “core political speech, the 'primary object of First Amendment protection.”’ McConnell, 540 U. S., at 264 (Thomas, J., concurring in part, concurring in judgment in part, and dissenting in part) (quoting Nixon v. Shrink Missouri Government PAC, 528 U. S. 377, 410-411 (2000) (Thomas, J., dissenting)). Accordingly, I respectfully dissent from the Court’s judgment upholding BCRA §§201 and 311.
3.1.3 Burwell v. Hobby Lobby Stores, Inc. 3.1.3 Burwell v. Hobby Lobby Stores, Inc.
Sylvia BURWELL, Secretary of Health and Human Services, et al., Petitioners
v.
HOBBY LOBBY STORES, INC., et al.
Conestoga Wood Specialties Corporation et al., Petitioners
v.
Sylvia Burwell, Secretary of Health and Human Services, et al.
Nos. 13-354, 13-356.
Supreme Court of the United States
Argued March 25, 2014.
Decided June 30, 2014.
Held Invalid
26 C.F.R. § 54.9815-2713(a)(1)(iv); 29 C.F.R. § 2590.715-2713(a)(1)(iv); 45 C.F.R. § 147.130(a)(1)(iv)
Prior Version Recognized as Unconstitutional
42 U.S.C.A. § 2000bb-2 *2754Syllabus*
The Religious Freedom Restoration Act of 1993 (RFRA) prohibits the "Government [from] substantially burden[ing] a person's exercise of religion even if the burden results from a rule of general applicability" unless the Government "demonstrates that application of the burden to the person-(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest." 42 U.S.C. §§ 2000bb-1(a), (b). As amended by the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), RFRA covers "any exercise of religion, whether or not compelled by, or central to, a system of religious belief." § 2000cc-5(7)(A).
At issue here are regulations promulgated by the Department of Health and Human Services (HHS) under the Patient Protection and Affordable Care Act of 2010(ACA), which, as relevant here, requires specified employers' group health plans to furnish "preventive care and screenings" for women without "any cost sharing requirements," 42 U.S.C. § 300gg-13(a)(4). Congress did not specify what types of preventive care must be covered; it authorized the Health Resources and Services Administration, a component of HHS, to decide. Ibid. Nonexempt employers are generally required to provide coverage for the 20 contraceptive methods approved by the Food and Drug Administration, including the 4 that may have the effect of preventing an already fertilized egg from developing any further by inhibiting its attachment to the uterus. Religious employers, such as churches, are exempt from this contraceptive mandate. HHS has also effectively exempted religious *2755nonprofit organizations with religious objections to providing coverage for contraceptive services. Under this accommodation, the insurance issuer must exclude contraceptive coverage from the employer's plan and provide plan participants with separate payments for contraceptive services without imposing any cost-sharing requirements on the employer, its insurance plan, or its employee beneficiaries.
In these cases, the owners of three closely held for-profit corporations have sincere Christian beliefs that life begins at conception and that it would violate their religion to facilitate access to contraceptive drugs or devices that operate after that point. In separate actions, they sued HHS and other federal officials and agencies (collectively HHS) under RFRA and the Free Exercise Clause, seeking to enjoin application of the contraceptive mandate insofar as it requires them to provide health coverage for the four objectionable contraceptives. In No. 13-356, the District Court denied the Hahns and their company-Conestoga Wood Specialties-a preliminary injunction. Affirming, the Third Circuit held that a for-profit corporation could not "engage in religious exercise" under RFRA or the First Amendment, and that the mandate imposed no requirements on the Hahns in their personal capacity. In No. 13-354, the Greens, their children, and their companies-Hobby Lobby Stores and Mardel-were also denied a preliminary injunction, but the Tenth Circuit reversed. It held that the Greens' businesses are "persons" under RFRA, and that the corporations had established a likelihood of success on their RFRA claim because the contraceptive mandate substantially burdened their exercise of religion and HHS had not demonstrated a compelling interest in enforcing the mandate against them; in the alternative, the court held that HHS had not proved that the mandate was the "least restrictive means" of furthering a compelling governmental interest.
Held : As applied to closely held corporations, the HHS regulations imposing the contraceptive mandate violate RFRA. Pp. 2761 - 2785.
(a) RFRA applies to regulations that govern the activities of closely held for-profit corporations like Conestoga, Hobby Lobby, and Mardel. Pp. 2761 - 2775.
(1) HHS argues that the companies cannot sue because they are for-profit corporations, and that the owners cannot sue because the regulations apply only to the companies, but that would leave merchants with a difficult choice: give up the right to seek judicial protection of their religious liberty or forgo the benefits of operating as corporations. RFRA's text shows that Congress designed the statute to provide very broad protection for religious liberty and did not intend to put merchants to such a choice. It employed the familiar legal fiction of including corporations within RFRA's definition of "persons," but the purpose of extending rights to corporations is to protect the rights of people associated with the corporation, including shareholders, officers, and employees. Protecting the free-exercise rights of closely held corporations thus protects the religious liberty of the humans who own and control them. Pp. 2761 - 2768.
(2) HHS and the dissent make several unpersuasive arguments. Pp. 2768 - 2775.
(i) Nothing in RFRA suggests a congressional intent to depart from the Dictionary Act definition of "person," which "include[s] corporations, ... as well as individuals." 1 U.S.C. § 1. The Court has entertained RFRA and free-exercise claims brought by nonprofit corporations. See, e.g.,Gonzales v. O Centro Espírita Beneficente Uniao do Vegetal, 546 U.S. 418, 126 S.Ct. 1211, 163 L.Ed.2d 1017.
*2756And HHS's concession that a nonprofit corporation can be a "person" under RFRA effectively dispatches any argument that the term does not reach for-profit corporations; no conceivable definition of "person" includes natural persons and nonprofit corporations, but not for-profit corporations. Pp. 2768 - 2769.
(ii) HHS and the dissent nonetheless argue that RFRA does not cover Conestoga, Hobby Lobby, and Mardel because they cannot "exercise ... religion." They offer no persuasive explanation for this conclusion. The corporate form alone cannot explain it because RFRA indisputably protects nonprofit corporations. And the profit-making objective of the corporations cannot explain it because the Court has entertained the free-exercise claims of individuals who were attempting to make a profit as retail merchants. Braunfeld v. Brown, 366 U.S. 599, 81 S.Ct. 1144, 6 L.Ed.2d 563. Business practices compelled or limited by the tenets of a religious doctrine fall comfortably within the understanding of the "exercise of religion" that this Court set out in Employment Div., Dept. of Human Resources of Ore. v. Smith, 494 U.S. 872, 877, 110 S.Ct. 1595, 108 L.Ed.2d 876. Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is simply to make money flies in the face of modern corporate law. States, including those in which the plaintiff corporations were incorporated, authorize corporations to pursue any lawful purpose or business, including the pursuit of profit in conformity with the owners' religious principles. Pp. 2769 - 2772.
(iii) Also flawed is the claim that RFRA offers no protection because it only codified pre- Smith Free Exercise Clause precedents, none of which squarely recognized free-exercise rights for for-profit corporations. First, nothing in RFRA as originally enacted suggested that its definition of "exercise of religion" was meant to be tied to pre- Smith interpretations of the First Amendment. Second, if RFRA's original text were not clear enough, the RLUIPA amendment surely dispels any doubt that Congress intended to separate the definition of the phrase from that in First Amendment case law. Third, the pre- Smith case of Gallagher v. Crown Kosher Super Market of Mass., Inc., 366 U.S. 617, 81 S.Ct. 1122, 6 L.Ed.2d 536, suggests, if anything, that for-profit corporations can exercise religion. Finally, the results would be absurd if RFRA, a law enacted to provide very broad protection for religious liberty, merely restored this Court's pre- Smith decisions in ossified form and restricted RFRA claims to plaintiffs who fell within a category of plaintiffs whose claims the Court had recognized before Smith. Pp. 2772 - 2774.
(3) Finally, HHS contends that Congress could not have wanted RFRA to apply to for-profit corporations because of the difficulty of ascertaining the "beliefs" of large, publicly traded corporations, but HHS has not pointed to any example of a publicly traded corporation asserting RFRA rights, and numerous practical restraints would likely prevent that from occurring. HHS has also provided no evidence that the purported problem of determining the sincerity of an asserted religious belief moved Congress to exclude for-profit corporations from RFRA's protection. That disputes among the owners of corporations might arise is not a problem unique to this context. State corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure. Courts will turn to that structure and the underlying state law in resolving disputes. Pp. 2774 - 2775.
*2757(b) HHS's contraceptive mandate substantially burdens the exercise of religion. Pp. 2775 - 2779.
(1) It requires the Hahns and Greens to engage in conduct that seriously violates their sincere religious belief that life begins at conception. If they and their companies refuse to provide contraceptive coverage, they face severe economic consequences: about $475 million per year for Hobby Lobby, $33 million per year for Conestoga, and $15 million per year for Mardel. And if they drop coverage altogether, they could face penalties of roughly $26 million for Hobby Lobby, $1.8 million for Conestoga, and $800,000 for Mardel. Pp. 2775 - 2776.
(2) Amici supporting HHS argue that the $2,000 per-employee penalty is less than the average cost of providing insurance, and therefore that dropping insurance coverage eliminates any substantial burden imposed by the mandate. HHS has never argued this and the Court does not know its position with respect to the argument. But even if the Court reached the argument, it would find it unpersuasive: It ignores the fact that the plaintiffs have religious reasons for providing health-insurance coverage for their employees, and it is far from clear that the net cost to the companies of providing insurance is more than the cost of dropping their insurance plans and paying the ACA penalty. Pp. 2776 - 2777.
(3) HHS argues that the connection between what the objecting parties must do and the end that they find to be morally wrong is too attenuated because it is the employee who will choose the coverage and contraceptive method she uses. But RFRA's question is whether the mandate imposes a substantial burden on the objecting parties' ability to conduct business in accordance with their religious beliefs. The belief of the Hahns and Greens implicates a difficult and important question of religion and moral philosophy, namely, the circumstances under which it is immoral for a person to perform an act that is innocent in itself but that has the effect of enabling or facilitating the commission of an immoral act by another. It is not for the Court to say that the religious beliefs of the plaintiffs are mistaken or unreasonable. In fact, this Court considered and rejected a nearly identical argument in Thomas v. Review Bd. of Indiana Employment Security Div., 450 U.S. 707, 101 S.Ct. 1425, 67 L.Ed.2d 624. The Court's "narrow function ... is to determine" whether the plaintiffs' asserted religious belief reflects "an honest conviction," id., at 716, 101 S.Ct. 1425, and there is no dispute here that it does. Tilton v. Richardson, 403 U.S. 672, 689, 91 S.Ct. 2091, 29 L.Ed.2d 790; and Board of Ed. of Central School Dist. No. 1 v. Allen, 392 U.S. 236, 248-249, 88 S.Ct. 1923, 20 L.Ed.2d 1060, distinguished. Pp. 2777 - 2779.
(c) The Court assumes that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is a compelling governmental interest, but the Government has failed to show that the contraceptive mandate is the least restrictive means of furthering that interest. Pp. 2779 - 2785.
(1) The Court assumes that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is compelling within the meaning of RFRA. Pp. 2779 - 2780.
(2) The Government has failed to satisfy RFRA's least-restrictive-means standard. HHS has not shown that it lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion. The Government could, e.g., assume the cost of providing the four contraceptives to women unable to obtain coverage due to their *2758employers' religious objections. Or it could extend the accommodation that HHS has already established for religious nonprofit organizations to non-profit employers with religious objections to the contraceptive mandate. That accommodation does not impinge on the plaintiffs' religious beliefs that providing insurance coverage for the contraceptives at issue here violates their religion and it still serves HHS's stated interests. Pp. 2780 - 2783.
(3) This decision concerns only the contraceptive mandate and should not be understood to hold that all insurance-coverage mandates, e.g., for vaccinations or blood transfusions, must necessarily fall if they conflict with an employer's religious beliefs. Nor does it provide a shield for employers who might cloak illegal discrimination as a religious practice. United States v. Lee, 455 U.S. 252, 102 S.Ct. 1051, 71 L.Ed.2d 127, which upheld the payment of Social Security taxes despite an employer's religious objection, is not analogous. It turned primarily on the special problems associated with a national system of taxation; and if Lee were a RFRA case, the fundamental point would still be that there is no less restrictive alternative to the categorical requirement to pay taxes. Here, there is an alternative to the contraceptive mandate. Pp. 2783 - 2785.
No. 13-354, 723 F.3d 1114, affirmed; No. 13-356, 724 F.3d 377, reversed and remanded.
ALITO, J., delivered the opinion of the Court, in which ROBERTS, C.J., and SCALIA, KENNEDY, and THOMAS, JJ., joined. KENNEDY, J., filed a concurring opinion. GINSBURG, J., filed a dissenting opinion, in which SOTOMAYOR, J., joined, and in which BREYER and KAGAN, JJ., joined as to all but Part III-C-1. BREYER AND KAGAN, JJ., filed a dissenting opinion.
Paul D. Clement, Washington, DC, for the private parties.
Donald B. Verrilli, Jr., Solicitor General, for the federal government.
Paul D. Clement, Michael H. McGinley, Bancroft PLLC, Washington, DC, Peter M. Dobelbower, General Counsel and Chief Legal Officer, Hobby Lobby Stores, Inc., Oklahoma City, OK, S. Kyle Duncan, Counsel of Record, Eric C. Rassbach, Luke W. Goodrich, Hannah C. Smith, Mark L. Rienzi, Lori H. Windham, Adèle Auxier Keim, The Becket Fund for Religious Liberty, Washington, DC, Joshua D. Hawley, University of Missouri, Columbia, MO, counsel for Respondents.
Donald B. Verrilli, Jr., Solicitor General, Counsel of Record, Stuart F. Delery, Assistant Attorney General, Ian Heath Gershengorn, Edwin S. Kneedler, Deputy Solicitors General, Joseph R. Palmore, Assistant to the Solicitor General, Mark B. Stern, Alisa B. Klein, Washington, DC, for Petitioners.
Jordan W. Lorence, Steven H. Aden, Gregory S. Baylor, Matthew S. Bowman, Alliance Defending Freedom, Washington, DC, David A. Cortman, Counsel of Record, Kevin H. Theriot, Rory T. Gray, Alliance Defending Freedom, Lawrenceville, GA, Charles W. Proctor, III, Law Offices of Proctor, Lindsay & Dixon, Chadds Ford, PA, Randall L. Wenger, Independence Law Center, Harrisburg, PA, for Petitioners Conestoga Wood Specialties Corporation et al.
We must decide in these cases whether the Religious Freedom Restoration Act of 1993 (RFRA), 107 Stat. 1488, 42 U.S.C. § 2000bb et seq., permits the United States Department of Health and Human Services (HHS) to demand that three closely held corporations provide health-insurance coverage for methods of contraception that violate the sincerely held religious beliefs of the companies' owners. We hold that the regulations that impose this obligation violate RFRA, which prohibits the Federal Government from taking any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest.
In holding that the HHS mandate is unlawful, we reject HHS's argument that the owners of the companies forfeited all RFRA protection when they decided to organize their businesses as corporations rather than sole proprietorships or general partnerships. The plain terms of RFRA make it perfectly clear that Congress did not discriminate in this way against men and women who wish to run their businesses as for-profit corporations in the manner required by their religious beliefs.
Since RFRA applies in these cases, we must decide whether the challenged HHS regulations substantially burden the exercise of religion, and we hold that they do. The owners of the businesses have religious objections to abortion, and according to their religious beliefs the four contraceptive methods at issue are abortifacients. If the owners comply with the HHS mandate, they believe they will be facilitating abortions, and if they do not comply, they will pay a very heavy price-as much as $1.3 million per day, or about $475 million per year, in the case of one of the companies. If these consequences do not amount to a substantial burden, it is hard to see what would.
Under RFRA, a Government action that imposes a substantial burden on religious exercise must serve a compelling government interest, and we assume that the HHS regulations satisfy this requirement. But in order for the HHS mandate to be sustained, it must also constitute the least restrictive means of serving that interest, and the mandate plainly fails that test. There are other ways in which Congress or HHS could equally ensure that every woman has cost-free access to the particular contraceptives at issue here and, indeed, to all FDA-approved contraceptives.
In fact, HHS has already devised and implemented a system that seeks to respect the religious liberty of religious nonprofit corporations while ensuring that the employees of these entities have precisely the same access to all FDA-approved contraceptives as employees of companies whose owners have no religious objections to providing such coverage. The employees of these religious nonprofit corporations still have access to insurance coverage without cost sharing for all FDA-approved contraceptives; and according to HHS, this system imposes no net economic burden on the insurance companies that are required to provide or secure the coverage.
Although HHS has made this system available to religious nonprofits that have religious objections to the contraceptive mandate, HHS has provided no reason why the same system cannot be made available when the owners of for-profit corporations have similar religious objections. We therefore conclude that this system constitutes an alternative that achieves all of the Government's aims while providing greater respect for religious liberty. And under RFRA, that conclusion means that enforcement of the *2760HHS contraceptive mandate against the objecting parties in these cases is unlawful.
As this description of our reasoning shows, our holding is very specific. We do not hold, as the principal dissent alleges, that for-profit corporations and other commercial enterprises can "opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs." Post, at 2787 (opinion of GINSBURG, J.). Nor do we hold, as the dissent implies, that such corporations have free rein to take steps that impose "disadvantages ... on others" or that require "the general public [to] pick up the tab." Post, at 2787 . And we certainly do not hold or suggest that "RFRA demands accommodation of a for-profit corporation's religious beliefs no matter the impact that accommodation may have on ... thousands of women employed by Hobby Lobby." Post, at 2787.1 The effect of the HHS-created accommodation on the women employed by Hobby Lobby and the other companies involved in these cases would be precisely zero. Under that accommodation, these women would still be entitled to all FDA-approved contraceptives without cost sharing.
I
A
Congress enacted RFRA in 1993 in order to provide very broad protection for religious liberty . RFRA's enactment came three years after this Court's decision in Employment Div., Dept. of Human Resources of Ore. v. Smith, 494 U.S. 872, 110 S.Ct. 1595, 108 L.Ed.2d 876 (1990), which largely repudiated the method of analyzing free-exercise claims that had been used in cases like Sherbert v. Verner, 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d 965 (1963), and Wisconsin v. Yoder, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972). In determining whether challenged government actions violated the Free Exercise Clause of the First Amendment, those decisions used a balancing test that took into account whether the challenged action imposed a substantial burden on the practice of religion, and if it did, whether it was needed to serve a compelling government interest. Applying this test, the Court held in Sherbert that an employee who was fired for refusing to work on her Sabbath could not be denied unemployment benefits. 374 U.S., at 408-409, 83 S.Ct. 1790. And in Yoder, the Court held that Amish children could not be required to comply with a state law demanding that they remain in school until the age of 16 even though their religion required them to focus on uniquely Amish values and beliefs during their formative adolescent years. 406 U.S., at 210-211, 234-236, 92 S.Ct. 1526.
In Smith, however, the Court rejected "the balancing test set forth in Sherbert." 494 U.S., at 883, 110 S.Ct. 1595. Smith concerned two members of the Native American Church who were fired for ingesting peyote for sacramental purposes. When they sought unemployment benefits, the State of Oregon rejected their claims on the ground that consumption of peyote was a crime, but the Oregon Supreme Court, applying the Sherbert test, held that the denial of benefits violated the Free Exercise Clause. 494 U.S., at 875, 110 S.Ct. 1595.
This Court then reversed, observing that use of the Sherbert test whenever a person objected on religious grounds to the enforcement of a generally applicable law "would open the prospect of constitutionally *2761required religious exemptions from civic obligations of almost every conceivable kind." 494 U.S., at 888, 110 S.Ct. 1595. The Court therefore held that, under the First Amendment, "neutral, generally applicable laws may be applied to religious practices even when not supported by a compelling governmental interest." City of Boerne v. Flores, 521 U.S. 507, 514, 117 S.Ct. 2157, 138 L.Ed.2d 624 (1997).
Congress responded to Smith by enacting RFRA. "[L]aws [that are] 'neutral' toward religion," Congress found, "may burden religious exercise as surely as laws intended to interfere with religious exercise." 42 U.S.C. § 2000bb(a)(2); see also § 2000bb(a)(4). In order to ensure broad protection for religious liberty, RFRA provides that "Government shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability." § 2000bb-1(a).2 If the Government substantially burdens a person's exercise of religion, under the Act that person is entitled to an exemption from the rule unless the Government "demonstrates that application of the burden to the person-(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest." § 2000bb-1(b).3
As enacted in 1993, RFRA applied to both the Federal Government and the States, but the constitutional authority invoked for regulating federal and state agencies differed. As applied to a federal agency, RFRA is based on the enumerated power that supports the particular agency's work,4 but in attempting to regulate the States and their subdivisions, Congress relied on its power under Section 5 of the Fourteenth Amendment to enforce the First Amendment. 521 U.S., at 516-517, 117 S.Ct. 2157. In City of Boerne, however, we held that Congress had overstepped its Section 5 authority because "[t]he stringent test RFRA demands" "far exceed[ed] any pattern or practice of unconstitutional conduct under the Free Exercise Clause as interpreted in Smith." Id., at 533-534, 117 S.Ct. 2157. See also id., at 532, 117 S.Ct. 2157.
Following our decision in City of Boerne, Congress passed the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), 114 Stat. 803, 42 U.S.C. § 2000cc et seq. That statute, enacted under Congress's Commerce and Spending Clause powers, imposes the same general test as RFRA but on a more limited category of governmental actions. See Cutter v. Wilkinson, 544 U.S. 709, 715-716, 125 S.Ct. 2113, 161 L.Ed.2d 1020 (2005). And, what is most relevant for present purposes, RLUIPA amended RFRA's definition of the "exercise of religion." See § 2000bb-2(4) (importing RLUIPA definition). Before RLUIPA, RFRA's definition made reference to the First Amendment. See § 2000bb-2(4) (1994 ed.) (defining "exercise of religion" as "the exercise of religion under the First Amendment"). In RLUIPA, in an obvious *2762effort to effect a complete separation from First Amendment case law, Congress deleted the reference to the First Amendment and defined the "exercise of religion" to include "any exercise of religion, whether or not compelled by, or central to, a system of religious belief." § 2000cc-5(7)(A). And Congress mandated that this concept "be construed in favor of a broad protection of religious exercise, to the maximum extent permitted by the terms of this chapter and the Constitution." § 2000cc-3(g).5
B
At issue in these cases are HHS regulations promulgated under the Patient Protection and Affordable Care Act of 2010(ACA), 124 Stat. 119. ACA generally requires employers with 50 or more full-time employees to offer "a group health plan or group health insurance coverage" that provides "minimum essential coverage." 26 U.S.C. § 5000A(f)(2); §§ 4980H(a), (c)(2). Any covered employer that does not provide such coverage must pay a substantial price. Specifically, if a covered employer provides group health insurance but its plan fails to comply with ACA's group-health-plan requirements, the employer may be required to pay $100 per day for each affected "individual." §§ 4980D(a)-(b). And if the employer decides to stop providing health insurance altogether and at least one full-time employee enrolls in a health plan and qualifies for a subsidy on one of the government-run ACA exchanges, the employer must pay $2,000 per year for each of its full-time employees. §§ 4980H(a), (c)(1).
Unless an exception applies, ACA requires an employer's group health plan or group-health-insurance coverage to furnish "preventive care and screenings" for women without "any cost sharing requirements." 42 U.S.C. § 300gg-13(a)(4). Congress itself, however, did not specify what types of preventive care must be covered. Instead, Congress authorized the Health Resources and Services Administration (HRSA), a component of HHS, to make that important and sensitive decision. Ibid. The HRSA in turn consulted the Institute of Medicine, a nonprofit group of volunteer advisers, in determining which preventive services to require. See 77 Fed.Reg. 8725-8726 (2012).
In August 2011, based on the Institute's recommendations, the HRSA promulgated the Women's Preventive Services Guidelines. See id., at 8725-8726, and n. 1; online at http:// hrsa. gov/ womens guidelines (all Internet materials as visited June 26, 2014, and available in Clerk of Court's case file). The Guidelines provide that nonexempt employers are generally required to provide "coverage, without cost sharing" for "[a]ll Food and Drug Administration [ (FDA) ] approved contraceptive methods, sterilization procedures, and patient education and counseling." 77 Fed.Reg. 8725 (internal quotation marks omitted) . Although many of the required, FDA-approved methods of contraception work by preventing the fertilization of an egg, four of those methods (those specifically at issue in these cases) may have the effect of preventing an already fertilized egg from *2763developing any further by inhibiting its attachment to the uterus. See Brief for HHS in No. 13-354, pp. 9-10, n. 4; 6 FDA, Birth Control: Medicines to Help You.7
HHS also authorized the HRSA to establish exemptions from the contraceptive mandate for "religious employers." 45 CFR § 147.131(a). That category encompasses "churches, their integrated auxiliaries, and conventions or associations of churches," as well as "the exclusively religious activities of any religious order." See ibid (citing 26 U.S.C. §§ 6033(a)(3)(A)(i), (iii)). In its Guidelines, HRSA exempted these organizations from the requirement to cover contraceptive services. See http:// hrsa. gov/ womens guidelines.
In addition, HHS has effectively exempted certain religious nonprofit organizations, described under HHS regulations as "eligible organizations," from the contraceptive mandate. See 45 CFR § 147.131(b); 78 Fed.Reg. 39874 (2013). An "eligible organization" means a nonprofit organization that "holds itself out as a religious organization" and "opposes providing coverage for some or all of any contraceptive services required to be covered ... on account of religious objections." 45 CFR § 147.131(b). To qualify for this accommodation, an employer must certify that it is such an organization. § 147.131(b)(4). When a group-health-insurance issuer receives notice that one of its clients has invoked this provision, the issuer must then exclude contraceptive coverage from the employer's plan and provide separate payments for contraceptive services for plan participants without imposing any cost-sharing requirements on the eligible organization, its insurance plan, or its employee beneficiaries. § 147.131(c).8 Although this procedure requires the issuer to bear the cost of these services, HHS has determined that this obligation will not impose any net expense on issuers because its cost will be less than or equal to the cost savings resulting from the services. 78 Fed.Reg. 39877.9
In addition to these exemptions for religious organizations, ACA exempts a great *2764many employers from most of its coverage requirements. Employers providing "grandfathered health plans"-those that existed prior to March 23, 2010, and that have not made specified changes after that date-need not comply with many of the Act's requirements, including the contraceptive mandate. 42 U.S.C. §§ 18011(a), (e). And employers with fewer than 50 employees are not required to provide health insurance at all. 26 U.S.C. § 4980H(c)(2).
All told, the contraceptive mandate "presently does not apply to tens of millions of people." 723 F.3d 1114, 1143 (C.A.10 2013). This is attributable, in large part, to grandfathered health plans: Over one-third of the 149 million nonelderly people in America with employer-sponsored health plans were enrolled in grandfathered plans in 2013. Brief for HHS in No. 13-354, at 53; Kaiser Family Foundation & Health Research & Educational Trust, Employer Health Benefits, 2013 Annual Survey 43, 221.10 The count for employees working for firms that do not have to provide insurance at all because they employ fewer than 50 employees is 34 million workers. See The Whitehouse, Health Reform for Small Businesses: The Affordable Care Act Increases Choice and Saving Money for Small Businesses 1.11
II
A
Norman and Elizabeth Hahn and their three sons are devout members of the Mennonite Church, a Christian denomination. The Mennonite Church opposes abortion and believes that "[t]he fetus in its earliest stages ... shares humanity with those who conceived it." 12
Fifty years ago, Norman Hahn started a wood-working business in his garage, and since then, this company, Conestoga Wood Specialties, has grown and now has 950 employees. Conestoga is organized under Pennsylvania law as a for-profit corporation. The Hahns exercise sole ownership of the closely held business; they control its board of directors and hold all of its voting shares. One of the Hahn sons serves as the president and CEO.
The Hahns believe that they are required to run their business "in accordance with their religious beliefs and moral principles." 917 F.Supp.2d 394, 402 (E.D.Pa.2013). To that end, the company's mission, as they see it, is to "operate in a professional environment founded upon the highest ethical, moral, and Christian principles." Ibid. (internal quotation marks omitted). The company's "Vision and Values Statements" affirms that Conestoga endeavors to "ensur[e] a reasonable profit in [a] manner that reflects [the Hahns'] Christian heritage." App. in No. 13-356, p. 94 (complaint).
As explained in Conestoga's board-adopted "Statement on the Sanctity of Human Life," the Hahns believe that "human life begins at conception."
*2765724 F.3d 377, 382, and n. 5 (C.A.3 2013) (internal quotation marks omitted). It is therefore "against [their] moral conviction to be involved in the termination of human life" after conception, which they believe is a "sin against God to which they are held accountable." Ibid. (internal quotation marks omitted). The Hahns have accordingly excluded from the group-health-insurance plan they offer to their employees certain contraceptive methods that they consider to be abortifacients. Id., at 382.
The Hahns and Conestoga sued HHS and other federal officials and agencies under RFRA and the Free Exercise Clause of the First Amendment, seeking to enjoin application of ACA's contraceptive mandate insofar as it requires them to provide health-insurance coverage for four FDA-approved contraceptives that may operate after the fertilization of an egg.13 These include two forms of emergency contraception commonly called "morning after" pills and two types of intrauterine devices.14
In opposing the requirement to provide coverage for the contraceptives to which they object, the Hahns argued that "it is immoral and sinful for [them] to intentionally participate in, pay for, facilitate, or otherwise support these drugs." Ibid. The District Court denied a preliminary injunction, see 917 F.Supp.2d, at 419, and the Third Circuit affirmed in a divided opinion, holding that "for-profit, secular corporations cannot engage in religious exercise" within the meaning of RFRA or the First Amendment. 724 F.3d, at 381. The Third Circuit also rejected the claims brought by the Hahns themselves because it concluded that the HHS "[m]andate does not impose any requirements on the Hahns" in their personal capacity. Id., at 389.
B
David and Barbara Green and their three children are Christians who own and operate two family businesses. Forty-five years ago, David Green started an arts-and-crafts store that has grown into a nationwide chain called Hobby Lobby. There are now 500 Hobby Lobby stores, and the company has more than 13,000 employees. 723 F.3d, at 1122. Hobby Lobby is organized as a for-profit corporation under Oklahoma law.
One of David's sons started an affiliated business, Mardel, which operates 35 Christian bookstores and employs close to 400 people. Ibid. Mardel is also organized as a for-profit corporation under Oklahoma law.
Though these two businesses have expanded over the years, they remain closely held, and David, Barbara, and their children retain exclusive control of both companies. Ibid. David serves as the CEO of Hobby Lobby, and his three children serve as the president, vice president, and vice CEO. See Brief for Respondents in No. 13-354, p. 8.15
*2766Hobby Lobby's statement of purpose commits the Greens to "[h]onoring the Lord in all [they] do by operating the company in a manner consistent with Biblical principles." App. in No. 13-354, pp. 134-135 (complaint). Each family member has signed a pledge to run the businesses in accordance with the family's religious beliefs and to use the family assets to support Christian ministries. 723 F.3d, at 1122. In accordance with those commitments, Hobby Lobby and Mardel stores close on Sundays, even though the Greens calculate that they lose millions in sales annually by doing so. Id., at 1122; App. in No. 13-354, at 136-137. The businesses refuse to engage in profitable transactions that facilitate or promote alcohol use; they contribute profits to Christian missionaries and ministries; and they buy hundreds of full-page newspaper ads inviting people to "know Jesus as Lord and Savior." Ibid. (internal quotation marks omitted).
Like the Hahns, the Greens believe that life begins at conception and that it would violate their religion to facilitate access to contraceptive drugs or devices that operate after that point. 723 F.3d, at 1122. They specifically object to the same four contraceptive methods as the Hahns and, like the Hahns, they have no objection to the other 16 FDA-approved methods of birth control. Id., at 1125. Although their group-health-insurance plan predates the enactment of ACA, it is not a grandfathered plan because Hobby Lobby elected not to retain grandfathered status before the contraceptive mandate was proposed. Id., at 1124.
The Greens, Hobby Lobby, and Mardel sued HHS and other federal agencies and officials to challenge the contraceptive mandate under RFRA and the Free Exercise Clause.16 The District Court denied a preliminary injunction, see 870 F.Supp.2d 1278 (W.D.Okla.2012), and the plaintiffs appealed, moving for initial en banc consideration. The Tenth Circuit granted that motion and reversed in a divided opinion. Contrary to the conclusion of the Third Circuit, the Tenth Circuit held that the Greens' two for-profit businesses are "persons" within the meaning of RFRA and therefore may bring suit under that law.
The court then held that the corporations had established a likelihood of success on their RFRA claim. 723 F.3d, at 1140-1147. The court concluded that the contraceptive mandate substantially burdened the exercise of religion by requiring the companies to choose between "compromis[ing] their religious beliefs" and paying a heavy fee-either "close to $475 million more in taxes every year" if they simply refused to provide coverage for the contraceptives at issue, or "roughly $26 million" annually if they "drop[ped] health-insurance benefits for all employees." Id., at 1141.
The court next held that HHS had failed to demonstrate a compelling interest in enforcing the mandate against the Greens' businesses and, in the alternative, that HHS had failed to prove that enforcement of the mandate was the "least restrictive means" of furthering the Government's asserted interests. Id., at 1143-1144 (emphasis deleted; internal quotation marks omitted). After concluding that the companies had "demonstrated irreparable harm," the court reversed and remanded for the District Court to consider the remaining factors of the preliminary-injunction test. Id., at 1147.17
*2767We granted certiorari. 571 U.S. ----, 134 S.Ct. 678, 187 L.Ed.2d 544 (2013).
III
A
RFRA prohibits the "Government [from] substantially burden[ing] a person's exercise of religion even if the burden results from a rule of general applicability" unless the Government "demonstrates that application of the burden to the person-(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest." 42 U.S.C. §§ 2000bb-1(a), (b) (emphasis added). The first question that we must address is whether this provision applies to regulations that govern the activities of for-profit corporations like Hobby Lobby, Conestoga, and Mardel.
HHS contends that neither these companies nor their owners can even be heard under RFRA. According to HHS, the companies cannot sue because they seek to make a profit for their owners, and the owners cannot be heard because the regulations, at least as a formal matter, apply only to the companies and not to the owners as individuals. HHS's argument would have dramatic consequences.
Consider this Court's decision in Braunfeld v. Brown, 366 U.S. 599, 81 S.Ct. 1144, 6 L.Ed.2d 563 (1961) (plurality opinion). In that case, five Orthodox Jewish merchants who ran small retail businesses in Philadelphia challenged a Pennsylvania Sunday closing law as a violation of the Free Exercise Clause. Because of their faith, these merchants closed their shops on Saturday, and they argued that requiring them to remain shut on Sunday threatened them with financial ruin. The Court entertained their claim (although it ruled against them on the merits), and if a similar claim were raised today under RFRA against a jurisdiction still subject to the Act (for example, the District of Columbia, see 42 U.S.C. § 2000bb-2(2)), the merchants would be entitled to be heard. According to HHS, however, if these merchants chose to incorporate their businesses-without in any way changing the size or nature of their businesses-they would forfeit all RFRA (and free-exercise) rights. HHS would put these merchants to a difficult choice: either give up the right to seek judicial protection of their religious liberty or forgo the benefits, available to their competitors, of operating as corporations.
As we have seen, RFRA was designed to provide very broad protection for religious liberty. By enacting RFRA, Congress went far beyond what this Court has held is constitutionally required.18 Is there any reason to think that the Congress that enacted such sweeping protection put small-business owners to the choice that HHS suggests? An examination of *2768RFRA's text, to which we turn in the next part of this opinion, reveals that Congress did no such thing.
As we will show, Congress provided protection for people like the Hahns and Greens by employing a familiar legal fiction: It included corporations within RFRA's definition of "persons." But it is important to keep in mind that the purpose of this fiction is to provide protection for human beings. A corporation is simply a form of organization used by human beings to achieve desired ends. An established body of law specifies the rights and obligations of the people (including shareholders, officers, and employees) who are associated with a corporation in one way or another. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people. For example, extending Fourth Amendment protection to corporations protects the privacy interests of employees and others associated with the company. Protecting corporations from government seizure of their property without just compensation protects all those who have a stake in the corporations' financial well-being. And protecting the free-exercise rights of corporations like Hobby Lobby, Conestoga, and Mardel protects the religious liberty of the humans who own and control those companies.
In holding that Conestoga, as a "secular, for-profit corporation," lacks RFRA protection, the Third Circuit wrote as follows:
"General business corporations do not, separate and apart from the actions or belief systems of their individual owners or employees, exercise religion. They do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors." 724 F.3d, at 385 (emphasis added).
All of this is true-but quite beside the point. Corporations, "separate and apart from" the human beings who own, run, and are employed by them, cannot do anything at all.
B
1
As we noted above, RFRA applies to "a person's" exercise of religion, 42 U.S.C. §§ 2000bb-1(a), (b), and RFRA itself does not define the term "person." We therefore look to the Dictionary Act, which we must consult "[i]n determining the meaning of any Act of Congress, unless the context indicates otherwise." 1 U.S.C. § 1.
Under the Dictionary Act, "the wor[d] 'person' ... include[s] corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." Ibid.; see FCC v. AT & T Inc., 562 U.S. ----, ----, 131 S.Ct. 1177, 1182-1183, 179 L.Ed.2d 132 (2011) ("We have no doubt that 'person,' in a legal setting, often refers to artificial entities. The Dictionary Act makes that clear"). Thus, unless there is something about the RFRA context that "indicates otherwise," the Dictionary Act provides a quick, clear, and affirmative answer to the question whether the companies involved in these cases may be heard.
We see nothing in RFRA that suggests a congressional intent to depart from the Dictionary Act definition, and HHS makes little effort to argue otherwise. We have entertained RFRA and free-exercise claims brought by nonprofit corporations, see Gonzales v. O Centro Espírita Beneficente Uniao do Vegetal, 546 U.S. 418, 126 S.Ct. 1211, 163 L.Ed.2d 1017 (2006) (RFRA);
*2769Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 565 U.S. ----, 132 S.Ct. 694, 181 L.Ed.2d 650 (2012) (Free Exercise); Church of the Lukumi Babalu Aye, Inc. v. Hialeah, 508 U.S. 520, 113 S.Ct. 2217, 124 L.Ed.2d 472 (1993) (Free Exercise), and HHS concedes that a nonprofit corporation can be a "person" within the meaning of RFRA. See Brief for HHS in No. 13-354, at 17; Reply Brief in No. 13-354, at 7-8.19
This concession effectively dispatches any argument that the term "person" as used in RFRA does not reach the closely held corporations involved in these cases. No known understanding of the term "person" includes some but not all corporations. The term "person" sometimes encompasses artificial persons (as the Dictionary Act instructs), and it sometimes is limited to natural persons. But no conceivable definition of the term includes natural persons and nonprofit corporations, but not for-profit corporations.20 Cf. Clark v. Martinez, 543 U.S. 371, 378, 125 S.Ct. 716, 160 L.Ed.2d 734 (2005) ("To give th[e] same words a different meaning for each category would be to invent a statute rather than interpret one").
2
The principal argument advanced by HHS and the principal dissent regarding RFRA protection for Hobby Lobby, Conestoga, and Mardel focuses not on the statutory term "person," but on the phrase "exercise of religion." According to HHS and the dissent, these corporations are not protected by RFRA because they cannot exercise religion. Neither HHS nor the dissent, however, provides any persuasive explanation for this conclusion.
Is it because of the corporate form? The corporate form alone cannot provide the explanation because, as we have pointed out, HHS concedes that nonprofit corporations can be protected by RFRA. The dissent suggests that nonprofit corporations are special because furthering their religious "autonomy ... often furthers individual religious freedom as well." Post, at 2794 (quoting Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327, 342, 107 S.Ct. 2862, 97 L.Ed.2d 273 (1987) (Brennan, J., concurring in judgment)). But this principle applies equally to for-profit corporations: Furthering their religious freedom also "furthers individual religious freedom." In these cases, for example, allowing Hobby Lobby, Conestoga, and Mardel to assert RFRA claims protects the religious liberty of the Greens and the Hahns.21
If the corporate form is not enough, what about the profit-making objective? In Braunfeld, 366 U.S. 599, 81 S.Ct. 1144, 6 L.Ed.2d 563, we entertained the free-exercise claims of individuals who were attempting to make a profit as retail merchants, and the Court never even hinted that this objective precluded their *2770claims. As the Court explained in a later case, the "exercise of religion" involves "not only belief and profession but the performance of (or abstention from) physical acts" that are "engaged in for religious reasons." Smith, 494 U.S., at 877, 110 S.Ct. 1595. Business practices that are compelled or limited by the tenets of a religious doctrine fall comfortably within that definition. Thus, a law that "operates so as to make the practice of ... religious beliefs more expensive" in the context of business activities imposes a burden on the exercise of religion. Braunfeld, supra, at 605, 81 S.Ct. 1144; see United States v. Lee, 455 U.S. 252, 257, 102 S.Ct. 1051, 71 L.Ed.2d 127 (1982) (recognizing that "compulsory participation in the social security system interferes with [Amish employers'] free exercise rights").
If, as Braunfeld recognized, a sole proprietorship that seeks to make a profit may assert a free-exercise claim,22 why can't Hobby Lobby, Conestoga, and Mardel do the same?
Some lower court judges have suggested that RFRA does not protect for-profit corporations because the purpose of such corporations is simply to make money.23 This argument flies in the face of modern corporate law. "Each American jurisdiction today either expressly or by implication authorizes corporations to be formed under its general corporation act *2771for any lawful purpose or business." 1 J. Cox & T. Hazen, Treatise of the Law of Corporations § 4:1, p. 224 (3d ed. 2010) (emphasis added); see 1A W. Fletcher, Cyclopedia of the Law of Corporations § 102 (rev. ed. 2010). While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires. A for-profit corporation that operates facilities in other countries may exceed the requirements of local law regarding working conditions and benefits. If for-profit corporations may pursue such worthy objectives, there is no apparent reason why they may not further religious objectives as well.
HHS would draw a sharp line between nonprofit corporations (which, HHS concedes, are protected by RFRA) and for-profit corporations (which HHS would leave unprotected), but the actual picture is less clear-cut. Not all corporations that decline to organize as nonprofits do so in order to maximize profit. For example, organizations with religious and charitable aims might organize as for-profit corporations because of the potential advantages of that corporate form, such as the freedom to participate in lobbying for legislation or campaigning for political candidates who promote their religious or charitable goals.24 In fact, recognizing the inherent compatibility between establishing a for-profit corporation and pursuing nonprofit goals, States have increasingly adopted laws formally recognizing hybrid corporate forms. Over half of the States, for instance, now recognize the "benefit corporation," a dual-purpose entity that seeks to achieve both a benefit for the public and a profit for its owners.25
In any event, the objectives that may properly be pursued by the companies in these cases are governed by the laws of the States in which they were incorporated-Pennsylvania and Oklahoma-and the laws of those States permit for-profit corporations to pursue "any lawful purpose" or "act," including the pursuit of profit in conformity with the owners' religious principles. 15 Pa. Cons.Stat. § 1301 (2001) ("Corporations may be incorporated under *2772this subpart for any lawful purpose or purposes"); Okla. Stat., Tit. 18, §§ 1002, 1005 (West 2012) ("[E]very corporation, whether profit or not for profit" may "be incorporated or organized ... to conduct or promote any lawful business or purposes"); see also § 1006(A)(3); Brief for State of Oklahoma as Amicus Curiae in No. 13-354.
3
HHS and the principal dissent make one additional argument in an effort to show that a for-profit corporation cannot engage in the "exercise of religion" within the meaning of RFRA: HHS argues that RFRA did no more than codify this Court's pre- Smith Free Exercise Clause precedents, and because none of those cases squarely held that a for-profit corporation has free-exercise rights, RFRA does not confer such protection. This argument has many flaws.
First, nothing in the text of RFRA as originally enacted suggested that the statutory phrase "exercise of religion under the First Amendment" was meant to be tied to this Court's pre- Smith interpretation of that Amendment. When first enacted, RFRA defined the "exercise of religion" to mean "the exercise of religion under the First Amendment"-not the exercise of religion as recognized only by then-existing Supreme Court precedents. 42 U.S.C. § 2000bb-2(4) (1994 ed.). When Congress wants to link the meaning of a statutory provision to a body of this Court's case law, it knows how to do so. See, e.g., Antiterrorism and Effective Death Penalty Act of 1996, 28 U.S.C. § 2254(d)(1) (authorizing habeas relief from a state-court decision that "was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States").
Second, if the original text of RFRA was not clear enough on this point-and we think it was-the amendment of RFRA through RLUIPA surely dispels any doubt. That amendment deleted the prior reference to the First Amendment, see 42 U.S.C. § 2000bb-2(4) (2000 ed.) (incorporating § 2000cc-5), and neither HHS nor the principal dissent can explain why Congress did this if it wanted to tie RFRA coverage tightly to the specific holdings of our pre- Smith free-exercise cases. Moreover, as discussed, the amendment went further, providing that the exercise of religion "shall be construed in favor of a broad protection of religious exercise, to the maximum extent permitted by the terms of this chapter and the Constitution." § 2000cc-3(g). It is simply not possible to read these provisions as restricting the concept of the "exercise of religion" to those practices specifically addressed in our pre- Smith decisions.
Third, the one pre- Smith case involving the free-exercise rights of a for-profit corporation suggests, if anything, that for-profit corporations possess such rights. In Gallagher v. Crown Kosher Super Market of Mass., Inc., 366 U.S. 617, 81 S.Ct. 1122, 6 L.Ed.2d 536 (1961), the Massachusetts Sunday closing law was challenged by a kosher market that was organized as a for-profit corporation, by customers of the market, and by a rabbi. The Commonwealth argued that the corporation lacked "standing" to assert a free-exercise claim,26 but not one member of the Court expressed agreement with that argument. The plurality opinion for four Justices rejected the First Amendment claim on the *2773merits based on the reasoning in Braunfeld, and reserved decision on the question whether the corporation had "standing" to raise the claim. See 366 U.S., at 631, 81 S.Ct. 1122. The three dissenters, Justices Douglas, Brennan, and Stewart, found the law unconstitutional as applied to the corporation and the other challengers and thus implicitly recognized their right to assert a free-exercise claim. See id., at 642, 81 S.Ct. 1122 (Brennan, J., joined by Stewart, J., dissenting); McGowan v. Maryland, 366 U.S. 420, 578-579, 81 S.Ct. 1101, 6 L.Ed.2d 393 (1961) (Douglas, J., dissenting as to related cases including Gallagher ). Finally, Justice Frankfurter's opinion, which was joined by Justice Harlan, upheld the Massachusetts law on the merits but did not question or reserve decision on the issue of the right of the corporation or any of the other challengers to be heard. See McGowan, 366 U.S., at 521-522, 81 S.Ct. 1101. It is quite a stretch to argue that RFRA, a law enacted to provide very broad protection for religious liberty, left for-profit corporations unprotected simply because in Gallagher-the only pre- Smith case in which the issue was raised-a majority of the Justices did not find it necessary to decide whether the kosher market's corporate status barred it from raising a free-exercise claim.
Finally, the results would be absurd if RFRA merely restored this Court's pre- Smith decisions in ossified form and did not allow a plaintiff to raise a RFRA claim unless that plaintiff fell within a category of plaintiffs one of whom had brought a free-exercise claim that this Court entertained in the years before Smith. For example, we are not aware of any pre- Smith case in which this Court entertained a free-exercise claim brought by a resident noncitizen. Are such persons also beyond RFRA's protective reach simply because the Court never addressed their rights before Smith ?
Presumably in recognition of the weakness of this argument, both HHS and the principal dissent fall back on the broader contention that the Nation lacks a tradition of exempting for-profit corporations from generally applicable laws. By contrast, HHS contends, statutes like Title VII, 42 U.S.C. § 2000e-19(A), expressly exempt churches and other nonprofit religious institutions but not for-profit corporations. See Brief for HHS in No. 13-356, p. 26. In making this argument, however, HHS did not call to our attention the fact that some federal statutes do exempt categories of entities that include for-profit corporations from laws that would otherwise require these entities to engage in activities to which they object on grounds of conscience. See, e.g., 42 U.S.C. § 300a-7(b)(2); § 238n(a).27 If Title VII and similar *2774laws show anything, it is that Congress speaks with specificity when it intends a religious accommodation not to extend to for-profit corporations.
4
Finally, HHS contends that Congress could not have wanted RFRA to apply to for-profit corporations because it is difficult as a practical matter to ascertain the sincere "beliefs" of a corporation. HHS goes so far as to raise the specter of "divisive, polarizing proxy battles over the religious identity of large, publicly traded corporations such as IBM or General Electric." Brief for HHS in No. 13-356, at 30.
These cases, however, do not involve publicly traded corporations, and it seems unlikely that the sort of corporate giants to which HHS refers will often assert RFRA claims. HHS has not pointed to any example of a publicly traded corporation asserting RFRA rights, and numerous practical restraints would likely prevent that from occurring. For example, the idea that unrelated shareholders-including institutional investors with their own set of stakeholders-would agree to run a corporation under the same religious beliefs seems improbable. In any event, we have no occasion in these cases to consider RFRA's applicability to such companies. The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs. 28
HHS has also provided no evidence that the purported problem of determining the sincerity of an asserted religious belief moved Congress to exclude for-profit corporations from RFRA's protection. On the contrary, the scope of RLUIPA shows that Congress was confident of the ability of the federal courts to weed out insincere claims. RLUIPA applies to "institutionalized persons," a category that consists primarily of prisoners, and by the time of RLUIPA's enactment, the propensity of some prisoners to assert claims of dubious sincerity was well documented.29 Nevertheless, after our decision in City of Boerne, Congress enacted RLUIPA to preserve the right of prisoners to raise religious liberty claims. If Congress thought that the federal courts were up to the job of dealing with insincere prisoner claims, there is no reason to believe that Congress limited RFRA's reach out of concern for the seemingly less difficult task of doing the same in corporate cases. And if, as HHS seems to concede, Congress wanted RFRA to apply to nonprofit corporations, see, Reply Brief in No. 13-354, at 7-8, what reason is there to think that Congress believed that spotting insincere claims would be tougher in cases involving for-profits?
HHS and the principal dissent express concern about the possibility of disputes among the owners of corporations, but that is not a problem that arises because of RFRA or that is unique to this context. The owners of closely held corporations may-and sometimes do-disagree about *2775the conduct of business. 1 Treatise of the Law of Corporations § 14:11. And even if RFRA did not exist, the owners of a company might well have a dispute relating to religion. For example, some might want a company's stores to remain open on the Sabbath in order to make more money, and others might want the stores to close for religious reasons. State corporate law provides a ready means for resolving any conflicts by, for example, dictating how a corporation can establish its governing structure. See, e.g., ibid; id., § 3:2; Del.Code Ann., Tit. 8, § 351 (2011) (providing that certificate of incorporation may provide how "the business of the corporation shall be managed"). Courts will turn to that structure and the underlying state law in resolving disputes.
For all these reasons, we hold that a federal regulation's restriction on the activities of a for-profit closely held corporation must comply with RFRA. 30
IV
Because RFRA applies in these cases, we must next ask whether the HHS contraceptive mandate "substantially burden[s]" the exercise of religion. 42 U.S.C. § 2000bb-1(a). We have little trouble concluding that it does.
A
As we have noted, the Hahns and Greens have a sincere religious belief that life begins at conception. They therefore object on religious grounds to providing health insurance that covers methods of birth control that, as HHS acknowledges, see Brief for HHS in No. 13-354, at 9, n. 4, may result in the destruction of an embryo. By requiring the Hahns and Greens and their companies to arrange for such coverage, the HHS mandate demands that they engage in conduct that seriously violates their religious beliefs.
If the Hahns and Greens and their companies do not yield to this demand, the economic consequences will be severe. If the companies continue to offer group health plans that do not cover the contraceptives at issue, they will be taxed $100 per day for each affected individual. 26 U.S.C. § 4980D. For Hobby Lobby, the bill could amount to $1.3 million per day or *2776about $475 million per year; for Conestoga, the assessment could be $90,000 per day or $33 million per year; and for Mardel, it could be $40,000 per day or about $15 million per year. These sums are surely substantial.
It is true that the plaintiffs could avoid these assessments by dropping insurance coverage altogether and thus forcing their employees to obtain health insurance on one of the exchanges established under ACA. But if at least one of their full-time employees were to qualify for a subsidy on one of the government-run exchanges, this course would also entail substantial economic consequences. The companies could face penalties of $2,000 per employee each year. § 4980H. These penalties would amount to roughly $26 million for Hobby Lobby, $1.8 million for Conestoga, and $800,000 for Mardel.
B
Although these totals are high, amici supporting HHS have suggested that the $2,000 per-employee penalty is actually less than the average cost of providing health insurance, see Brief for Religious Organizations 22, and therefore, they claim, the companies could readily eliminate any substantial burden by forcing their employees to obtain insurance in the government exchanges. We do not generally entertain arguments that were not raised below and are not advanced in this Court by any party, see United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 60, n. 2, 101 S.Ct. 1559, 67 L.Ed.2d 732 (1981); Bell v. Wolfish, 441 U.S. 520, 532, n. 13, 99 S.Ct. 1861, 60 L.Ed.2d 447 (1979); Knetsch v. United States, 364 U.S. 361, 370, 81 S.Ct. 132, 5 L.Ed.2d 128 (1960), and there are strong reasons to adhere to that practice in these cases. HHS, which presumably could have compiled the relevant statistics, has never made this argument-not in its voluminous briefing or at oral argument in this Court nor, to our knowledge, in any of the numerous cases in which the issue now before us has been litigated around the country. As things now stand, we do not even know what the Government's position might be with respect to these amici's intensely empirical argument. 31 For this same reason, the plaintiffs have never had an opportunity to respond to this novel claim that-contrary to their longstanding practice and that of most large employers-they would be better off discarding their employer insurance plans altogether.
Even if we were to reach this argument, we would find it unpersuasive. As an initial matter, it entirely ignores the fact that the Hahns and Greens and their companies have religious reasons for providing health-insurance coverage for their employees. Before the advent of ACA, they were not legally compelled to provide insurance, but they nevertheless did so-in part, no doubt, for conventional business reasons, but also in part because their religious beliefs govern their relations with their employees. See App. to Pet. for Cert. in No. 13-356, p. 11g; App. in No. 13-354, at 139.
Putting aside the religious dimension of the decision to provide insurance, moreover, it is far from clear that the net cost to the companies of providing insurance is more than the cost of dropping their insurance plans and paying the ACA penalty. Health insurance is a benefit that employees value. If the companies simply eliminated that benefit and forced employees to *2777purchase their own insurance on the exchanges, without offering additional compensation, it is predictable that the companies would face a competitive disadvantage in retaining and attracting skilled workers. See App. in No. 13-354, at 153.
The companies could attempt to make up for the elimination of a group health plan by increasing wages, but this would be costly. Group health insurance is generally less expensive than comparable individual coverage, so the amount of the salary increase needed to fully compensate for the termination of insurance coverage may well exceed the cost to the companies of providing the insurance. In addition, any salary increase would have to take into account the fact that employees must pay income taxes on wages but not on the value of employer-provided health insurance. 26 U.S.C. § 106(a). Likewise, employers can deduct the cost of providing health insurance, see § 162(a)(1), but apparently cannot deduct the amount of the penalty that they must pay if insurance is not provided; that difference also must be taken into account. Given these economic incentives, it is far from clear that it would be financially advantageous for an employer to drop coverage and pay the penalty.32
In sum, we refuse to sustain the challenged regulations on the ground-never maintained by the Government-that dropping insurance coverage eliminates the substantial burden that the HHS mandate imposes. We doubt that the Congress that enacted RFRA-or, for that matter, ACA-would have believed it a tolerable result to put family-run businesses to the choice of violating their sincerely held religious beliefs or making all of their employees lose their existing healthcare plans.
C
In taking the position that the HHS mandate does not impose a substantial burden on the exercise of religion, HHS's main argument (echoed by the principal dissent) is basically that the connection between what the objecting parties must do (provide health-insurance coverage for four methods of contraception that may operate after the fertilization of an egg) and the end that they find to be morally wrong (destruction of an embryo) is simply too attenuated. Brief for HHS in 13-354, pp. 31-34; post, at 2798 - 2799. HHS and the dissent note that providing the coverage would not itself result in the destruction of an embryo; that would occur only if an employee chose to take advantage of the coverage and to use one of the four methods at issue. 33Ibid.
*2778This argument dodges the question that RFRA presents (whether the HHS mandate imposes a substantial burden on the ability of the objecting parties to conduct business in accordance with their religious beliefs ) and instead addresses a very different question that the federal courts have no business addressing (whether the religious belief asserted in a RFRA case is reasonable). The Hahns and Greens believe that providing the coverage demanded by the HHS regulations is connected to the destruction of an embryo in a way that is sufficient to make it immoral for them to provide the coverage. This belief implicates a difficult and important question of religion and moral philosophy, namely, the circumstances under which it is wrong for a person to perform an act that is innocent in itself but that has the effect of enabling or facilitating the commission of an immoral act by another.34 Arrogating the authority to provide a binding national answer to this religious and philosophical question, HHS and the principal dissent in effect tell the plaintiffs that their beliefs are flawed. For good reason, we have repeatedly refused to take such a step. See, e.g., Smith, 494 U.S., at 887, 110 S.Ct. 1595 ("Repeatedly and in many different contexts, we have warned that courts must not presume to determine ... the plausibility of a religious claim"); Hernandez v. Commissioner, 490 U.S. 680, 699, 109 S.Ct. 2136, 104 L.Ed.2d 766 (1989); Presbyterian Church in U.S. v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 450, 89 S.Ct. 601, 21 L.Ed.2d 658 (1969).
Moreover, in Thomas v. Review Bd. of Indiana Employment Security Div., 450 U.S. 707, 101 S.Ct. 1425, 67 L.Ed.2d 624 (1981), we considered and rejected an argument that is nearly identical to the one now urged by HHS and the dissent. In Thomas, a Jehovah's Witness was initially employed making sheet steel for a variety of industrial uses, but he was later transferred to a job making turrets for tanks. Id., at 710, 101 S.Ct. 1425. Because he objected on religious grounds to participating in the manufacture of weapons, he lost his job and sought unemployment compensation. Ruling against the employee, the state court had difficulty with the line that the employee drew between work that he found to be consistent with his religious beliefs (helping to manufacture steel that was used in making weapons) and work that he found morally objectionable (helping to make the weapons themselves). This Court, however, held that "it is not for us to say that the line he drew was an unreasonable one." Id., at 715, 101 S.Ct. 1425.35
*2779Similarly, in these cases, the Hahns and Greens and their companies sincerely believe that providing the insurance coverage demanded by the HHS regulations lies on the forbidden side of the line, and it is not for us to say that their religious beliefs are mistaken or insubstantial. Instead, our "narrow function ... in this context is to determine" whether the line drawn reflects "an honest conviction," id., at 716, 101 S.Ct. 1425, and there is no dispute that it does.
HHS nevertheless compares these cases to decisions in which we rejected the argument that the use of general tax revenue to subsidize the secular activities of religious institutions violated the Free Exercise Clause. See Tilton v. Richardson, 403 U.S. 672, 689, 91 S.Ct. 2091, 29 L.Ed.2d 790 (1971) (plurality); Board of Ed. of Central School Dist. No. 1 v. Allen, 392 U.S. 236, 248-249, 88 S.Ct. 1923, 20 L.Ed.2d 1060 (1968). But in those cases, while the subsidies were clearly contrary to the challengers' views on a secular issue, namely, proper church-state relations, the challengers never articulated a religious objection to the subsidies. As we put it in Tilton, they were "unable to identify any coercion directed at the practice or exercise of their religious beliefs." 403 U.S., at 689, 91 S.Ct. 2091 (plurality opinion); see Allen, supra, at 249, 88 S.Ct. 1923 ("[A]ppellants have not contended that the New York law in any way coerces them as individuals in the practice of their religion"). Here, in contrast, the plaintiffs do assert that funding the specific contraceptive methods at issue violates their religious beliefs, and HHS does not question their sincerity. Because the contraceptive mandate forces them to pay an enormous sum of money-as much as $475 million per year in the case of Hobby Lobby-if they insist on providing insurance coverage in accordance with their religious beliefs, the mandate clearly imposes a substantial burden on those beliefs.
V
Since the HHS contraceptive mandate imposes a substantial burden on the exercise of religion, we must move on and decide whether HHS has shown that the mandate both "(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest." 42 U.S.C. § 2000bb-1(b).
A
HHS asserts that the contraceptive mandate serves a variety of important interests, but many of these are couched in very broad terms, such as promoting "public health" and "gender equality." Brief for HHS in No. 13-354, at 46, 49. RFRA, however, contemplates a "more focused" inquiry: It "requires the Government to demonstrate that the compelling interest test is satisfied through application of the challenged law 'to the person'-the particular claimant whose sincere exercise of religion is being substantially burdened." O Centro, 546 U.S., at 430-431, 126 S.Ct. 1211 (quoting § 2000bb-1(b)). This requires us to "loo[k] beyond broadly formulated interests" and to "scrutiniz[e] the asserted harm of granting specific exemptions to particular religious claimants"-in other words, to look to the marginal interest in enforcing the contraceptive mandate in these cases. O Centro, supra, at 431, 126 S.Ct. 1211.
In addition to asserting these very broadly framed interests, HHS maintains that the mandate serves a compelling interest in ensuring that all women have access to all FDA-approved contraceptives without cost sharing. See Brief for HHS in No. 13-354, at 14-15, 49; see Brief for HHS in No. 13-356, at 10, 48. Under our *2780cases, women (and men) have a constitutional right to obtain contraceptives, see Griswold v. Connecticut, 381 U.S. 479, 485-486, 85 S.Ct. 1678, 14 L.Ed.2d 510 (1965), and HHS tells us that "[s]tudies have demonstrated that even moderate copayments for preventive services can deter patients from receiving those services." Brief for HHS in No. 13-354, at 50 (internal quotation marks omitted).
The objecting parties contend that HHS has not shown that the mandate serves a compelling government interest, and it is arguable that there are features of ACA that support that view. As we have noted, many employees-those covered by grandfathered plans and those who work for employers with fewer than 50 employees-may have no contraceptive coverage without cost sharing at all.
HHS responds that many legal requirements have exceptions and the existence of exceptions does not in itself indicate that the principal interest served by a law is not compelling. Even a compelling interest may be outweighed in some circumstances by another even weightier consideration. In these cases, however, the interest served by one of the biggest exceptions, the exception for grandfathered plans, is simply the interest of employers in avoiding the inconvenience of amending an existing plan. Grandfathered plans are required "to comply with a subset of the Affordable Care Act's health reform provisions" that provide what HHS has described as "particularly significant protections." 75 Fed.Reg. 34540 (2010). But the contraceptive mandate is expressly excluded from this subset. Ibid.
We find it unnecessary to adjudicate this issue. We will assume that the interest in guaranteeing cost-free access to the four challenged contraceptive methods is compelling within the meaning of RFRA, and we will proceed to consider the final prong of the RFRA test, i.e., whether HHS has shown that the contraceptive mandate is "the least restrictive means of furthering that compelling governmental interest." § 2000bb-1(b)(2).
B
The least-restrictive-means standard is exceptionally demanding, see City of Boerne, 521 U.S., at 532, 117 S.Ct. 2157, and it is not satisfied here. HHS has not shown that it lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion by the objecting parties in these cases. See §§ 2000bb-1(a), (b) (requiring the Government to "demonstrat[e] that application of [a substantial] burden to the person ... is the least restrictive means of furthering [a] compelling governmental interest" (emphasis added)).
The most straightforward way of doing this would be for the Government to assume the cost of providing the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employers' religious objections. This would certainly be less restrictive of the plaintiffs' religious liberty, and HHS has not shown, see § 2000bb-1(b)(2), that this is not a viable alternative. HHS has not provided any estimate of the average cost per employee of providing access to these contraceptives, two of which, according to the FDA, are designed primarily for emergency use. See Birth Control: Medicines to Help You, online at http:// www. fda. gov/ forconsumers/ byaudience/ forwomen/ free publications/ ucm 313215. htm. Nor has HHS provided any statistics regarding the number of employees who might be affected because they work for corporations like Hobby Lobby, Conestoga, and Mardel. Nor has HHS told us that it is unable to provide such *2781statistics. It seems likely, however, that the cost of providing the forms of contraceptives at issue in these cases (if not all FDA-approved contraceptives) would be minor when compared with the overall cost of ACA. According to one of the Congressional Budget Office's most recent forecasts, ACA's insurance-coverage provisions will cost the Federal Government more than $1.3 trillion through the next decade. See CBO, Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014, p. 2.36 If, as HHS tells us, providing all women with cost-free access to all FDA-approved methods of contraception is a Government interest of the highest order, it is hard to understand HHS's argument that it cannot be required under RFRA to pay anything in order to achieve this important goal.
HHS contends that RFRA does not permit us to take this option into account because "RFRA cannot be used to require creation of entirely new programs." Brief for HHS in 13-354, at 15.37 But we see nothing in RFRA that supports this argument, and drawing the line between the "creation of an entirely new program" and the modification of an existing program (which RFRA surely allows) would be fraught with problems. We do not doubt that cost may be an important factor in the least-restrictive-means analysis, but both RFRA and its sister statute, RLUIPA, may in some circumstances require the Government to expend additional funds to accommodate citizens' religious beliefs. Cf. § 2000cc-3(c) (RLUIPA: "[T]his chapter may require a government to incur expenses in its own operations to avoid imposing a substantial burden on religious exercise."). HHS's view that RFRA can never require the Government to spend even a small amount reflects a judgment about the importance of religious liberty that was not shared by the Congress that enacted that law.
In the end, however, we need not rely on the option of a new, government-funded *2782program in order to conclude that the HHS regulations fail the least-restrictive-means test. HHS itself has demonstrated that it has at its disposal an approach that is less restrictive than requiring employers to fund contraceptive methods that violate their religious beliefs. As we explained above, HHS has already established an accommodation for nonprofit organizations with religious objections. See supra, at 2763 - 2764, and nn. 8-9. Under that accommodation, the organization can self-certify that it opposes providing coverage for particular contraceptive services. See 45 CFR §§ 147.131(b)(4), (c)(1); 26 CFR §§ 54.9815-2713A(a)(4), (b). If the organization makes such a certification, the organization's insurance issuer or third-party administrator must "[e]xpressly exclude contraceptive coverage from the group health insurance coverage provided in connection with the group health plan" and "[p]rovide separate payments for any contraceptive services required to be covered" without imposing "any cost-sharing requirements ... on the eligible organization, the group health plan, or plan participants or beneficiaries." 45 CFR § 147.131(c)(2); 26 CFR § 54.9815-2713A(c)(2). 38
We do not decide today whether an approach of this type complies with RFRA for purposes of all religious claims.39 At a minimum, however, it does not impinge on the plaintiffs' religious belief that providing insurance coverage for the contraceptives at issue here violates their religion, and it serves HHS's stated interests equally well.40
The principal dissent identifies no reason why this accommodation would fail to protect the asserted needs of women as effectively as the contraceptive mandate, and there is none.41 Under the accommodation, the plaintiffs' female employees would continue to receive contraceptive coverage without cost sharing for all FDA-approved contraceptives, and they would continue to "face minimal logistical and administrative obstacles," post, at 2802 (internal quotation marks omitted), because their employers' insurers would be responsible for providing information and coverage, see, e.g.,45 CFR §§ 147.131(c)- (d); cf.
*278326 CFR §§ 54.9815-2713A(b), (d). Ironically, it is the dissent's approach that would "[i]mped[e] women's receipt of benefits by 'requiring them to take steps to learn about, and to sign up for, a new government funded and administered health benefit,' " post, at 2802, because the dissent would effectively compel religious employers to drop health-insurance coverage altogether, leaving their employees to find individual plans on government-run exchanges or elsewhere. This is indeed "scarcely what Congress contemplated." Ibid.
C
HHS and the principal dissent argue that a ruling in favor of the objecting parties in these cases will lead to a flood of religious objections regarding a wide variety of medical procedures and drugs, such as vaccinations and blood transfusions, but HHS has made no effort to substantiate this prediction.42 HHS points to no evidence that insurance plans in existence prior to the enactment of ACA excluded coverage for such items. Nor has HHS provided evidence that any significant number of employers sought exemption, on religious grounds, from any of ACA's coverage requirements other than the contraceptive mandate.
It is HHS's apparent belief that no insurance-coverage mandate would violate RFRA-no matter how significantly it impinges on the religious liberties of employers-that would lead to intolerable consequences. Under HHS's view, RFRA would permit the Government to require all employers to provide coverage for any medical procedure allowed by law in the jurisdiction in question-for instance, third-trimester abortions or assisted suicide. The owners of many closely held corporations could not in good conscience provide such coverage, and thus HHS would effectively exclude these people from full participation in the economic life of the Nation. RFRA was enacted to prevent such an outcome.
In any event, our decision in these cases is concerned solely with the contraceptive mandate. Our decision should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer's religious beliefs. Other coverage requirements, such as immunizations, may be supported by different interests (for example, the need to combat the spread of infectious diseases) and may involve different arguments about the least restrictive means of providing them.
The principal dissent raises the possibility that discrimination in hiring, for example on the basis of race, might be cloaked as religious practice to escape legal sanction. See post, at 2804 - 2805. Our decision today provides no such shield. The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal.
HHS also raises for the first time in this Court the argument that applying the contraceptive mandate to for-profit employers with sincere religious objections is essential to the comprehensive health-insurance scheme that ACA establishes. HHS analogizes the contraceptive mandate to the requirement to pay Social Security taxes, which we upheld in Lee despite the religious objection of an employer, but these *2784cases are quite different. Our holding in Lee turned primarily on the special problems associated with a national system of taxation. We noted that "[t]he obligation to pay the social security tax initially is not fundamentally different from the obligation to pay income taxes." 455 U.S., at 260, 102 S.Ct. 1051. Based on that premise, we explained that it was untenable to allow individuals to seek exemptions from taxes based on religious objections to particular Government expenditures: "If, for example, a religious adherent believes war is a sin, and if a certain percentage of the federal budget can be identified as devoted to war-related activities, such individuals would have a similarly valid claim to be exempt from paying that percentage of the income tax." Ibid. We observed that "[t]he tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious belief." Ibid.; see O Centro, 546 U.S., at 435, 126 S.Ct. 1211.
Lee was a free-exercise, not a RFRA, case, but if the issue in Lee were analyzed under the RFRA framework, the fundamental point would be that there simply is no less restrictive alternative to the categorical requirement to pay taxes. Because of the enormous variety of government expenditures funded by tax dollars, allowing taxpayers to withhold a portion of their tax obligations on religious grounds would lead to chaos. Recognizing exemptions from the contraceptive mandate is very different. ACA does not create a large national pool of tax revenue for use in purchasing healthcare coverage. Rather, individual employers like the plaintiffs purchase insurance for their own employees. And contrary to the principal dissent's characterization, the employers' contributions do not necessarily funnel into "undifferentiated funds." Post, at 2799. The accommodation established by HHS requires issuers to have a mechanism by which to "segregate premium revenue collected from the eligible organization from the monies used to provide payments for contraceptive services." 45 CFR § 147.131(c)(2)(ii). Recognizing a religious accommodation under RFRA for particular coverage requirements, therefore, does not threaten the viability of ACA's comprehensive scheme in the way that recognizing religious objections to particular expenditures from general tax revenues would.43
In its final pages, the principal dissent reveals that its fundamental objection to the claims of the plaintiffs is an objection to RFRA itself. The dissent worries about forcing the federal courts to apply RFRA to a host of claims made by litigants seeking a religious exemption from generally applicable laws, and the dissent expresses a desire to keep the courts out of this business. See post, at 2804 - 2806. In making this plea, the dissent reiterates a point made forcefully by the Court in Smith. 494 U.S., at 888-889, 110 S.Ct. 1595 (applying the Sherbert test to all free-*2785exercise claims "would open the prospect of constitutionally required religious exemptions from civic obligations of almost every conceivable kind"). But Congress, in enacting RFRA, took the position that "the compelling interest test as set forth in prior Federal court rulings is a workable test for striking sensible balances between religious liberty and competing prior governmental interests." 42 U.S.C. § 2000bb(a)(5). The wisdom of Congress's judgment on this matter is not our concern. Our responsibility is to enforce RFRA as written, and under the standard that RFRA prescribes, the HHS contraceptive mandate is unlawful.
* * *
The contraceptive mandate, as applied to closely held corporations, violates RFRA. Our decision on that statutory question makes it unnecessary to reach the First Amendment claim raised by Conestoga and the Hahns.
The judgment of the Tenth Circuit in No. 13-354 is affirmed; the judgment of the Third Circuit in No. 13-356 is reversed, and that case is remanded for further proceedings consistent with this opinion.
It is so ordered.
It seems to me appropriate, in joining the Court's opinion, to add these few remarks. At the outset it should be said that the Court's opinion does not have the breadth and sweep ascribed to it by the respectful and powerful dissent. The Court and the dissent disagree on the proper interpretation of the Religious Freedom and Restoration Act of 1993 (RFRA), but do agree on the purpose of that statute. 42 U.S.C. § 2000bb et seq.It is to ensure that interests in religious freedom are protected. Ante, at 2760 - 2761; post, at 2790 - 2791 (GINSBURG, J., dissenting).
In our constitutional tradition, freedom means that all persons have the right to believe or strive to believe in a divine creator and a divine law. For those who choose this course, free exercise is essential in preserving their own dignity and in striving for a self-definition shaped by their religious precepts. Free exercise in this sense implicates more than just freedom of belief. See Cantwell v. Connecticut, 310 U.S. 296, 303, 60 S.Ct. 900, 84 L.Ed. 1213 (1940). It means, too, the right to express those beliefs and to establish one's religious (or nonreligious) self-definition in the political, civic, and economic life of our larger community. But in a complex society and an era of pervasive governmental regulation, defining the proper realm for free exercise can be difficult. In these cases the plaintiffs deem it necessary to exercise their religious beliefs within the context of their own closely held, for-profit corporations. They claim protection under RFRA, the federal statute discussed with care and in detail in the Court's opinion.
As the Court notes, under our precedents, RFRA imposes a " 'stringent test.' " Ante, at 2761 (quoting City of Boerne v. Flores, 521 U.S. 507, 533, 117 S.Ct. 2157, 138 L.Ed.2d 624 (1997)). The Government must demonstrate that the application of a substantial burden to a person's exercise of religion "(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest." § 2000bb-1(b).
As to RFRA's first requirement, the Department of Health and Human Services (HHS) makes the case that the mandate serves the Government's compelling interest in providing insurance coverage that is necessary to protect the health of *2786female employees, coverage that is significantly more costly than for a male employee. Ante, at 2779; see, e.g., Brief for HHS in No. 13-354, pp. 14-15. There are many medical conditions for which pregnancy is contraindicated. See, e.g., id., at 2784. It is important to confirm that a premise of the Court's opinion is its assumption that the HHS regulation here at issue furthers a legitimate and compelling interest in the health of female employees. Ante, at 2780.
But the Government has not made the second showing required by RFRA, that the means it uses to regulate is the least restrictive way to further its interest. As the Court's opinion explains, the record in these cases shows that there is an existing, recognized, workable, and already-implemented framework to provide coverage. That framework is one that HHS has itself devised, that the plaintiffs have not criticized with a specific objection that has been considered in detail by the courts in this litigation, and that is less restrictive than the means challenged by the plaintiffs in these cases. Ante, at 2763 - 2764, and n. 9, 2781 - 2782.
The means the Government chose is the imposition of a direct mandate on the employers in these cases. Ante, at 2762 - 2763. But in other instances the Government has allowed the same contraception coverage in issue here to be provided to employees of nonprofit religious organizations, as an accommodation to the religious objections of those entities. See ante, at 2763 - 2764, and n. 9, 2781 - 2782. The accommodation works by requiring insurance companies to cover, without cost sharing, contraception coverage for female employees who wish it. That accommodation equally furthers the Government's interest but does not impinge on the plaintiffs' religious beliefs. See ante, at 2782.
On this record and as explained by the Court, the Government has not met its burden of showing that it cannot accommodate the plaintiffs' similar religious objections under this established framework. RFRA is inconsistent with the insistence of an agency such as HHS on distinguishing between different religious believers-burdening one while accommodating the other-when it may treat both equally by offering both of them the same accommodation.
The parties who were the plaintiffs in the District Courts argue that the Government could pay for the methods that are found objectionable. Brief for Respondents in No. 13-354, p. 58. In discussing this alternative, the Court does not address whether the proper response to a legitimate claim for freedom in the health care arena is for the Government to create an additional program. Ante, at 2780 - 2782. The Court properly does not resolve whether one freedom should be protected by creating incentives for additional government constraints. In these cases, it is the Court's understanding that an accommodation may be made to the employers without imposition of a whole new program or burden on the Government. As the Court makes clear, this is not a case where it can be established that it is difficult to accommodate the government's interest, and in fact the mechanism for doing so is already in place. Ante, at 2781 - 2782.
"[T]he American community is today, as it long has been, a rich mosaic of religious faiths." Town of Greece v. Galloway, 572 U.S. ----, ----, 134 S.Ct. 1811, 1849, 188 L.Ed.2d 835 (2014) (KAGAN, J., dissenting). Among the reasons the United States is so open, so tolerant, and so free is that no person may be restricted or demeaned by government in exercising his or her religion. Yet neither may that *2787same exercise unduly restrict other persons, such as employees, in protecting their own interests, interests the law deems compelling. In these cases the means to reconcile those two priorities are at hand in the existing accommodation the Government has designed, identified, and used for circumstances closely parallel to those presented here. RFRA requires the Government to use this less restrictive means. As the Court explains, this existing model, designed precisely for this problem, might well suffice to distinguish the instant cases from many others in which it is more difficult and expensive to accommodate a governmental program to countless religious claims based on an alleged statutory right of free exercise. Ante, at 2782 - 2783.
For these reasons and others put forth by the Court, I join its opinion.
Justice GINSBURG, with whom Justice Sotomayor joins, and with whom Justice BREYER and Justice KAGAN join as to all but Part III-C-1, dissenting.
In a decision of startling breadth, the Court holds that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs. See ante, at 2767 - 2785. Compelling governmental interests in uniform compliance with the law, and disadvantages that religion-based opt-outs impose on others, hold no sway, the Court decides, at least when there is a "less restrictive alternative." And such an alternative, the Court suggests, there always will be whenever, in lieu of tolling an enterprise claiming a religion-based exemption, the government, i.e., the general public, can pick up the tab. See ante, at 2780 - 2782.1
The Court does not pretend that the First Amendment's Free Exercise Clause demands religion-based accommodations so extreme, for our decisions leave no doubt on that score. See infra, at 2789 - 2791. Instead, the Court holds that Congress, in the Religious Freedom Restoration Act of 1993 (RFRA), 42 U.S.C. § 2000bb et seq., dictated the extraordinary religion-based exemptions today's decision endorses. In the Court's view, RFRA demands accommodation of a for-profit corporation's religious beliefs no matter the impact that accommodation may have on third parties who do not share the corporation owners' religious faith-in these cases, thousands of women employed by Hobby Lobby and Conestoga or dependents of persons those corporations employ. Persuaded that Congress enacted RFRA to serve a far less radical purpose, and mindful of the havoc the Court's judgment can introduce, I dissent.
I
"The ability of women to participate equally in the economic and social life of the Nation has been facilitated by their ability to control their reproductive lives."
*2788Planned Parenthood of Southeastern Pa. v. Casey, 505 U.S. 833, 856, 112 S.Ct. 2791, 120 L.Ed.2d 674 (1992). Congress acted on that understanding when, as part of a nationwide insurance program intended to be comprehensive, it called for coverage of preventive care responsive to women's needs. Carrying out Congress' direction, the Department of Health and Human Services (HHS), in consultation with public health experts, promulgated regulations requiring group health plans to cover all forms of contraception approved by the Food and Drug Administration (FDA). The genesis of this coverage should enlighten the Court's resolution of these cases.
A
The Affordable Care Act (ACA), in its initial form, specified three categories of preventive care that health plans must cover at no added cost to the plan participant or beneficiary.2 Particular services were to be recommended by the U.S. Preventive Services Task Force, an independent panel of experts. The scheme had a large gap, however; it left out preventive services that "many women's health advocates and medical professionals believe are critically important." 155 Cong. Rec. 28841 (2009) (statement of Sen. Boxer). To correct this oversight, Senator Barbara Mikulski introduced the Women's Health Amendment, which added to the ACA's minimum coverage requirements a new category of preventive services specific to women's health.
Women paid significantly more than men for preventive care, the amendment's proponents noted; in fact, cost barriers operated to block many women from obtaining needed care at all. See, e.g., id., at 29070 (statement of Sen. Feinstein) ("Women of childbearing age spend 68 percent more in out-of-pocket health care costs than men."); id., at 29302 (statement of Sen. Mikulski) ("copayments are [often] so high that [women] avoid getting [preventive and screening services] in the first place"). And increased access to contraceptive services, the sponsors comprehended, would yield important public health gains. See, e.g., id., at 29768 (statement of Sen. Durbin) ("This bill will expand health insurance coverage to the vast majority of [the 17 million women of reproductive age in the United States who are uninsured].... This expanded access will reduce unintended pregnancies.").
As altered by the Women's Health Amendment's passage, the ACA requires new insurance plans to include coverage without cost sharing of "such additional preventive care and screenings ... as provided for in comprehensive guidelines supported by the Health Resources and Services Administration [ (HRSA) ]," a unit of HHS. 42 U.S.C. § 300gg-13(a)(4). Thus charged, the HRSA developed recommendations in consultation with the Institute of Medicine (IOM). See 77 Fed.Reg. 8725-8726 (2012).3 The IOM convened a group of independent experts, including "specialists in disease prevention [and] women's health"; those experts prepared a report *2789evaluating the efficacy of a number of preventive services. IOM, Clinical Prevention Services for Women: Closing the Gaps 2 (2011) (hereinafter IOM Report). Consistent with the findings of "[n]umerous health professional associations" and other organizations, the IOM experts determined that preventive coverage should include the "full range" of FDA-approved contraceptive methods. Id., at 10. See also id., at 102-110.
In making that recommendation, the IOM's report expressed concerns similar to those voiced by congressional proponents of the Women's Health Amendment. The report noted the disproportionate burden women carried for comprehensive health services and the adverse health consequences of excluding contraception from preventive care available to employees without cost sharing. See, e.g., id., at 19 ("[W]omen are consistently more likely than men to report a wide range of cost-related barriers to receiving ... medical tests and treatments and to filling prescriptions for themselves and their families."); id., at 103-104, 107 (pregnancy may be contraindicated for women with certain medical conditions, for example, some congenital heart diseases, pulmonary hypertension, and Marfan syndrome, and contraceptives may be used to reduce risk of endometrial cancer, among other serious medical conditions); id., at 103 (women with unintended pregnancies are more likely to experience depression and anxiety, and their children face "increased odds of preterm birth and low birth weight").
In line with the IOM's suggestions, the HRSA adopted guidelines recommending coverage of "[a]ll [FDA-] approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity." 4 Thereafter, HHS, the Department of Labor, and the Department of Treasury promulgated regulations requiring group health plans to include coverage of the contraceptive services recommended in the HRSA guidelines, subject to certain exceptions, described infra, at 2800 - 2801. 5 This opinion refers to these regulations as the contraceptive coverage requirement.
B
While the Women's Health Amendment succeeded, a countermove proved unavailing. The Senate voted down the so-called "conscience amendment," which would have enabled any employer or insurance provider to deny coverage based on its asserted "religious beliefs or moral convictions." 158 Cong. Rec. S539 (Feb. 9, 2012); see id., at S1162-S1173 (Mar. 1, 2012) (debate and vote). 6 That amendment, Senator Mikulski observed, would have "pu[t] the personal opinion of employers and insurers over the practice of medicine." Id., at S1127 (Feb. 29, 2012). Rejecting the "conscience amendment," Congress left health care decisions-including the choice among contraceptive *2790methods-in the hands of women, with the aid of their health care providers.
II
Any First Amendment Free Exercise Clause claim Hobby Lobby or Conestoga 7 might assert is foreclosed by this Court's decision in Employment Div., Dept. of Human Resources of Ore. v. Smith, 494 U.S. 872, 110 S.Ct. 1595, 108 L.Ed.2d 876 (1990). In Smith, two members of the Native American Church were dismissed from their jobs and denied unemployment benefits because they ingested peyote at, and as an essential element of, a religious ceremony. Oregon law forbade the consumption of peyote, and this Court, relying on that prohibition, rejected the employees' claim that the denial of unemployment benefits violated their free exercise rights. The First Amendment is not offended, Smith held, when "prohibiting the exercise of religion ... is not the object of [governmental regulation] but merely the incidental effect of a generally applicable and otherwise valid provision." Id., at 878, 110 S.Ct. 1595; see id., at 878-879, 110 S.Ct. 1595 ("an individual's religious beliefs [do not] excuse him from compliance with an otherwise valid law prohibiting conduct that the State is free to regulate"). The ACA's contraceptive coverage requirement applies generally, it is "otherwise valid," it trains on women's well being, not on the exercise of religion, and any effect it has on such exercise is incidental.
Even if Smith did not control, the Free Exercise Clause would not require the exemption Hobby Lobby and Conestoga seek. Accommodations to religious beliefs or observances, the Court has clarified, must not significantly impinge on the interests of third parties.8
The exemption sought by Hobby Lobby and Conestoga would override significant interests of the corporations' employees and covered dependents. It would deny legions of women who do not hold their employers' beliefs access to contraceptive coverage that the ACA would otherwise secure. See Catholic Charities of Sacramento, Inc. v. Superior Court, 32 Cal.4th 527, 565, 10 Cal.Rptr.3d 283, 85 P.3d 67, 93 (2004) ("We are unaware of any decision in which ... [the U.S. Supreme Court] has exempted a religious objector from the operation of a neutral, generally applicable law despite the recognition that the requested *2791exemption would detrimentally affect the rights of third parties."). In sum, with respect to free exercise claims no less than free speech claims, " '[y]our right to swing your arms ends just where the other man's nose begins.' " Chafee, Freedom of Speech in War Time, 32 Harv. L.Rev. 932, 957 (1919).
III
A
Lacking a tenable claim under the Free Exercise Clause, Hobby Lobby and Conestoga rely on RFRA, a statute instructing that "[g]overnment shall not substantially burden a person's exercise of religion even if the burden results from a rule of general applicability" unless the government shows that application of the burden is "the least restrictive means" to further a "compelling governmental interest." 42 U.S.C. § 2000bb-1(a), (b)(2). In RFRA, Congress "adopt[ed] a statutory rule comparable to the constitutional rule rejected in Smith." Gonzales v. O Centro Espírita Beneficente Uniao do Vegetal, 546 U.S. 418, 424, 126 S.Ct. 1211, 163 L.Ed.2d 1017 (2006).
RFRA's purpose is specific and written into the statute itself. The Act was crafted to "restore the compelling interest test as set forth in Sherbert v. Verner, 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d 965 (1963) and Wisconsin v. Yoder, 406 U.S. 205, 92 S.Ct. 1526, 32 L.Ed.2d 15 (1972) and to guarantee its application in all cases where free exercise of religion is substantially burdened." § 2000bb(b)(1).9 See also § 2000bb(a)(5) ("[T]he compelling interest test as set forth in prior Federal court rulings is a workable test for striking sensible balances between religious liberty and competing prior governmental interests."); ante, at 2785 (agreeing that the pre- Smith compelling interest test is "workable" and "strike[s] sensible balances").
The legislative history is correspondingly emphatic on RFRA's aim. See, e.g.,S.Rep. No. 103-111, p. 12 (1993) (hereinafter Senate Report) (RFRA's purpose was "only to overturn the Supreme Court's decision in Smith," not to "unsettle other areas of the law."); 139 Cong. Rec. 26178 (1993) (statement of Sen. Kennedy) (RFRA was "designed to restore the compelling interest test for deciding free exercise claims."). In line with this restorative purpose, Congress expected courts considering RFRA claims to "look to free exercise cases decided prior to Smith for guidance." Senate Report 8. See also H.R.Rep. No. 103-88, pp. 6-7 (1993) (hereinafter House Report) (same). In short, the Act reinstates the law as it was prior to Smith, without "creat[ing] ... new rights for any religious practice or for any potential litigant." 139 Cong. Rec. 26178 (statement of Sen. Kennedy). Given the Act's moderate purpose, it is hardly surprising that RFRA's enactment in 1993 provoked little controversy. See Brief for Senator Murray et al. as Amici Curiae 8 (hereinafter Senators Brief) (RFRA was approved by a 97-to-3 vote in the Senate and a voice vote in the House of Representatives).
B
Despite these authoritative indications, the Court sees RFRA as a bold initiative departing from, rather than restoring, pre-*2792Smith jurisprudence. See ante, at 2761, n. 3, 2761 - 2762, 2767, 2771 - 2773. To support its conception of RFRA as a measure detached from this Court's decisions, one that sets a new course, the Court points first to the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), 42 U.S.C. § 2000cc et seq., which altered RFRA's definition of the term "exercise of religion." RFRA, as originally enacted, defined that term to mean "the exercise of religion under the First Amendment to the Constitution." § 2000bb-2(4) (1994 ed.). See ante, at 2761 - 2762. As amended by RLUIPA, RFRA's definition now includes "any exercise of religion, whether or not compelled by, or central to, a system of religious belief." § 2000bb-2(4) (2012 ed.) (cross-referencing § 2000cc-5). That definitional change, according to the Court, reflects "an obvious effort to effect a complete separation from First Amendment case law." Ante, at 2761 - 2762.
The Court's reading is not plausible. RLUIPA's alteration clarifies that courts should not question the centrality of a particular religious exercise. But the amendment in no way suggests that Congress meant to expand the class of entities qualified to mount religious accommodation claims, nor does it relieve courts of the obligation to inquire whether a government action substantially burdens a religious exercise. See Rasul v. Myers, 563 F.3d 527, 535 (C.A.D.C.2009) (Brown, J., concurring) ("There is no doubt that RLUIPA's drafters, in changing the definition of 'exercise of religion,' wanted to broaden the scope of the kinds of practices protected by RFRA, not increase the universe of individuals protected by RFRA."); H.R.Rep. No. 106-219, p. 30 (1999). See also Gilardi v. United States Dept. of Health and Human Servs., 733 F.3d 1208, 1211 (C.A.D.C.2013) (RFRA, as amended, "provides us with no helpful definition of 'exercise of religion.' "); Henderson v. Kennedy, 265 F.3d 1072, 1073 (C.A.D.C.2001) ("The [RLUIPA] amendments did not alter RFRA's basic prohibition that the '[g]overnment shall not substantially burden a person's exercise of religion.' ").10
Next, the Court highlights RFRA's requirement that the government, if its action substantially burdens a person's religious observance, must demonstrate that it chose the least restrictive means for furthering a compelling interest. "[B]y imposing a least-restrictive-means test," the Court suggests, RFRA "went beyond what was required by our pre- Smith decisions." Ante, at 2767, n. 18 (citing City of Boerne v. Flores, 521 U.S. 507, 117 S.Ct. 2157, 138 L.Ed.2d 624 (1997)). See also ante, at 2761, n. 3. But as RFRA's statements of purpose and legislative history make clear, Congress intended only to restore, not to scrap or alter, the balancing test as this Court had applied it pre-Smith. See supra, at 2790 - 2791. See also Senate Report 9 (RFRA's "compelling interest test generally should not be construed more stringently or more leniently than it was prior to Smith."); House Report 7 (same).
The Congress that passed RFRA correctly read this Court's pre- Smith case law as including within the "compelling interest test" a "least restrictive means" requirement. See, e.g., Senate Report 5 ("Where [a substantial] burden is placed *2793upon the free exercise of religion, the Court ruled [in Sherbert ], the Government must demonstrate that it is the least restrictive means to achieve a compelling governmental interest."). And the view that the pre- Smith test included a "least restrictive means" requirement had been aired in testimony before the Senate Judiciary Committee by experts on religious freedom. See, e.g., Hearing on S. 2969 before the Senate Committee on the Judiciary, 102d Cong., 2d Sess., 78-79 (1993) (statement of Prof. Douglas Laycock).
Our decision in City of Boerne, it is true, states that the least restrictive means requirement "was not used in the pre- Smith jurisprudence RFRA purported to codify." See ante, at 2761, n. 3, 2767, n. 18. As just indicated, however, that statement does not accurately convey the Court's pre- Smith jurisprudence. See Sherbert, 374 U.S., at 407, 83 S.Ct. 1790 ("[I]t would plainly be incumbent upon the [government] to demonstrate that no alternative forms of regulation would combat [the problem] without infringing First Amendment rights."); Thomas v. Review Bd. of Indiana Employment Security Div., 450 U.S. 707, 718, 101 S.Ct. 1425, 67 L.Ed.2d 624 (1981) ("The state may justify an inroad on religious liberty by showing that it is the least restrictive means of achieving some compelling state interest."). See also Berg, The New Attacks on Religious Freedom Legislation and Why They Are Wrong, 21 Cardozo L.Rev. 415, 424 (1999) ("In Boerne, the Court erroneously said that the least restrictive means test 'was not used in the pre- Smith jurisprudence.' ").11
C
With RFRA's restorative purpose in mind, I turn to the Act's application to the instant lawsuits. That task, in view of the positions taken by the Court, requires consideration of several questions, each potentially dispositive of Hobby Lobby's and Conestoga's claims: Do for-profit corporations rank among "person[s]" who "exercise ... religion"? Assuming that they do, does the contraceptive coverage requirement "substantially burden" their religious exercise? If so, is the requirement "in furtherance of a compelling government interest"? And last, does the requirement represent the least restrictive means for furthering that interest?
Misguided by its errant premise that RFRA moved beyond the pre- Smith case law, the Court falters at each step of its analysis.
1
RFRA's compelling interest test, as noted, see supra, at 2790, applies to government actions that "substantially burden a person's exercise of religion." 42 U.S.C. § 2000bb-1(a) (emphasis added). This reference, the Court submits, incorporates the definition of "person" found in the Dictionary Act, 1 U.S.C. § 1, which extends to "corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals." See ante, at 2768 . The Dictionary Act's definition, however, controls only where "context" does not "indicat[e] otherwise." § 1. Here, context does so indicate. RFRA speaks of "a person's exercise of religion." 42 U.S.C. § 2000bb-1(a) (emphasis added). See also §§ 2000bb-2(4), *27942000cc-5(7)(a).12 Whether a corporation qualifies as a "person" capable of exercising religion is an inquiry one cannot answer without reference to the "full body" of pre- Smith "free-exercise caselaw." Gilardi, 733 F.3d, at 1212. There is in that case law no support for the notion that free exercise rights pertain to for-profit corporations.
Until this litigation, no decision of this Court recognized a for-profit corporation's qualification for a religious exemption from a generally applicable law, whether under the Free Exercise Clause or RFRA.13 The absence of such precedent is just what one would expect, for the exercise of religion is characteristic of natural persons, not artificial legal entities. As Chief Justice Marshall observed nearly two centuries ago, a corporation is "an artificial being, invisible, intangible, and existing only in contemplation of law." Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 636, 4 L.Ed. 629 (1819). Corporations, Justice Stevens more recently reminded, "have no consciences, no beliefs, no feelings, no thoughts, no desires." Citizens United v. Federal Election Comm'n, 558 U.S. 310, 466, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010) (opinion concurring in part and dissenting in part).
The First Amendment's free exercise protections, the Court has indeed recognized, shelter churches and other nonprofit religion-based organizations. 14 "For many individuals, religious activity derives meaning in large measure from participation in a larger religious community," and "furtherance of the autonomy of religious organizations often furthers individual religious freedom as well." Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327, 342, 107 S.Ct. 2862, 97 L.Ed.2d 273 (1987) (Brennan, J., concurring in judgment). The Court's "special solicitude to the rights of religious organizations,"
*2795Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 565 U.S. ----, ----, 132 S.Ct. 694, 706, 181 L.Ed.2d 650 (2012), however, is just that. No such solicitude is traditional for commercial organizations.15 Indeed, until today, religious exemptions had never been extended to any entity operating in "the commercial, profit-making world." Amos, 483 U.S., at 337, 107 S.Ct. 2862.16
The reason why is hardly obscure. Religious organizations exist to foster the interests of persons subscribing to the same religious faith. Not so of for-profit corporations. Workers who sustain the operations of those corporations commonly are not drawn from one religious community. Indeed, by law, no religion-based criterion can restrict the work force of for-profit corporations. See 42 U.S.C. §§ 2000e(b), 2000e-1(a), 2000e-2(a); cf. Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 80-81, 97 S.Ct. 2264, 53 L.Ed.2d 113 (1977) (Title VII requires reasonable accommodation of an employee's religious exercise, but such accommodation must not come "at the expense of other[ employees]").
*2796The distinction between a community made up of believers in the same religion and one embracing persons of diverse beliefs, clear as it is, constantly escapes the Court's attention.17 One can only wonder why the Court shuts this key difference from sight.
Reading RFRA, as the Court does, to require extension of religion-based exemptions to for-profit corporations surely is not grounded in the pre- Smith precedent Congress sought to preserve. Had Congress intended RFRA to initiate a change so huge, a clarion statement to that effect likely would have been made in the legislation. See Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001) (Congress does not "hide elephants in mouseholes"). The text of RFRA makes no such statement and the legislative history does not so much as mention for-profit corporations. See Hobby Lobby Stores, Inc. v. Sebelius, 723 F.3d 1114, 1169 (C.A.10 2013) (Briscoe, C.J., concurring in part and dissenting in part) (legislative record lacks "any suggestion that Congress foresaw, let alone intended that, RFRA would cover for-profit corporations"). See also Senators Brief 10-13 (none of the cases cited in House or Senate Judiciary Committee reports accompanying RFRA, or mentioned during floor speeches, recognized the free exercise rights of for-profit corporations).
The Court notes that for-profit corporations may support charitable causes and use their funds for religious ends, and therefore questions the distinction between such corporations and religious nonprofit organizations. See ante, at 2769 - 2772. See also ante, at 2786 (KENNEDY, J., concurring) (criticizing the Government for "distinguishing between different religious believers-burdening one while accommodating the other-when it may treat both equally by offering both of them the same accommodation").18 Again, the Court forgets that religious organizations exist to serve a community of believers. For-profit corporations do not fit that bill. Moreover, history is not on the Court's side. Recognition of the discrete characters of "ecclesiastical and lay" corporations dates back to Blackstone, see 1 W. Blackstone, Commentaries on the Laws of England 458 (1765), and was reiterated by this Court centuries before the enactment of the Internal Revenue Code. See Terrett v. Taylor, 9 Cranch 43, 49, 3 L.Ed. 650 (1815) (describing religious corporations); Trustees of Dartmouth College, 4 Wheat., at 645 (discussing "eleemosynary" corporations, including those "created for the promotion of religion"). To reiterate, "for-*2797profit corporations are different from religious non-profits in that they use labor to make a profit, rather than to perpetuate [the] religious value[s] [shared by a community of believers]." Gilardi, 733 F.3d, at 1242 (Edwards, J., concurring in part and dissenting in part) (emphasis deleted).
Citing Braunfeld v. Brown, 366 U.S. 599, 81 S.Ct. 1144, 6 L.Ed.2d 563 (1961), the Court questions why, if "a sole proprietorship that seeks to make a profit may assert a free-exercise claim, [Hobby Lobby and Conestoga] can't ... do the same?" Ante, at 2770 (footnote omitted). See also ante, at 2767 - 2768. But even accepting, arguendo, the premise that unincorporated business enterprises may gain religious accommodations under the Free Exercise Clause, the Court's conclusion is unsound. In a sole proprietorship, the business and its owner are one and the same. By incorporating a business, however, an individual separates herself from the entity and escapes personal responsibility for the entity's obligations. One might ask why the separation should hold only when it serves the interest of those who control the corporation. In any event, Braunfeld is hardly impressive authority for the entitlement Hobby Lobby and Conestoga seek. The free exercise claim asserted there was promptly rejected on the merits.
The Court's determination that RFRA extends to for-profit corporations is bound to have untoward effects. Although the Court attempts to cabin its language to closely held corporations, its logic extends to corporations of any size, public or private.19 Little doubt that RFRA claims will proliferate, for the Court's expansive notion of corporate personhood-combined with its other errors in construing RFRA-invites for-profit entities to seek religion-based exemptions from regulations they deem offensive to their faith.
2
Even if Hobby Lobby and Conestoga were deemed RFRA "person[s]," to gain an exemption, they must demonstrate that the contraceptive coverage requirement *2798"substantially burden[s] [their] exercise of religion." 42 U.S.C. § 2000bb-1(a). Congress no doubt meant the modifier "substantially" to carry weight. In the original draft of RFRA, the word "burden" appeared unmodified. The word "substantially" was inserted pursuant to a clarifying amendment offered by Senators Kennedy and Hatch. See 139 Cong. Rec. 26180. In proposing the amendment, Senator Kennedy stated that RFRA, in accord with the Court's pre- Smith case law, "does not require the Government to justify every action that has some effect on religious exercise." Ibid.
The Court barely pauses to inquire whether any burden imposed by the contraceptive coverage requirement is substantial. Instead, it rests on the Greens' and Hahns' "belie[f] that providing the coverage demanded by the HHS regulations is connected to the destruction of an embryo in a way that is sufficient to make it immoral for them to provide the coverage." Ante, at 2778.20 I agree with the Court that the Green and Hahn families' religious convictions regarding contraception are sincerely held. See Thomas, 450 U.S., at 715, 101 S.Ct. 1425 (courts are not to question where an individual "dr[aws] the line" in defining which practices run afoul of her religious beliefs). See also 42 U.S.C. §§ 2000bb-1(a), 2000bb-2(4), 2000cc-5(7)(A).21 But those beliefs, however deeply held, do not suffice to sustain a RFRA claim. RFRA, properly understood, distinguishes between "factual allegations that [plaintiffs'] beliefs are sincere and of a religious nature," which a court must accept as true, and the "legal conclusion ... that [plaintiffs'] religious exercise is substantially burdened," an inquiry the court must undertake. Kaemmerling v. Lappin, 553 F.3d 669, 679 (C.A.D.C.2008).
That distinction is a facet of the pre- Smith jurisprudence RFRA incorporates. Bowen v. Roy, 476 U.S. 693, 106 S.Ct. 2147, 90 L.Ed.2d 735 (1986), is instructive. There, the Court rejected a free exercise challenge to the Government's use of a Native American child's Social Security number for purposes of administering benefit programs. Without questioning the sincerity of the father's religious belief that "use of [his daughter's Social Security] number may harm [her] spirit," the Court concluded that the Government's internal uses of that number "place[d] [no] restriction on what [the father] may believe or what he may do." Id., at 699, 106 S.Ct. 2147 . Recognizing that the father's "religious views may not accept" the position that the challenged uses concerned only the Government's internal affairs, the Court explained that "for the adjudication of a constitutional claim, the Constitution, rather than an individual's religion, must *2799supply the frame of reference." Id., at 700-701, n. 6, 106 S.Ct. 2147. See also Hernandez v. Commissioner, 490 U.S. 680, 699, 109 S.Ct. 2136, 104 L.Ed.2d 766 (1989) (distinguishing between, on the one hand, "question[s] [of] the centrality of particular beliefs or practices to a faith, or the validity of particular litigants' interpretations of those creeds," and, on the other, "whether the alleged burden imposed [by the challenged government action] is a substantial one"). Inattentive to this guidance, today's decision elides entirely the distinction between the sincerity of a challenger's religious belief and the substantiality of the burden placed on the challenger.
Undertaking the inquiry that the Court forgoes, I would conclude that the connection between the families' religious objections and the contraceptive coverage requirement is too attenuated to rank as substantial. The requirement carries no command that Hobby Lobby or Conestoga purchase or provide the contraceptives they find objectionable. Instead, it calls on the companies covered by the requirement to direct money into undifferentiated funds that finance a wide variety of benefits under comprehensive health plans. Those plans, in order to comply with the ACA, see supra, at 2788 - 2790, must offer contraceptive coverage without cost sharing, just as they must cover an array of other preventive services.
Importantly, the decisions whether to claim benefits under the plans are made not by Hobby Lobby or Conestoga, but by the covered employees and dependents, in consultation with their health care providers. Should an employee of Hobby Lobby or Conestoga share the religious beliefs of the Greens and Hahns, she is of course under no compulsion to use the contraceptives in question. But "[n]o individual decision by an employee and her physician-be it to use contraception, treat an infection, or have a hip replaced-is in any meaningful sense [her employer's] decision or action." Grote v. Sebelius, 708 F.3d 850, 865 (C.A.7 2013) (Rovner, J., dissenting). It is doubtful that Congress, when it specified that burdens must be "substantia[l]," had in mind a linkage thus interrupted by independent decisionmakers (the woman and her health counselor) standing between the challenged government action and the religious exercise claimed to be infringed. Any decision to use contraceptives made by a woman covered under Hobby Lobby's or Conestoga's plan will not be propelled by the Government, it will be the woman's autonomous choice, informed by the physician she consults.
3
Even if one were to conclude that Hobby Lobby and Conestoga meet the substantial burden requirement, the Government has shown that the contraceptive coverage for which the ACA provides furthers compelling interests in public health and women's well being. Those interests are concrete, specific, and demonstrated by a wealth of empirical evidence. To recapitulate, the mandated contraception coverage enables women to avoid the health problems unintended pregnancies may visit on them and their children. See IOM Report 102-107. The coverage helps safeguard the health of women for whom pregnancy may be hazardous, even life threatening. See Brief for American College of Obstetricians and Gynecologists et al. as Amici Curiae 14-15. And the mandate secures benefits wholly unrelated to pregnancy, preventing certain cancers, menstrual disorders, and pelvic pain. Brief for Ovarian Cancer National Alliance et al. as Amici Curiae 4, 6-7, 15-16; 78 Fed.Reg. 39872 (2013); IOM Report 107.
That Hobby Lobby and Conestoga resist coverage for only 4 of the 20 FDA-approved *2800contraceptives does not lessen these compelling interests. Notably, the corporations exclude intrauterine devices (IUDs), devices significantly more effective, and significantly more expensive than other contraceptive methods. See id., at 105.22 Moreover, the Court's reasoning appears to permit commercial enterprises like Hobby Lobby and Conestoga to exclude from their group health plans all forms of contraceptives. See Tr. of Oral Arg. 38-39 (counsel for Hobby Lobby acknowledged that his "argument ... would apply just as well if the employer said 'no contraceptives' " (internal quotation marks added)).
Perhaps the gravity of the interests at stake has led the Court to assume, for purposes of its RFRA analysis, that the compelling interest criterion is met in these cases. See ante, at 2780.23 It bears note in this regard that the cost of an IUD is nearly equivalent to a month's full-time pay for workers earning the minimum wage, Brief for Guttmacher Institute et al. as Amici Curiae 16; that almost one-third of women would change their contraceptive method if costs were not a factor, Frost & Darroch, Factors Associated With Contraceptive Choice and Inconsistent Method Use, United States, 2004, 40 Perspectives on Sexual & Reproductive Health 94, 98 (2008); and that only one-fourth of women who request an IUD actually have one inserted after finding out how expensive it would be, Gariepy, Simon, Patel, Creinin, & Schwarz, The Impact of Out-of-Pocket Expense on IUD Utilization Among Women With Private Insurance, 84 Contraception e39, e40 (2011). See also Eisenberg, supra, at S60 (recent study found that women who face out-of-pocket IUD costs in excess of $50 were "11-times less likely to obtain an IUD than women who had to pay less than $50"); Postlethwaite, Trussell, Zoolakis, Shabear, & Petitti, A Comparison of Contraceptive Procurement Pre- and Post-Benefit Change, 76 Contraception 360, 361-362 (2007) (when one health system eliminated patient cost sharing for IUDs, use of this form of contraception more than doubled).
Stepping back from its assumption that compelling interests support the contraceptive coverage requirement, the Court notes that small employers and grandfathered plans are not subject to the requirement. If there is a compelling interest in contraceptive coverage, the Court suggests, Congress would not have created these exclusions. See ante, at 2779 - 2780.
Federal statutes often include exemptions for small employers, and such provisions have never been held to undermine the interests served by these statutes. See, e.g., Family and Medical Leave Act of 1993, 29 U.S.C. § 2611(4)(A)(i) (applicable to employers with 50 or more employees); Age Discrimination in Employment Act of 1967, 29 U.S.C. § 630(b) (originally exempting employers with fewer than 50 employees, 81 Stat. 605, the statute now *2801governs employers with 20 or more employees); Americans With Disabilities Act, 42 U.S.C. § 12111(5)(A) (applicable to employers with 15 or more employees); Title VII, 42 U.S.C. § 2000e(b) (originally exempting employers with fewer than 25 employees, see Arbaugh v. Y & H Corp., 546 U.S. 500, 505, n. 2, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006), the statute now governs employers with 15 or more employees).
The ACA's grandfathering provision, 42 U.S.C. § 18011, allows a phasing-in period for compliance with a number of the Act's requirements (not just the contraceptive coverage or other preventive services provisions). Once specified changes are made, grandfathered status ceases. See 45 CFR § 147.140(g). Hobby Lobby's own situation is illustrative. By the time this litigation commenced, Hobby Lobby did not have grandfathered status. Asked why by the District Court, Hobby Lobby's counsel explained that the "grandfathering requirements mean that you can't make a whole menu of changes to your plan that involve things like the amount of co-pays, the amount of co-insurance, deductibles, that sort of thing." App. in No. 13-354, pp. 39-40. Counsel acknowledged that, "just because of economic realities, our plan has to shift over time. I mean, insurance plans, as everyone knows, shif[t] over time." Id., at 40.24 The percentage of employees in grandfathered plans is steadily declining, having dropped from 56% in 2011 to 48% in 2012 to 36% in 2013. Kaiser Family Foundation & Health Research & Educ. Trust, Employer Benefits 2013 Annual Survey 7, 196. In short, far from ranking as a categorical exemption, the grandfathering provision is "temporary, intended to be a means for gradually transitioning employers into mandatory coverage." Gilardi, 733 F.3d, at 1241 (Edwards, J., concurring in part and dissenting in part).
The Court ultimately acknowledges a critical point: RFRA's application " must take adequate account of the burdens a requested accommodation may impose on nonbeneficiaries." Ante, at 2781, n. 37 (quoting Cutter v. Wilkinson, 544 U.S. 709, 720, 125 S.Ct. 2113, 161 L.Ed.2d 1020 (2005); emphasis added). No tradition, and no prior decision under RFRA, allows a religion-based exemption when the accommodation would be harmful to others-here, the very persons the contraceptive coverage requirement was designed to protect. Cf. supra, at 2790 - 2791; Prince v. Massachusetts, 321 U.S. 158, 177, 64 S.Ct. 438, 88 L.Ed. 645 (1944) (Jackson, J., dissenting) ("[The] limitations which of necessity bound religious freedom ... begin to operate whenever activities begin to affect or collide with liberties of others or of the public.").
4
After assuming the existence of compelling government interests, the Court holds that the contraceptive coverage requirement fails to satisfy RFRA's least restrictive means test. But the Government has shown that there is no less restrictive, equally effective means that would both (1) satisfy the challengers' religious objections to providing insurance coverage for certain contraceptives (which they believe cause abortions); and (2) carry out the objective of the ACA's contraceptive coverage requirement, to ensure that women employees *2802receive, at no cost to them, the preventive care needed to safeguard their health and well being. A "least restrictive means" cannot require employees to relinquish benefits accorded them by federal law in order to ensure that their commercial employers can adhere unreservedly to their religious tenets. See supra, at 2790 - 2791, 2801.25
Then let the government pay (rather than the employees who do not share their employer's faith), the Court suggests. "The most straightforward [alternative]," the Court asserts, "would be for the Government to assume the cost of providing ... contraceptives ... to any women who are unable to obtain them under their health-insurance policies due to their employers' religious objections." Ante, at 2780. The ACA, however, requires coverage of preventive services through the existing employer-based system of health insurance "so that [employees] face minimal logistical and administrative obstacles." 78 Fed.Reg. 39888. Impeding women's receipt of benefits "by requiring them to take steps to learn about, and to sign up for, a new [government funded and administered] health benefit" was scarcely what Congress contemplated. Ibid. Moreover, Title X of the Public Health Service Act, 42 U.S.C. § 300 et seq., "is the nation's only dedicated source of federal funding for safety net family planning services." Brief for National Health Law Program et al. as Amici Curiae 23. "Safety net programs like Title X are not designed to absorb the unmet needs of ... insured individuals." Id., at 24. Note, too, that Congress declined to write into law the preferential treatment Hobby Lobby and Conestoga describe as a less restrictive alternative. See supra, at 2789.
And where is the stopping point to the "let the government pay" alternative? Suppose an employer's sincerely held religious belief is offended by health coverage of vaccines, or paying the minimum wage, see Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 303, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985), or according women equal pay for substantially similar work, see Dole v. Shenandoah Baptist Church, 899 F.2d 1389, 1392 (C.A.4 1990)? Does it rank as a less restrictive alternative to require the government to provide the money or benefit to which the employer has a religion-based objection? 26 Because the Court cannot easily answer that question, it proposes something else: Extension to commercial enterprises of the accommodation already afforded to nonprofit religion-based organizations. See ante, at 2759 - 2760, 2763 - 2764, 2781 - 2783. "At a minimum," according to the Court, such an approach would not "impinge on [Hobby Lobby's and Conestoga's] religious belief." Ante, at 2782. I have already discussed the "special solicitude"
*2803generally accorded nonprofit religion-based organizations that exist to serve a community of believers, solicitude never before accorded to commercial enterprises comprising employees of diverse faiths. See supra, at 2794 - 2796.
Ultimately, the Court hedges on its proposal to align for-profit enterprises with nonprofit religion-based organizations. "We do not decide today whether [the] approach [the opinion advances] complies with RFRA for purposes of all religious claims." Ante, at 2782. Counsel for Hobby Lobby was similarly noncommittal. Asked at oral argument whether the Court-proposed alternative was acceptable,27 counsel responded: "We haven't been offered that accommodation, so we haven't had to decide what kind of objection, if any, we would make to that." Tr. of Oral Arg. 86-87.
Conestoga suggests that, if its employees had to acquire and pay for the contraceptives (to which the corporation objects) on their own, a tax credit would qualify as a less restrictive alternative. See Brief for Petitioners in No. 13-356, p. 64. A tax credit, of course, is one variety of "let the government pay." In addition to departing from the existing employer-based system of health insurance, Conestoga's alternative would require a woman to reach into her own pocket in the first instance, and it would do nothing for the woman too poor to be aided by a tax credit.
In sum, in view of what Congress sought to accomplish, i.e., comprehensive preventive care for women furnished through employer-based health plans, none of the proffered alternatives would satisfactorily serve the compelling interests to which Congress responded.
IV
Among the pathmarking pre- Smith decisions RFRA preserved is United States v. Lee, 455 U.S. 252, 102 S.Ct. 1051, 71 L.Ed.2d 127 (1982). Lee, a sole proprietor engaged in farming and carpentry, was a member of the Old Order Amish. He sincerely believed that withholding Social Security taxes from his employees or paying the employer's share of such taxes would violate the Amish faith. This Court held that, although the obligations imposed by the Social Security system conflicted with Lee's religious beliefs, the burden was not unconstitutional. Id., at 260-261, 102 S.Ct. 1051. See also id., at 258, 102 S.Ct. 1051 (recognizing the important governmental interest in providing a "nationwide ... comprehensive insurance system with a variety of benefits available to all participants, with costs shared by employers and employees").28 The Government *2804urges that Lee should control the challenges brought by Hobby Lobby and Conestoga. See Brief for Respondents in No. 13-356, p. 18. In contrast, today's Court dismisses Lee as a tax case. See ante, at 2783 - 2784. Indeed, it was a tax case and the Court in Lee homed in on "[t]he difficulty in attempting to accommodate religious beliefs in the area of taxation." 455 U.S., at 259, 102 S.Ct. 1051.
But the Lee Court made two key points one cannot confine to tax cases. "When followers of a particular sect enter into commercial activity as a matter of choice," the Court observed, "the limits they accept on their own conduct as a matter of conscience and faith are not to be superimposed on statutory schemes which are binding on others in that activity." Id., at 261, 102 S.Ct. 1051. The statutory scheme of employer-based comprehensive health coverage involved in these cases is surely binding on others engaged in the same trade or business as the corporate challengers here, Hobby Lobby and Conestoga. Further, the Court recognized in Lee that allowing a religion-based exemption to a commercial employer would "operat[e] to impose the employer's religious faith on the employees." Ibid.29 No doubt the Greens and Hahns and all who share their beliefs may decline to acquire for themselves the contraceptives in question. But that choice may not be imposed on employees who hold other beliefs. Working for Hobby Lobby or Conestoga, in other words, should not deprive employees of the preventive care available to workers at the shop next door,30 at least in the absence of directions from the Legislature or Administration to do so.
Why should decisions of this order be made by Congress or the regulatory authority, and not this Court? Hobby Lobby and Conestoga surely do not stand alone as commercial enterprises seeking exemptions from generally applicable laws on the basis of their religious beliefs. See, e.g., Newman v. Piggie Park Enterprises, Inc., 256 F.Supp. 941, 945 (D.S.C.1966) (owner of restaurant chain refused to serve black patrons based on his religious beliefs opposing racial integration), aff'd in relevant part and rev'd in part on other grounds, 377 F.2d 433 (C.A.4 1967), aff'd and modified on other grounds, 390 U.S. 400, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968); In re Minnesota ex rel. McClure, 370 N.W.2d 844, 847 (Minn.1985) (born-again Christians who owned closely held, for-profit health clubs believed that the Bible proscribed hiring or retaining an "individua[l] living with but not married to a person of the opposite sex," "a young, single woman working without her father's consent or a married woman working without her husband's consent," and any person "antagonistic *2805to the Bible," including "fornicators and homosexuals" (internal quotation marks omitted)), appeal dismissed, 478 U.S. 1015, 106 S.Ct. 3315, 92 L.Ed.2d 730 (1986); Elane Photography, LLC v. Willock, 2013-NMSC-040, --- N.M. ----, 309 P.3d 53 (for-profit photography business owned by a husband and wife refused to photograph a lesbian couple's commitment ceremony based on the religious beliefs of the company's owners), cert. denied, 572 U.S. ----, 134 S.Ct. 1787, 188 L.Ed.2d 757 (2014). Would RFRA require exemptions in cases of this ilk? And if not, how does the Court divine which religious beliefs are worthy of accommodation, and which are not? Isn't the Court disarmed from making such a judgment given its recognition that "courts must not presume to determine ... the plausibility of a religious claim"? Ante, at 2778.
Would the exemption the Court holds RFRA demands for employers with religiously grounded objections to the use of certain contraceptives extend to employers with religiously grounded objections to blood transfusions (Jehovah's Witnesses); antidepressants (Scientologists); medications derived from pigs, including anesthesia, intravenous fluids, and pills coated with gelatin (certain Muslims, Jews, and Hindus); and vaccinations (Christian Scientists, among others)? 31 According to counsel for Hobby Lobby, "each one of these cases ... would have to be evaluated on its own ... apply [ing] the compelling interest-least restrictive alternative test." Tr. of Oral Arg. 6. Not much help there for the lower courts bound by today's decision.
The Court, however, sees nothing to worry about. Today's cases, the Court concludes, are "concerned solely with the contraceptive mandate. Our decision should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer's religious beliefs. Other coverage requirements, such as immunizations, may be supported by different interests (for example, the need to combat the spread of infectious diseases) and may involve different arguments about the least restrictive means of providing them." Ante, at 2783. But the Court has assumed, for RFRA purposes, that the interest in women's health and well being is compelling and has come up with no means adequate to serve that interest, the one motivating Congress to adopt the Women's Health Amendment.
There is an overriding interest, I believe, in keeping the courts "out of the business of evaluating the relative merits of differing religious claims," Lee, 455 U.S., at 263, n. 2, 102 S.Ct. 1051 (Stevens, J., concurring in judgment), or the sincerity with which an asserted religious belief is held. Indeed, approving some religious claims while deeming others unworthy of accommodation could be "perceived as favoring one religion over another," the very "risk the Establishment Clause was designed to preclude." Ibid. The Court, I fear, has ventured into a minefield, cf. Spencer v. World Vision, Inc., 633 F.3d 723, 730 (C.A.9 2010) (O'Scannlain, J., concurring), by its immoderate reading of RFRA. I would confine religious exemptions under that Act to organizations formed "for a religious purpose," "engage[d] primarily in carrying out that religious purpose," and not "engaged ...
*2806substantially in the exchange of goods or services for money beyond nominal amounts." See id., at 748 (Kleinfeld, J., concurring).
* * *
For the reasons stated, I would reverse the judgment of the Court of Appeals for the Tenth Circuit and affirm the judgment of the Court of Appeals for the Third Circuit.
Justice BREYER and Justice KAGAN, dissenting.
We agree with Justice GINSBURG that the plaintiffs' challenge to the contraceptive coverage requirement fails on the merits. We need not and do not decide whether either for-profit corporations or their owners may bring claims under the Religious Freedom Restoration Act of 1993. Accordingly, we join all but Part III-C-1 of Justice GINSBURG's dissenting opinion.
3.2 Core "rules" for the course 3.2 Core "rules" for the course
"Rules" are sometimes thought of as "bright-line rules." Many of the components of the statutes linked here do not consist of "bright-lines." Rather, think of these "rules" as the basic statutes applicable to corporations in the U.S.
3.2.1. Delaware General Corporation Law
3.2.2. Securities Exchange Act of 1934
3.2.3. NYSE Listed Company Manual - Corporate Responsibility
Perhaps needless to say, the NYSE listed company manual applies to NYSE-listed companies only. The Nasdaq exchange has similar standards for companies listed there. Because listed companies also must register with the SEC under the Securities Exchange Act of 1934, these listing requirements should be considered in combination with the requirements of that law. Many of the elements of "corporate governance" that non-lawyers assume are in securities law, or in the Sarbanes-Oxley Act (which will cover later), are in fact only set out in the NYSE or Nasdaq listing standards. For example, it is the listing standards that require independent compensation committees. The "only" sanction for violating listing standards is delisting -- not fines or penalties or the other kinds of ways that the securities laws are enforced -- so keeping clear what the source of corporate governance requirements can be important in practice.
3.3 Some basics of corporate finance 3.3 Some basics of corporate finance
Author: Holger Spamann (modestly edited by John Coates as of October 2022)
Note: This section matters as much for terminology as for substance. If you have no background in business and finance, you should read it extremely carefully and look up any terms that you do not understand after reading twice.
As already mentioned above, the corporation is the vehicle of choice for pooling the resources of many investors. Before studying this vehicle in detail, it is worth zooming out for a moment to appreciate why these details matter—a lot!
The basic corporate investment relationship
The corporation is at the center of an elaborate system that matches cash-rich investors to cash-poor firms, and thereby enables life as we know it. On one side are savers who invest. For the time being, you can think of such savers as yourself when you start saving for retirement, usually through a tax-deferred plan like a 401(k). Savers invest first and foremost to transfer value through time, from today to the future: you put money into your 401(k) today and get it out when you retire in 40 years or so. On the other side are firms (or, in the beginning, a simple entrepreneur). Firms also wish to transfer value through time, but in the opposite direction, i.e., from the future to today: the firm expects to generate lots of cash in the future and offers to share it in return for financing today, without which it would not be able to generate the future cash in the first place (“Have idea, need money!”).
To be sure, individual savers and entrepreneurs could decide to go it alone and put only their own money into a small-scale self-financed business. But in most industries, the investment required for efficient production far exceeds the wealth of individuals and thus requires pooling resources. For example, Apple has in excess of $300 billion in assets, financed by countless investors. Even if an individual could afford to finance an entire firm, it is generally preferable to spread the individual’s wealth over many firms so as not to put all eggs into one basket, i.e., to reduce risk through diversification.
The importance of large-scale matching of savers and firms cannot be overstated. Without it, life as we know it would be impossible. There would be no personal computers, no smart phones, no cars (electric or not), and no electric skateboards. Nor should we take this matching for granted. In the U.S. and some other developed economies, the system matches savers and firms without much friction (cost): many firms can finance themselves on a grand scale at reasonable rates, and a great number of savers can expect returns not much below the rates paid by the firms. Elsewhere in the world, the spread between what savers get and what firms must pay is large, firms often find it hard to impossible to obtain funding at all, and saving is a treacherous affair. Given the enormous temptations for the recipients of financing not to pay it back, it is easy to see why the system might not work (“Tens of trillions of dollars entrusted to money-driven, focused people by naïve and absent-minded savers – what could go wrong?”). The astonishing thing is that it works so well in some parts of the world – and corporate law has a large part in that.
Investors, intermediaries, and the lifecycle of firms
In fact, the system achieves nothing short of a miracle once you consider that the typical retirement plan saver invests the money for decades and never looks closely at what firms do with the money or even which firms have the money (more on this below). Firms, on the other hand, come and go and mutate all the time, as new ideas are born and old ones adapt or disappear. Throughout this lifecycle of firms, investors have to make important decisions or risk wasting their money on bad firms or being taken to the cleaners by the firms’ managers or other investors. Fortunately, most of these decisions are made by professional investment managers—intermediaries—to whom the ultimate investors like us have entrusted their savings, relying on a well-functioning legal system and other institutions to ensure that we will eventually get our money back, and more.
A thumbnail sketch of a firm’s lifecycle might be: In the beginning, an entrepreneur solicits financing from so-called venture capital funds (VCs) that specialize in early-stage financing. 90% of early stage companies fail. The VCs make their money off of the 10% that do not and reach the next stage:
- a “trade sale” to another company, or
- an initial public offering (IPO) of the corporation’s stock to investors at large by means of registration with the S.E.C. and listing on a stock exchange.
Depending on how the business develops, the corporation might later
- offer more stock to the public in a so-called secondary equity offering (SEO),
- be acquired by another company, acquire other companies, or
- go bankrupt – or
- all of the above in various permutations.[1]
Along the way, the corporation holds numerous shareholder meetings (with shareholders voting) and investor calls, engages in all sorts of financing transactions, and, last but decidedly not least, runs its business. This happens at tens of thousands of firms. Meanwhile, all that the ultimate investors are doing is to put their money into a bank account, annuity contract, retirement plan, etc., wait a couple decades, and leave the rest to financial intermediaries.
Such intermediaries include banks and insurance companies. Banks use funds received as deposits or savings to make loans. Insurance companies offer annuity products by taking savers’ premia and investing them in firms; they also invest premia received from other insurance clients. Prudential regulation generally prohibits banks and insurance companies from investing in stocks, however, and thus they will feature less prominently in this course.
Retail investors’ main way to invest in stocks and bonds (= tradeable debt) is through mutual funds. As the name suggests, mutual funds pool individual investor’ funds and invest them in a pre-specified type of assets (e.g., S&P 500 stocks); each individual investor owns a share of the fund. By size, mutual funds are the big dog among intermediaries, especially in stocks: as of 2017, U.S. mutual funds had almost 20 trillion U.S. dollars under management.
However, traditionally, mutual funds have not been the most active participants in corporate governance, nor are they present in all types of firms. This is largely because, in the name of investor protection, the Investment Company Act and the Investment Advisers Act, respectively, impose considerable restrictions on mutual funds and their management companies (like Fidelity or Vanguard). In particular, mutual funds must offer daily redemption at the fund’s then-current net asset value (NAV), which makes it difficult to impossible for mutual funds to invest in illiquid assets, i.e., assets that do not trade in thick markets and hence cannot be sold quickly except at a major discount. Mutual funds therefore mostly invest in public securities, i.e., securities that are registered with the S.E.C. and, usually, admitted to trading on a trading venue such as a stock exchange.
Moreover, mutual funds’ diversification requirement and prohibition of performance fees makes it less likely for mutual fund managers to expend significant resources on effecting change at individual firms in the fund’s portfolio.
Private funds—funds open only to select investors—are not subject to these restrictions and are thus present in all asset classes. They provide high-powered incentives to their managers for active management, and thus generate a disproportionate amount of trading and engagement. One small but important group of private funds are the aforementioned VCs. A larger group of private funds called private equity (PE) buys mature companies (usually using plenty of additional debt financing), holds and reshapes them for a couple years, and then resells them. Both VCs and private equity funds have investment horizons of at least several years up to a decade and require their own investors to commit their capital for similar periods. All other private funds go by the catch-all name hedge funds. Their investment strategies and horizons differ greatly. Of particular importance for this course, so-called activist hedge funds seek to profit from changing the way a public company conducts its business, having taken a sizeable equity stake in the company that will increase in value if the company improves. Merger arbitrage hedge funds specialize in buying the equity of corporations that have announced to merge.
Investors in private funds include institutional investors such as public and private pension funds (e.g., CalPERS), endowments (e.g., Harvard’s), and sovereign wealth funds (e.g., Saudi Arabia’s). (The teams managing institutional investors are themselves intermediaries for the ultimate beneficiaries, such as employees and retirees.) Other investors in private funds are wealthy individuals, particularly ultra wealthy individuals who often have their own wealth management teams (“family offices”). In this connection, it is worth pointing out that the “savers” that invest their money in firms are not the average Joe: in the U.S., the top 1% own one third of all equity in public firms, and the top 10% own four fifths (these numbers include indirect ownership through pension funds etc.).
Capital structure and corporate governance
As hinted above, there are two broad categories of financial claims that investors acquire in firms, in return for their investment: debt and equity. Debt is an IOU—a fixed claim. It includes loans from banks and others, as well as publicly traded debt securities called bonds. These payment claims can be enforced in court: creditors can sue for payment, and seize the corporation’s assets if payment is not forthcoming. Equity (a/k/a shares, stock), on the other hand, provides no right to payment but usually provides voting rights to elect the corporation’s board, which may determine to pay money to equity holders as a dividend or to buy back their stock.
If the corporation cannot pay its creditors—i.e., if it is insolvent—, unpaid creditors or the corporation itself may petition the bankruptcy court to open a bankruptcy procedure. Bankruptcy does not mean that the business of the corporation is liquidated. Rather, bankruptcy is a collective proceeding to settle various investors’ claims, while preserving the business’s going concern value, if any (potentially simply by selling the business, and then dividing the sale price between existing claimants). The most important tool of bankruptcy law is its automatic stay of individual proceedings, which prevents inefficient liquidation by individual creditors racing to grab the corporation’s assets and explains the expression “filing for bankruptcy protection.” In bankruptcy, claimants are supposed to be paid in order of their seniority (see below). In particular, equity holders are supposed to get paid only after all creditors have been paid in full. Hence equity holders are often referred to as the corporation’s residual claimants.
Debt and equity come in various flavors, including hybrids. This is especially true for debt. Not only do debt claims come in different maturities and with different ancillary rights, such as creditor undertakings to do or not to do something (covenants). Importantly, debt claims also differ in their seniority. Some creditors—so-called juniors—may contractually agree to subordination to certain other creditors—so-called seniors—in bankruptcy, i.e., to receive payment only after the latter have been paid in full. (Bankruptcy law itself also contains some seniority rules for special groups of creditors.) The debtor may grant a security interest in particular assets (e.g., a mortgage) to so-called secured creditors, which enables the secured creditors to obtain satisfaction of their claim from the sale of the asset prior to any other creditors, provided certain formalities, usually including a filing, have been complied with. (Security interests are also called collateral.) The debt contract may provide that the debt is convertible into equity at the election of the creditor and/or the corporation. The debt may also be issued together with options—known as warrants when issued by the corporation—, i.e., rights to purchase stock of the corporation at a pre-specified price (cf. DGCL 157).
Equity tends to be less varied, and most corporations only have one class of common stock. Of late, however, many prominent tech corporations such as Google, Facebook, or Snap have gone public with two or more different classes of stock (“dual class”) to preserve the founders’ control: one high-voting class reserved to the founders, and one low- or even non-voting class for outside investors. Many corporations also issue so-called preferred stock, which tends to have no voting rights but a dividend preference, i.e., the right to receive some specified minimum amount of dividends before any dividends can be paid to common stockholders (cf. DGCL 151(c)/(d)). Anything goes under Delaware corporate law: DGCL 151(a)). Voting and other rights may even be extended to creditors (DGCL 221).
A very important point is that the so-called capital structure formed by the combination of different claims on the corporation is just that: a structure to raise capital and ultimately to divide the returns, if any. There is nothing essential or even permanent about any of the claims or the investors who hold them. The same investors often hold different parts of the capital structure, such as debt and equity, simultaneously or at different points in time. Investors may trade in an out of the corporations’ claims at any time (at least if they are traded in a liquid market). The corporation frequently extinguishes some claims by paying or buying them back and creates others by selling them in return for new investment. For example, the corporation may borrow money to buy back stock (“leveraged recapitalization”), issue stock to pay off debt, repay one loan by taking on another (“refinancing”), or offer to exchange one type of stock for another. (However, sensibly enough, shares owned by the corporation itself—"treasury shares"—do not have voting rights etc., see DGCL 160(c).)
Does capital structure matter? It obviously matters for the pricing of individual claims, as investors only pay for what they get. But what the corporation gives to holders of one claim it cannot give to another, and in light of the previous paragraph, the value of individual claims is hardly of deep interest (except, of course, to those buying or holding those claims!). The real question is whether the total value of all claims that the corporation can sell, and hence the total amount of financing it can raise, depends on the way the claims are delineated by contract, charter, and law? Specifically, does it matter which part of the dollars taken in by the firm (cash flows) go to which investors under which circumstances (cash flow rights), and what rights do those investors have to influence the decisions taken by the firm (control rights)?
Modigliani and Miller’s famous benchmark result in corporate finance is that if the firm’s cash flows were fixed and some other conditions held, it would not matter what sort of financial claims the firm issued – the total value of the claims would always be the same. As Miller once explained this proposition, it does not matter how you slice a pizza – it will always be the same amount of pizza. A corporation, however, is not a pizza: its cash flows depend crucially on how it is managed, which in turn depends on how it is governed, i.e., who has which control rights and how they exercise them. Cash flow rights provide incentives to exercise control rights in a certain manner. These incentives can be more or less aligned with increasing the value of the pie (or size of the pizza, if you will). The division and bundling of cash flow and control rights thus matters a great deal.
Corporate and bankruptcy law have some role in the division and bundling of rights, but most of it is done by contract writ large, including the corporate charter. This is inevitable because businesses differ and hence need different governance terms adjusted to the business. In particular, businesses differ in the amount of debt they can service. Debt offers important advantages. First, it is tax advantaged: interest is tax deductible, while dividends are not. Second, debt is less information-sensitive: creditors only need to assess the corporation's ability to repay the loan rather than the corporation’s full potential. Last but not least, creditors' return expectations are backed up by a hard legal claim and its threat of judicial enforcement and bankruptcy, whereas shareholders are at the mercy of the board. This last feature, however, also makes debt inflexible: it will lead to costly litigation, bankruptcy, or even liquidation whenever the actual cash flows fall short of projected cash flows, or at least give creditors the ability to extract concessions in renegotiating the debt. That is why only stable businesses with predictable cash flows tend to use a lot of debt, while more volatile businesses, particularly startups, rely mostly or exclusively on equity financing. Most of this course will be concerned with the ways in which corporate law seeks to ensure that shareholders will get a return even though they lack a hard claim to repayment.
A final note on capital structure and corporate governance is that every possible arrangement is a compromise, and perfection is impossible. Ex ante, every participant in the business would agree that the goal is to maximize the size of the total pie (or pizza, if you prefer) because that will enable everyone to get a bigger slice (the division can be adjusted by side payments). Once the business gets under way, however, whoever has control over a decision will be tempted to use that control to get a bigger slice, even if doing so reduces the size of the total pie. For example, managers may favor growing the business beyond the efficient size if they enjoy the greater power and prestige that comes from running a bigger firm. Creditors may favor inefficient liquidation if continuation, while profitable in expectation, is also risky, such that creditors stand to lose but not much to gain from continuation (remember that creditors' claims are fixed!). Inversely, shareholders may favor inefficient continuation if continuation, while unprofitable in expectation, presents at least the possibility of a positive outcome whereas the liquidation proceeds would go fully or mostly to creditors. The point is that as soon as people pool resources, conflicts of interest are unavoidable. The goal is to mitigate such conflicts; they cannot be eliminated.
Valuation
Reassuring note: This subsection is conceptually denser and more algebraic than anything else in this course. You may find it challenging on first reading.
Above, I said tongue-in-cheek that the value of individual claims does not matter in the big scheme of things. Of course, to individual investors, the value of their claim is all that matters. And because of that, understanding how different actions affect the value of individual claims is crucial to understand the incentives of those holding those claims.
To value a claim, one usually starts with the claim’s expected future cash flows. Expected cash flows are the probability-weighted average of the cash flows that the investor will receive in all the conceivable scenarios. For example, if the investment will return either $2 million or nothing with equal probability, the expected cash flows are 50% × $2 million + 50% × 0 = $1 million. In the real world, estimating expected cash flows requires understanding the business and the capital structure, particularly—for debt—the seniority structure and security interests. Usually, such estimates are fraught with very considerable uncertainty, especially for equity (cf. discussion of information-sensitivity above).
The next step is to discount the future cash flows to present value for the time value of money and a risk premium, to name only the most important ones. The time value of money arises from the simple fact that in the world we live in, all investors have the alternative to put their money into other investments that are expected to pay back the same amount of money plus a positive return in the future. In particular, investors have the alternative to invest in U.S. government bonds that will pay back the same amount of money plus interest with certainty. Thus, to persuade investors to give their money to the corporation, the corporation has to offer more than the interest paid by the government. How much more? That depends on the risk of the corporation’s claim. Risk in this context does not mean the probability of non-payment per se: that is already accounted for in the calculation of expected future cash flows. Rather, risk here means the variance or volatility of the expected cash flows. For example, for their retirement, most people would rather have $1 million for sure rather than a 50/50 chance of $2 million or nothing (note that the expected cash flows are the same, namely 50% × $2 million + 50% × 0 = 100% × $1 million). That said, investors can diversify away most risk by investing small amounts in many different assets rather than everything in one asset. By and large, investors thus receive a risk premium only for systematic risk, i.e., risk that is undiversifiable because it is likely to hit all assets at the same time, such as a global recession. (Of course, individual investors would prefer to receive premia for all sorts of things, but in a competitive financial market, investors compete away most other premia – ultimately, the expected return on an investment is set by the supply and demand for capital.)
Let us consider an extremely stylized example. Imagine we knew for certain that a firm will be in operation for only one year, after which it will liquidate all its assets and distribute them to its investors. Imagine further that we magically know that there are only three possible outcomes, all equally likely: after liquidation but before distribution, the firm will hold (1) $0, (2) $100, or (3) $200. What is this firm worth? Start with the expected future cash flows: ⅓×$0+⅓×$100+⅓×$200=$100. To discount those future cash flows to present value, we need to know the time value of money and the firm-specific risk premium. As mentioned above, the time value of money is what you could earn on a government bond of the same duration.[2] Let’s assume the government currently offers 1% on a one year bond. What is the right risk premium? It depends on the firm! The more the success of the firm is correlated with the health of the economy, the higher the risk premium. How high? It depends on what financial markets demand—or equivalently, what investors can get elsewhere—, which in practice we would estimate by looking at similar firms. Imagine we found the right premium to be 10%. In that case, our firm would be worth $100/(1+1%+10%)=$90.09.[3]
Having valued the firm as a whole, let us value individual claims on it. Imagine the firm is organized as a corporation and only has two claimants: a creditor owed $100, and a shareholder.
Let us start with the creditor and observe that the creditor’s claim is not necessarily worth $100—the corporation has promised $100, but whether it will pay that much is an entirely different question, and how to value those payments yet another.[4] Concretely, the corporation will not be able to pay anything to the creditor in case 1 where it ends up holding $0 (perhaps the shareholder would be able to pay, but, because of limited liability, the shareholder will not need to pay and presumably won’t). In the other two cases 2 and 3, the corporation will be able to pay $100 but will not pay more than that (in case 3, it could pay more but it won’t because the creditor only has a fixed claim $100). Thus, the expected cash flows to the creditor are ⅓×$0+⅓×$100+⅓×$100=$66.67. As to the appropriate discount rate, observe that the creditor’s claim is less volatile than the firm as a whole: in two out of three states, the creditor gets the same amount of money. The appropriate risk premium will thus be lower than for the firm as a whole (which was 10%); assume it is 7%. The time value of money is still 1%. Thus, the creditor’s claim is worth $66.67/(1+1%+7%)=$61.73.
Meanwhile, the shareholder as residual claimant gets whatever is left over after paying the creditor, which is nothing in cases 1 and 2 and $100 in case 3, for an expected cash flow of ⅓×$0+⅓×$0+⅓×$100=$33.33 (alternatively, we could have found this number by subtracting the creditor’s expected cash flows from those of the corporation as a whole). The shareholder’s claim is riskier than the firm as a whole because the shareholder will only be paid in the best possible case; let us assume the appropriate risk premium is 16.5%. Then, the shareholder’s claim is worth $33.33/(1+1%+16.5%)=$28.37.[5]
For obvious reasons, the valuation approach exposited above is called discounted cash-flow analysis (DCF). An alternative to DCF is to use comparables: one calculates some valuation ratio (or “multiple”) for comparable claims, and then assumes that the same ratio will hold for the claim under examination. For example, to value the shares of company A (say, Pepsi), one might look at comparable company B (say, Coca-Cola), calculate the ratio of company B’s stock price to B’s current earnings per share (EPS; roughly, firm profits divided by number of shares outstanding), and then calculate company A’s share value as A’s EPS times B’s share value divided by B’s EPS. (Thus, if Coca-Cola’s share is worth $150, Coca-Cola’s EPS is $10 per share, and Pepsi’s EPS is $8 per share, then Pepsi’s share is worth $8 × $150/$10 = $120, as valued by EPS multiple.) The advantage of the comparables approach to valuation is that it avoids the difficult task of estimating company A’s expected cash flows. The disadvantage is that one must not only assume that company B is already correctly valued, but also that both companies will develop in parallel from their current starting point. The latter assumption is never exactly true and even the approximation may be very bad. In practice, most valuations triangulate from a combination of DCF and multiple comparable firms.
Finally, knowing a claim’s present value, or PV, is not enough to make an investment decision. At the risk of stating the obvious, the price of the claim also matters. The investment is appealing only if the net present value (NPV), i.e., PV minus price, is positive.
[1] Note in this regard that bankruptcy usually means restructuring or sale rather than liquidation, and firms not only buy but also sell a/k/a “spin off” subsidiaries and other parts of their business. For example, United Airlines was founded as Boeing Air Transport by William Boeing in 1927, merged with his Boeing Airplane Company in 1929, and spun out as United Airlines in 1934; it filed for bankruptcy in 2002, emerged from bankruptcy in 2006, and merged with Continental Airlines in 2013.
[2] Well, actually, the government bond also pays you a compensation for expected inflation. But we’ll assume our business’s outcomes are measured in nominal terms, so including an inflation premium is appropriate.
[3] At the limit, if the success of the firm were purely idiosyncratic—e.g., it depends on whether or not a patent will be upheld in court—, then the appropriate risk premium would be zero, and our firm would be worth $100/(1+1%+0%)=$99.01.
[4] Nor did the creditor necessarily invest $100 – that is merely the face value of the claim, i.e., the promised amount. In fact, given the time value of money, the investor presumably invested less than $100!
[5] In this example, the value of the creditor’s claim and the value of the shareholder’s claim add up to the value of the firm as a whole. This might appear unsurprising because the two claims are the only claims on the firm, and value cannot evaporate or appear from out of nowhere. Notice, however, that the algebraic equivalence depended on the risk premia: it would not hold with different risk premia (e.g., a lower risk premium for equity). Modigliani and Miller, mentioned above, are famous for showing that, under certain conditions, risk premia must be such that the equivalence does hold. As also mentioned above, however, Modigliani-Miller is merely a benchmark result. In reality, risk premia may not obey the equivalence exactly. More importantly, Modigliani-Miller applies to fixed cash flows; if capital structure influences cash flows, then all bets are off. In the example above, an important omission was taxes: the mix of debt and equity generally influences tax burdens, and it would not even make sense to value “the firm” without taking into account its financing and associated expected taxes.
3.4 A note on entity choice 3.4 A note on entity choice
History
Once upon a time, all property and businesses were owned by individuals. Even today, most businesses are "sole proprietorships," as they are called when owned by an individual. This is true even for businesses of significant size, with many employees.
Throughout history, too, families have gone into business together, resulting inevitably in disputes between members of these jointly owned firms. Courts developed the law of (general) partnerships to cope with jointly owned and operated businesses. Some aspects of that case law have been codified in the Uniform Partnership Act (1914) and more modern (Revised) Uniform Partnership Act (1997).
From the Middle Ages, kings found it useful to delegate authority and ownership of property to select subjects. In England, early corporations included cities, universities, religious organizations, guilds, and colonies, often with regulatory authority over their members or residents -- see, for example, the Massachusetts Bay Colony Charter of 1629. In Civil Law countries, rulers revived conceptions of legal entities -- Universitas, corpus or collegium, for example -- that can be traced to Roman Law.
These organizations followed a broadly similar model of a "legal person” with distinct property, centralized governance, and judicial standing to sue and be sued. Collectively, they created a template for business activity. As early as the Tudors, sovereign-chartered companies pursued charitable goals, as well as what modernly would be for-profit businesses, often with exclusive rights to pursue a designated line of business, sometimes based on what today we would view as a patent of an invention or innovation, but sometimes based solely on sovereign power to control or promote agriculture, trade or manufacturing activities. Examples ranged from soap (then a novel product) to new techniques of weaving.
As legislatures displaced kings, they took over this function, chartering companies by statute. Harvard University is a “corporation” resembling early corporations, with its own special charter from the Massachusetts General Assembly (or "General Court" as it was known in 1636).
In the age of exploration, long-distance overseas trade required large “capital” ships and investment by many individuals. The discrete and long-term nature of a ship’s journey between the Netherlands or England to Indonesia, and the merchant exchange it enabled, joined the conception of “companies,” with assets that were co-owned by separate from their owners’ individual assets. Most famous was the East India Company, which exploited sovereign authority, monopoly power and violence for private profit-seeking over many centuries. Such companies became so large and influential they became entangled with public finance, rivaling another type of corporation -- banks -- such as the Bank of England. Sovereign-chartered corporations and trading companies effectively combined limited liability for investors, indefinite legal existence that could outlast any one owner, judicial standing, and a standard centralized management structure.
In early America, these models of incorporation created fears of (and sometimes actual) corruption by financial-political elites. While a select number of “national” corporations were chartered, such as the First and Second Banks of the United States, political rivalries and fears meant that most corporations were created by states by local elites to pursue local business. Early examples included fire insurance companies and banks chartered in many states; later companies developed canals and railroads.
Emergence of modern corporations, limited partnerships, trusts, and antitrust
Still more “democratic” mechanisms were state “general incorporation” statutes that were widely adopted in the middle of the nineteenth century. Such statutes authorized and required creation of any corporation anyone enfranchised sought to create, for any lawful stated purpose, following observance of basic formalities, such as the filing of a certificate of incorporation with a state.
Shortly after New York adopted the first “general incorporation” statute (1811), New York also became the first state to authorize a “limited partnership” (LP) by statute (1822). LPs allowed partners the ability to obtain equity investment without requiring the investor to also take on unlimited liability. As with corporations, they required formalities to create – which among other things put creditors on notice about the limited nature of the liability of the limited partners.
These state statutes remain the legal basis for modern for-profit business corporations and LPs. Unlike earlier corporations, these general corporations were not typically given special powers or monopolies, and increasingly were not limited by their charters in what businesses they could pursue. As illustrated by the YouTube linked here, anyone can set up a company quickly and fairly cheaply.
The challenge of corruption and economic dominance by elites persisted, however. Businesses such as railroads and canals often continued to require further authorizations of public power and/or monopolies, to make them viable and give them the ability to “take” property needed to create transportation networks. Later, trusts were used to concentrate private control over whole industries, by pooling ownership of multiple corporations in one trust. This form of economic dominance and monopoly power generated a reactive “antitrust” movement, and modern federal antitrust law.
So things stood for a century. Individuals could create and operate businesses in several forms:
(a) sole proprietorships,
(b) general partnerships,
(c) limited partnerships or
(d) corporations.
The impact of corporate tax
Once the U.S. adopted a corporate income tax[1] (in the early twentieth century), the result was (and still is) often “double” taxation on business income of entities. That is, the entity is taxed on its own (entity-level) income, and its investors are taxed again at individual income tax rates when income is distributed to them by the entity. Meanwhile, businesses held as sole proprietorships and general partnerships were taxed only once. In the case of partnerships, income was (and is) taxed on each partner as if they had received it (pro rata based on their ownership) as it was generated, even if the income was still held in the business.
Not surprisingly, owners of limited partnerships sought (and still seek) to obtain the same “partnership” or pass-through taxation as general partnerships. Up through the 1980s, Internal Revenue Code (IRC) and Internal Revenue Service (IRS) regulations provided an entity like a limited partnership would be taxed like a corporation if it possessed three or more “corporate” characteristics:
(1) limited liability for owners,
(2) centralized management,
(3) freely transferable ownership interests, and
(4) continuity of life.
Limited partnerships (LPs) were able to meet this test because (1) they required a general partner with unlimited liability (but today LP general partners are commonly corporations with limited capital), (2) partnerships are automatically dissolved by partnership withdrawal (but today partners can re-partner into an ongoing partnership), and (3) because LP interests cannot be freely transferred (but continuing partners could contract to approving transfers). LPs thus were an attractive vehicle for multiple owner businesses, combining the attributes of corporate status with pass-through tax treatment.
During the Eisenhower presidency, U.S. corporate tax rates reached 50%, and individual rates 92%. Public resistance to such high taxation led Congress to authorize (for tax purposes) the “S” (for “shareholder”) corporation. S corps would be taxed only once, like partnerships, if they kept their number of shareholders small. Today, S corps can have no more than 100 shareholders, only one class of stock, and only U.S. individuals and specified trusts as shareholders.
For other corporations, the IRC today still imposes two tiers of tax. Double tax is also imposed on LPs, or any other business entity if they have ownership interests listed on a stock exchange or have shares traded on a secondary market.[2] Corporations thus remained the vehicle of choice for widely owned businesses, and LPs were typically owned by a small number of investors.
Enter the LLC
Complicating this picture, in 1997, after intense lobbying, the IRS adopted new rules -- known as “check the box” regulations -- that scrapped the four-factor test. The new rules allow all unincorporated business entities not listed on a stock exchange or publicly traded to choose whether to be taxed as partnerships or corporations.[3] Since 1997, LLCs have provided most of the benefits of LPs, and need not involve any general partners. In addition, LLC statutes generally offer complete flexibility in terms – more so than corporate statutes or even partnerships, which are also said to be “creatures of contract.” Unlike the other forms, most LLC statutes authorize near-complete freedom to “opt out” of default statutory rules on governance, and the ability to disclaim all fiduciary duties.
LLCs have now displaced all other forms for ordinary, actively managed, closely held businesses operating in a single state.[4] Put differently, wealthy actors have increasingly chosen contracts negotiated up-front over reliance on after-the-fact duties developed by courts. Sometimes the parties even build in alternative dispute resolution, as in other kinds of contracts, shifting all disputes outside the traditional forum for business organization litigation.
Does this trend show suggest a rejection of Cardozo’s view of judicially enforceable personal loyalty as essential in jointly owned businesses? Increasingly, this seems to be the case. LLC “operating agreements” have increasingly excluded all fiduciary duties. Lobbying led Delaware, New York and other states to take the contracting parties at their word, and limit courts to enforcing the contract, plus the bare minimum of situations where fraud or the implied covenant of good faith and fair dealing can be invoked, based on a true contractual gap. The result may be surprise and opportunism when the formal terms of the contract permit such behavior. Well informed parties should be and are careful about who they invest with through such an LLC.
They should also be prepared to either pay lawyers significant sums to analyze and negotiate an LLC contract at the outset of an investment, or simply take on faith that a proposed contract is fair. Highly lawyered LLC operating agreements are often hundreds of pages in length and are treated as proprietary information of the parties involved. They are not filed with certificates of formation, which give limited information beyond formal notice of the name and good standing of the registered entity. Delaware practitioners prefer the confidentiality permitted by the Delaware LLC statute. In some states, a list of initial managers or members appear in a LLC’s public certificate, but not in Delaware.
LLCs also set limited liability as the default term for creditors.[5] Credit terms for sophisticated lenders presumably adjust – increasing the interest rate or including contract protections, or personal guarantees from limited liability investors. Unsophisticated unsecured creditors, and tort creditors, of insolvent entities are consigned to suing the bankruptcy estate of the entity and collecting pennies on the dollar, if anything.
Continuing role for limited partnerships
Llimited partnerships do still exist. Indeed, they dominate some sectors. They remain most popular for hedge funds, private equity firms, venture capital firms, and oil and gas firms. The norms for these industries formed before tax treatment of LLCs was on par with LPs. Inertia (costs of learning and drafting) plus lack of any clear advantage of LLCs over LPs has given LPs staying power in those industries.
Publicly traded LPs also have long existed in special industries where investors can be passive, such as oil and gas, where LPs have a special exemption from double tax and are known as “master limited partnerships.”[2] Familiarity on Wall Street gives them a modest marketing advantage over LLCs when it comes time to go public. Private equity firms – even those operating as LLCs while private – have reorganized into LPs before going public. LPs are also fairly well recognized outside the U.S., making it easier to sell shares to foreign investors.
In addition to inertia, a number of federal, state and international tax law differences continue to favor LPs, particularly those that operate nationally or internationally. Particularly for penny-conscious investment managers, even small tax advantages matter. For example:[6]
- While the IRC now provides equivalent pass-through (single) federal income taxation for both LPs and LLCs (and general partnerships), federal self-employment tax often imposes non-trivial tax on LLC members but not on LP limited partners.
- Some states impose greater effective taxes (e.g., franchise) taxes on LLCs than they do on LPs. For example, LPs (but not LLCs) can qualify as "passive" entities exempt from the Texas franchise tax, which is non-trivial in size.
- Some states also impose special property taxes on LLCs but not LPs, such as Florida's tax on intangible personal property taxes.
- For businesses based in the U.S. but operating in other countries, many "tax treaties" more clearly address LPs than they do LLCs.
- Non-profits that wish to invest through limited liability entities often prefer LPs because (a) they may lose their non-profit status if deemed to be actively involved in an entity's business and (b) IRS regulations more clearly provide safe harbor protection for limited partners of LPs than they do for inactive members of LLCs.
The value of tax flexibility favors LLCs and LPs over S corps
While LLCs, LPs and S-corps all have the tax benefit of eliminating double federal income taxation, LLCs and LPs have an important advantage over S corporations from a tax perspective, for any large, well-financed business. That is because those entities have flexibility in how they allocate taxes among their owners.[7] Partners of LPs and members of LLCs may:
- agree to split items of income and loss differently than ownership shares,
- modify their agreement throughout the tax year, and
- make 'special allocations' to partners that deviate from general patterns in the agreement.
These advantages can be important because some investors in LPs or LLCs may not be taxable -- they may be non-profits or pension plans. Other investors may have variable tax losses than can be used to offset allocated LLC or LP taxes opportunistically over time. S-corps offer no such flexibility. Tax allocations must be made to shareholders pro-rata. An estimate of these benefits is roughly 15-20% of income tax per year. [8]
Delaware's dominance of all types of multistate business entities
Delaware dominates the market in out-of-state business organizations. While most small businesses organize in their primary place of business to save legal costs, larger businesses, particularly those operating across state lines, commonly choose Delaware. Of firms with 5,000 or more employees, most are organized outside their home state, whether as LLCs or corporations. Of those, nearly all are organized in Delaware, for reasons discussed and debated at great length in numerous books and law review articles. Delaware now derives a large and growing portion of its tax revenue from franchise taxes on LLCs, augmenting its already large flow of income from franchise taxes on corporations.
In a kind of virtuous circle, the very success of Delaware in deriving profit from chartering businesses is part of why businesses trust Delaware -- they know that Delaware is unlikely to change law in ways that would disrupt its dominance. There is also a natural "winner take all" element to the competition among states -- it is cheaper for any given lawyer based in any other state to learn and keep up with the law of one other state (Delaware) than it would be to do the same with multiple states. Finally, Delaware is unusual in having a specialized set of courts (Chancery) dedicated primarily to business disputes, and in not using juries in those courts. Delaware Chancellors and Vice-Chancellors are widely believed to have business savvy and knowledge, and to be committed to rapid resolution of disputes, arranging their calendars in response to legitimate needs for rapid dispute resolution.
[1] A corporate income tax enacted in 1894 was held unconstitutional a year later in Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895). After ratification of the Sixteenth Amendment to the U.S. Constitution, which established the legality of progressive income tax generally, Congress transformed a corporate excise tax imposed in return for limited liability and indefinite duration, adopted in 1909, into the modern corporate income tax.
[2] There are exceptions for a limited set of specialized industries designated in the IRC, such as mutual funds, real estate investment companies, and oil and gas companies. E.g., IRC §7704(c).
[3] IRS Reg. §§7701-1 through 7701-3; IRS Notice 95-14, 1995-14 IRB 7.
[4] Other forms, such as the limited liability partnership (LLP), the professional corporation (PC) and the professional limited liability company (PLLC), are confined to professional practices—law firms, accounting firms, medical practices—where corporate ownership is barred or limited by professional ethics or regulation. As of 2020, New York had ~53000 PCs, ~30000 PLLCs, and ~5000 LLPs.
[5] In the case of LPs, creditors once could look to assets of the general partner of the limited partnership, but from the 1970s on, those general partners were conventionally corporations with limited or nearly no assets. Case law that once imposed liability on limited partners who exerted “control” over the LP has withered. Limited liability is thus the norm for LPs, no less than LLCs.
[6] Thanks to Katherine Ko for research on these specialized tax topics.
[7] Michael Love, Who Benefits from Partnership Flexibility?, Working Paper (Oct. 27, 2022).
[8] Id.
3.5 A note on purpose, profits, non-profits and B corps 3.5 A note on purpose, profits, non-profits and B corps
What are corporations (and other legal entities), what purposes do they serve, and what purposes should corporate law serve? Answers to the question of what corporations are have long fallen into three general categories:
- “aggregate” (or, sometimes, “contractarian”) views of corporations as serving the purpose of their shareholders, who aggregate their capital in one legal form (a type of collective contract, in this view) to pursue shareholder interests, usually presumed to be profit, and for a company listed on a stock exchange, the value of its stock, although (especially in closely held companies) also potentially other non-wealth-denominated shareholder goals that might conflict with pure wealth maximization (such as religious or political goals);
- “artificial entity” views of corporations as creatures of the state, reflecting the continued fact that corporations obtain special legal privileges (limited liability, indefinite duration, juridical standing) by virtue of legislative grants of authority, are governed by directors who have “fiduciary duties” beyond any written contract, and operate conditional on compliance with law generally (not simply corporate law), as well as (more contestably) the need to serve broader social goals to justify those privileges; and
- “natural entity” views of corporations as “real” organizations of people arising naturally from their pursuit of collective goals and interests, which include shareholder wealth but also include organizational survival and growth, and an arguably more realistic sense of the complexities and nuances of “governance” of collective action of any kind, all of which can be potentially in conflict (at least over some time frame) with a strictly shareholder-oriented perspective.
Complicating each of these views is the fact companies vary in their practical reality, quite significantly, by size, ownership, formal goals (for-profit or not-for-profit), and industry or type of activity, even as corporate law typically speaks more generally, with law applying to a wide range of different kinds of companies.
For those who view U.S. corporate law through the lens of shareholder primacy -- believing that the role of corporate law is to channel corporate behavior towards the service of shareholder interests – they can point to single-shareholder corporations, where the founder and sole owner of shares determines the identity of the board and the chief executive officer (and often plays many other roles besides), and where the company tends to have relatively small amounts of assets and relatively small impacts on anyone other than the single owner. Even relations with creditors are relatively simple for such companies, not very different from those with individual owners, although the corporate form does provide some opportunities for mischief in itself. In such companies, it is hard to see how or why corporate law could or should do anything much more than facilitate shareholder interests, subject to non-corporate legal compliance, with nuances to protect creditors.
For large public companies any narrow shareholder framework is less tenable. Such companies usually have fully dispersed owners, no one of which owns more than a small fraction of shares. This makes the idea that the company expresses virtues or values of shareholders per se implausible. They also have significant assets and operations with important effects on creditors, employees, communities, consumers. By virtue of being important social institutions, they can affect public debates on topics such as diversity, and can have political influence through lobbying, contributions to candidates or parties, and issue ads. Large companies can through pollution or other externalities change the environment – as with climate change, for example. These effects make corporate governance of interest to groups other than shareholders or even creditors. Many companies are in between these extremes – small public companies, or large private ones – further complicating any simple picture of how best to think about what companies are, or what their purposes should be.
Reflecting these disparate perspectives and facts about corporations, the best understanding of “corporate purpose” has also been contested since at least the Great Depression. (Anyone who tells you the answer ever was settled is likely “talking their book,” as the saying goes on Wall Street.) During that era, U.S. voters actively considered socialism as a potential alternative way to organize its economy, lending real force to visions of corporations solely focused on shareholder wealth as hostile to social interests. Broader understandings of corporate purpose were reinforced by World War II and the Cold War, when corporate entanglement with government and broader social movements was substantial.
“Corporate social responsibility” (CSR) as a way of broadening understandings of what corporations were for was conceptually developed by corporate managers themselves, partly as a public relations move (to address skepticism of their size and power, as well as their loss of legitimacy in the Great Depression). CSR, however, was also borne in partial recognition of an ongoing need to articulate to the broader public the reasons that corporate power and wealth might be viewed as beneficial overall. Companies began to donate directly to charities (as opposed to wealth derived from corporate ownership being contributed by shareholders), a tendency reinforced by high income tax rates on both individuals and corporations in the 1950s. From the late 1960s onwards, corporations organized politically, dedicating significant resources to reshaping public debates on monetary policy, trade, labor, tax, and regulatory policy.
One product of that early embrace of an active role for companies beyond generating wealth for shareholders was the Business Roundtable, whose members include the CEOs of most of America’s largest corporations. In the face of rising anti-capitalist and anti-corporate sentiment coming out of the 2007-08 financial crisis, the Business Roundtable in 2019 asserted that every large public corporation has a broad social purpose to enhance the welfare of all of its stakeholders.[1] Corporate managers’ realization that they need to convince the public to believe in their broader mission has only been reinforced by subsequent challenges to globalization, including pandemics, trade wars, real wars, geopolitics, populist politics, Brexit, etc.
Since 2000, CSR has been reinforced, complemented and complicated by the fact that individuals have turned ever-greater amounts of wealth has been turned over to mutual funds dedicated to “socially responsible investing” (SRI), to “environmental social and governance” (ESG) focused funds, and to index funds, which have increasingly taken (or been pressed to take) positions on various corporate political questions that affect how large public companies are governed.[2] The result has been to continually pressure large public companies to embrace different versions of something similar to CSR as a way to serve shareholders. This can be seen as a way to reconcile shareholder and social purpose. If shareholders want companies to sacrifice shareholder wealth for broader purposes, then it still serves shareholder ends. But it can also be seen as further complicating the picture painted above, since not all shareholders of a large public company will typically agree on any particular non-shareholder purpose, any more than they agree in the political sphere.
Might shareholder and stakeholder value align?
Many who take a broader vision of corporate purpose view it as fully or mostly aligned with the creation of long-term shareholder value, as opposed to short-term profits or stock prices. Indeed, many argue that companies that pursue a larger vision of stakeholder welfare and societal well-being also maximize long-term shareholder value. A famous cartoon illustrates the point:
Credit: Tom Toro, http://tomtoro.com/cartoons/
Viewed over the long term, issues arising within corporate law often do not create a large conflict between shareholder and social interests. For example:
- both shareholders and society need for economic principals to be able to control their agents, because if they cannot, joint activity of all kinds will be less likely to occur, reducing social and shareholder welfare alike,
- partners need to trust one another, because without that trust, less joint investment will occur, reducing social and shareholder welfare alike,
- everyone needs clarity about who controls corporate decision-making, because without it, more conflicts and expensive litigation will arise, reducing social and shareholder welfare alike, and
- improved disclosure and less wealth diversion tends to enhance the extent of trade and increase the perceived legitimacy of the institutions making disclosure, benefiting society and shareholders alike.
One could say similar things about many other – but not all -- recurrent issues in corporate law.
Others take the view that shareholders should be privileged within corporate law because as equity holders are the “residual claimants” of corporations — that is, shareholders get paid only after everyone else is paid, including business creditors, employees, and suppliers. This, the reasoning goes, justifies maximizing shareholder wealth as a corporate goal, particular in settings where a company is being wound up or sold. This syllogism requires that corporations are forced, by some mechanism other than corporate law – environmental law, for example -- to internalize all of their effects on society generally. Where this is true, choices of the details of corporate law that increase shareholder value is “efficient,” i.e., will maximize social welfare. Where it is not true, pursuit of shareholder wealth may not increase social welfare, leaving room for efforts to bend corporate law away from shareholder primacy, at least in some settings.
How might corporate law increase wealth or welfare?
Putting aside whether shareholder wealth, shareholder welfare, and social welfare align, how can corporate law increase any of them? First, corporate law can function as a standard “form” (some liken it to a contract), like an “off the rack” suit, reducing the transaction costs of new investment through the corporate form. Standard forms save time and effort, without needing to reinvent the corporate wheel. Particularly if conditions under which corporations are created are simple, and all involved in formation are able to negotiate and adjust in light of background law, corporate law may do best by setting “default terms” that are open to modification from company to company. Where third-party rights are at stake, particularly if they are unaware that a company may affect them, terms may need to be mandatory.
Second, corporate law can add value by permitting business actors to modify property rights in circumstances or in ways when ordinary contract and contract law make this complex or difficult. Corporate law, for example, permits investors to “partition” assets into different buckets that can serve as collateral for different groups of creditors, with different priorities among them. This is arguably difficult to achieve through contract alone, and in any event is more expensive when creditors are numerous and dispersed.
Finally, corporate law has evolved a mix of rules and standards that control the least socially defensible forms of self-interested opportunism arising from joint activity.
- Agents who subordinate principals’ interests in negotiating contracts in return for kickbacks are example.
- Partners who secretly divert wealth from their partners are another.
- Boards who sell themselves corporate assets at a below-market price are another.
More debatably, agents, partners and boards and executives may simply fail to take adequate care in their activities, knowing that others (principals, other partners, or shareholders) will bear the downside of their inattention or excessive risk-taking. In the academic literature, these types of problems are generically called the “agency problem” and the costs arising from them are called “agency costs.” Other aspects of corporate law are said to address “collective action problems,” where the joint interests of a group are challenged by difficulties of communication and coordination. Arguably (although this is debated), corporate law efficiently minimizes agency and collective action costs by combining explicit up-front contract-like rules with standard governance terms (such as quorums and majority voting by shareholders) with after-the-fact court-enforced standards in the form of fiduciary duties.
Corporate law by its express terms
Still, corporate law as it is actually constituted rarely reads as if efficiency or minimization of transaction or agency or collective action costs were its main drivers. Corporate statutes and decisions by the leading court – the Delaware Court of Chancery – rarely refer explicitly to those concepts. Instead, as with contract law, courts more often use the language of morality or appeals to legal norms such as precedents than appeals to efficiency or economic or political concepts to justify their decisions. Attention to policy concerns is submerged, even if powerful in some moments, such as when the words of a statute, prior cases, and abstract principles of corporate law fail to address a new fact pattern. Delaware judges are commonly analogized to “high priests” of a religious-like faith in past doctrine and the ability of “equity” to produce justice (and efficiency!) on an ongoing basis. They write very long fact-based opinions, and engage in very long common law reasoning, with only passing references of academic research in economics, finance, psychology, and law.
Broad debates about corporate personhood or corporate purpose more often occur in public forums such as newspapers, legislatures, political campaigns, or inside board rooms, than in corporate legal materials, such as legal briefs or corporate contracts. It is a fair question as to how often they have any observable influence on corporate law disputes. You might reflect as we go through the course how often answers to the questions that arise would change based on which of the three conceptions of what a corporation is, or what the purpose of a corporation or corporate law should be.
Non-profits and hybrids
In addition to the standard for-profit corporation that we study in this course, all states permit the creation of dedicated non-profits (or "not-for-profits"). Such corporations lack shareholders and retain all net revenues (what would normally be called "profits") for use to pursue their missions. Harvard University is such a non-profit. Non-profits by definition pursue something other than profits for their "owners," since they have no owners as such. Usually, they pursue specific social benefits, such as charitable giving -- non-profits, for example, may raise funds from big-dollar donors turn those into in-kind or small-dollar donations to others, and may be more efficient at that than the donors would be if they tried to individually donate to dispersed beneficiaries. Other kinds of non-profits (such as universities) sell services of a kind that for-profits do not seem to be able to deliver in a sustainable, high-quality way. More important to the operation of non-profits than corporate law is tax law, since most non-profits seek to qualify as tax-free organizations under Section 501 of the Internal Revenue Code and equivalent local and state tax laws. The details of those requirements are beyond the scope of this course.
Some non-profits are "membership" organizations in which dispersed individuals may pursue their collective self-interest through a corporation. Members may have voting rights and participate in governance, similar to shareholders. In some such member non-profits, members have access to free or low-cost goods or services, as in co-ops (e.g., grocery stores), sometimes in return for providing in-kind services or goods. Such organizations are sometimes important in settings where for whatever reason ordinary for-profit businesses fail to produce "complete markets," leaving significant gains from exchange or trade unsatisfied by ordinary economic activity. Again, however, the members are not ordinarily viewed as "residual claimants" and usually have no rights to dividends of retained earnings or distributions in the event of a liquidation.
In recent years, new types of hybrid corporations have emerged. The most prominent are "benefit" corporations, a/k/a "public benefit corporations," or "B-corps" for short. B-corps are expressly permitted by special subsections of corporate statutes in many states in the US and in many countries around the world. Like ordinary for-profits, they have shareholders, pursue profits, and pay dividends. But more like non-profits, they have stated social goals, and are expressly directed and authorized to subordinate shareholder interests and profit to pursue those goals. Examples include Moodle and Coursera (online education providers) and Warby Parker (eyeglasses). Some B Corps are publicly traded themselves (e.g., Coursera and Warby Parker, as well as Vital Farms, Inc., a seller of "pasture-raised eggs" and as of this writing bills itself as having "the second largest U.S. egg brand by retail dollar sales"). Others are subsidiaries of publicly traded for-profits (e.g. Plum Organics, owned by Campbell Soup Co.). Social missions can appeal to consumers, and (as with for-profits) may allow B corps to generate more profit than if they did not have their explicit social missions.
Yet another hybrid is the so-called "capped profit" structure implemented by OpenAI, developer of the ChatGPT chatbot that made headlines in 2022. Originally established as a non-profit to pursue artificial intelligence research in a way that was transparent to the public, OpenAI created a for-profit subsidiary, in the form of a limited partnership, to raise additional capital from venture capital firms and, eventually, Microsoft, the large publicly held for-profit software company.[3] (From your review of the note on entity choice, consider why OpenAI used the LP form for its for-profit subsidiary.) The new LP would pay profits to those investors, but profits would be capped at 100x their investment.
3.6 A note on the "internal affairs doctrine" 3.6 A note on the "internal affairs doctrine"
Note on the “internal affairs doctrine”
Corporate law lawsuits can be filed in any court with personal and subject matter jurisdiction, including state courts other than the state in which a corporation is organized. When a shareholder of an Ohio-incorporated company (for example) sues directors derivatively, claiming the directors breached their fiduciary duties, the shareholder may sue in Ohio, but also may sue in (for example) Kentucky if the company does business there and (for example) the directors and the shareholder live in Kentucky. In such suits, a Kentucky court would have to decide what choice of law to use.
The “internal affairs doctrine” (IAD) is a choice of law “rule” that generally provides that the law applicable to the “internal governance” of a business entity is that of the chartering jurisdiction. “External” matters include torts and contract disputes, including collection of debts to creditors. “Internal” matters include most of those we cover in Corporations: fiduciary duties of directors, shareholder rights, board elections, inspection rights, dividends, and dissolution.
Because of the IAD, courts hearing disputes about a corporation chartered in Ohio will generally apply Ohio’s corporate law with respect to disputes arising out of internal affairs -- even if the corporation’s operations, employees, headquarters, and all or nearly all of its shareholders, are located in other states. Because of the dominance of Delaware as a state of incorporation, the IAD effectively gives Delaware a national role in setting the rules for corporate governance.
For the majority of “corporate law” disputes, the foregoing is all that is needed to know what law to apply. Yet because the IAD is a court-made self-imposed conflicts of law “rule,” state legislatures and even courts have the power, and on occasion, use that power, to deviate from the IAD. For example, some state statutes give inspection rights of corporate books and records stockholders and even directors of foreign corporations located in the state. The U.S. Supreme Court has upheld regulation of dividends of foreign corporations when necessary to protect the interest of creditors in the forum state. See Int’l Harvester Co. v. Wisconsin Dept. of Taxation, 322 U.S. 435 (1944).
But perhaps the most prominent deviation from the IAD is California’s statute designating corporations incorporated elsewhere as “pseudo-California corporations” if they meet specific tests demonstrating California’s interest in their governance. Specifically, the statute applies if:
- more than one-half of a corporation’s outstanding voting securities are owned by persons having addresses in California, and
- the average of its “property factor,” its “payroll factor,” and its “sales factor” is more than 50%,
- unless it is listed on a stock exchange (including the Nasdaq), or is a wholly owned subsidiary of an exempt corporation.
The “factors” considered for the second part of the test measure, in general terms, how much of the item (property, etc.) is located in California.
Differences between California’s corporate law and law elsewhere include:
- annual elections of directors and removal without cause by shareholders are mandatory, not optional as in Delaware and most other states (which generally permit “classified boards” where directors are up for election only every three years, in which case directors are removable only with cause);
- shareholders are entitled to “cumulate” their shares in voting for directors (e.g., if three directors are up for election, shareholders can vote their shares three times in favor of one director, rather than once for each, making it more likely that a minority shareholder can elect at least one director); and
- shares of different classes of voting stock have separate “class” votes on key topics, such as mergers.
Perhaps not surprisingly, Delaware courts have taken a dim view of this statute. In 2005, the Delaware Supreme Court held that Section 2115 violated “Delaware’s well-established choice of law rules.” But that holding would only bind if a case were already in a Delaware court. Courts in other states might choose to apply Delaware’s choice of law as a matter of discretion under its own state’s choice of law “rules,” but since choice of law in most states is detailed, complex and somewhat unpredictable in application, the Delaware view as to its own choice of law rules might well be ignored.
The Delaware Supreme Court went further, venturing to offer dicta about the U.S. constitution, an interesting role for it to try to play: a state court telling other state courts what the federal constitution says. The IAD, said the Delaware Supreme Court, is required by the federal constitution. VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005). One constitutional claim is that under the Due Process Clause, directors and officers have a “right” to know which state’s law applies. The problem with that argument is that it assumes its conclusion – that it is the state of incorporation, rather than (say) where the company is headquartered and primarily based, that is the one state that directors and officers have a right to know will set relevant corporate law principles. Needless to say, the text of the federal constitution does not answer the question. The Constitution does not mention corporations at all. There is also no “original” meaning that can easily be looked to, because in 1789 few companies operated across state lines.
A second, better (but limited) constitutional claim is that the Commerce Clause of the U.S. Constitution implicitly bars states from regulating interstate commerce in ways that discriminate against corporations chartered by other states, such as by applying rules that are inconsistent with the chartering state’s law. (Because this constitutional doctrine is implicit only, and not explicit in the text of the Constitution, it is called the “dormant” Commerce Clause doctrine, which purports to protect Congress’s ability to regulate interstate commerce.) Yet Federal courts, when confronted with similar arguments (e.g., in the context of anti-takeover statutes), have not sweepingly required the IAD as Delaware would suggest, but have emphasized the burden that the laws impose on the interstate market in securities, in part because they applied to listed companies, and that the laws required only a minority (10%) of a company’s shareholders to be located in-state to be subject to the law. E.g., Edgar v Mite Corp., 457 U.S. 624 (1982).
California’s quasi-California corporation statute by design only applies to companies where its (economic and social) interest in a company was strong, where a majority of its shareholders were in California, and where (because it excludes listed companies) no or only a modest interstate market in its securities exists. No one has succeeded in challenging Section 2155 under the federal constitution, and at least one court has upheld it against such a challenge. See Wilson v. Louisiana–Pacific Resources, Inc. 138 Cal.App.3d 216, 187 Cal.Rptr. 852 (1982). Delaware’s attempt at legal imperialism across the board under the IAD remains at best a contested claim. Assertions by some to the contrary smack of ideology, and California’s Section 2115 remains on the books. It remains for California courts to decide whether and to what extent to follow Delaware’s suggestion that California surrender even corporate law sovereignty over businesses primarily based in California to Delaware. Most practitioners continue to recommend that, when possible, a quasi-California corporation comply with Section 2115.
In addition to whether the IAD overrides other states’ corporate laws, the IAD is in reality a “standard” not a “rule,” and there are disputes in which the question of what counts as “internal affairs,” and what does not, itself is in dispute. Borderline issues include (for example) disputes between corporations and their officers, who are also employees, e.g., Lidow v. Superior Court, 206 Cal.App.4th 351, 141 Cal.Rptr.3d 729 (2012), and stock purchases, which can raise questions sounding in tort, contract and corporate law. State “blue sky” (i.e., securities) law, for example, applies where misconduct occurred and not the state of incorporation. E.g., Friese v. Superior Court, 134 Cal. App. 4th 693, 36 Cal. Rptr. 3d 558 (4th Dist. 2005), as modified on denial of reh'g, (Dec. 29, 2005) and as modified, (Jan. 24, 2006). Doctrines of “successor liability” and “alter ego” that can give rise to “veil-piercing” or its economic equivalent (which we will cover late) also can raise difficult questions under choice of law doctrines, including whether the IAD applies.