Mass. Gen. Laws Ann., ch. 55, § 8 prohibits banks and business corporations from making contributions or expenditures for the purpose of influencing the vote on any referendum question other than one materially affecting the corporation's property, business, or assets. The statute also specifies that no question solely concerning the taxation of individuals would be deemed to have such an effect.
Appellants, the First National Bank of Boston, New England Merchants National Bank, the Gillette Company, Digital Equipment Corporation, and Wyman-Gordon Company, wished to spend corporate funds to publicize their opposition to a proposed constitutional amendment authorizing the legislature to impose a graduated personal income tax. That amendment was scheduled for submission to voters on November 2, 1976.
Appellants brought suit in the Supreme Judicial Court of Massachusetts seeking a declaration that the statute was unconstitutional as applied to their proposed expenditures. The case was submitted on an expedited basis upon agreed facts to a single justice of that court, who referred the matter to the full bench the same day.
The statement of agreed facts reflected disagreement among economists on whether a graduated personal income tax would affect corporate business or assets. Appellants' management nevertheless believed the tax would have a significant effect on their businesses.
The Supreme Judicial Court upheld the statute in a 1973 decision. After the United States Supreme Court vacated the judgment and remanded for further consideration in light of Buckley v. Valeo, the Massachusetts court again upheld the statute in a February 1977 opinion. It construed the law to bar the proposed corporate expenditures on the individual-tax referendum.
Although the November 1976 referendum was held and the amendment defeated, the United States Supreme Court addressed the merits. The controversy fell within the class of cases capable of repetition yet evading review. Similar graduated-income-tax amendments had been submitted to voters four times in recent years. The interval between legislative authorization and election was only about eighteen months.
The statute prescribed a maximum fine of $50,000 for a violating corporation. It also prescribed a maximum fine of $10,000 or imprisonment for up to one year, or both, for a violating corporate officer, director, or agent.
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