In a ruling that dramatically changes core elements of existing campaign finance rules, the U.S. Supreme Court has decided to loosen spending restrictions on corporations, associations and unions in federal elections.

In a 5-4 decision in the closely watched case of Citizens United v. Federal Election Commission, the high court ruled that corporations may use money from their general treasuries to pay for campaign ads. The high court also struck down parts of the Bipartisan Campaign Reform Act, which prohibited unions and corporations from running issue ads in the closing days before primary and general elections.

"The censorship we now confront is vast in its reach," Justice Anthony Kennedy said in the majority opinion, which he signed along with four other conservative colleagues.

In a dissent, Justice John Paul Stevens wrote "the court's ruling threatens to undermine the integrity of elected institutions around the nation." Joining Stevens were Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor.

Fearful that the Republican Party stands to gain the most from the eased restrictions, Democrats may write legislation that would reinstate restrictions in time for the midterm elections in November.

Public Affairs Council President Doug Pinkham predicted that the ruling would not, as some critics fear, open the floodgates to corporate spending on federal candidates, but could lead to a wave of new political groups that focus on specific campaign issues.

"Corporations are not likely to get involved in controversial campaigns that might damage their brand," Pinkham said. "In addition, a lot of companies don't want to put more money into politics."  

The case involved the group Citizens United, which produced a 90-minute documentary critical of then-Sen. Hillary Rodham Clinton titled "Hillary: The Movie." After the group was barred from airing the film on pay-per-view television during the 2008 presidential primary, it brought suit challenging key components of the Bipartisan Campaign Reform Act of 2002, otherwise known as McCain-Feingold. After hearing initial arguments on the details of the movie last June, the high court called for extended oral arguments on the case, thus signaling an interest in reviewing broader free-speech questions.

Arguments were heard Sept. 9. Two key issues were under intense scrutiny.

The first was the constitutionality of restrictions on corporate expenditures for electioneering communications -- targeted television and radio messages that refer to federal candidates in the weeks before an election, as decided in McConnell v. FEC in 2003.

The second and more provocative was a 1990 ruling in Austin v. Michigan State Chamber of Commerce, which found that banning corporate expenditures on express advocacy campaigns that encourage voting for or against a federal candidate does not violate First Amendment free-speech protections.  

Considered key to deciding the landmark campaign finance case was Chief Justice John Roberts, who was known to be skeptical of the spending restrictions and who remarked tersely during the re-hearing that "we don't put our First Amendment rights in the hands of FEC bureaucrats."

The court's decision:

•Overturns a 20-year-old ruling that said corporations can be prohibited from using money from their general treasuries to pay for their own campaign ads.

•Leaves in place a prohibition on direct contributions to candidates from corporations and unions.

•Strikes down part of the landmark McCain-Feingold campaign finance bill that barred union- and corporate-paid issue ads in the closing days of election campaigns.

•Removes limits on independent expenditures that are not coordinated with candidates' campaigns.

Legal experts say the 2010 elections will bring the first large-scale application of the high court's decision and other court rulings that have essentially stripped away advocacy restrictions.

"It will be no holds barred when it comes to independent expenditures," Kenneth A. Gross, a veteran political law expert at the firm of Skadden Arps, told the New York Times recently.

Pinkham predicts the ruling could encourage the creation of ideological groups focused on single issues, and perhaps led by lawmakers. In addition, he said the ruling could further weaken the influence political parties have on federal campaigns because there remains a soft-money ban on party spending.

The Times reported that a series of other court decisions is "reshaping the political battlefield by freeing corporations, unions and other interest groups from many of the restrictions on their advertising about issues and candidates."

While these rulings have not challenged bans on direct corporate contributions to parties and candidates, experts say that practically speaking, the rulings and an FEC deadlock have already given independent groups broad latitude to advocate for or against candidates.

Read the Supreme Court ruling at http://www.supremecourtus.gov/opinions/09pdf/08-205.pdf.

Read the Supreme Court ruling, and the Skadden Observations (members only).