WASHINGTON—An appeals court on Tuesday reversed a lower court ruling that likely would have led to greater disclosure of who is paying for certain election ads.

In March, U.S. District Judge Amy Berman Jackson ruled that the Federal Election Commission overstepped its bounds in allowing groups that fund certain election ads to keep their financiers anonymous.

But Tuesday's unanimous ruling by a three-judge panel of the U.S. Court of Appeals for the District of Columbia sent the case back to Jackson, with instructions to refer the matter to the FEC for further consideration.

At issue are electioneering communications—ads that don't expressly advocate voting for or against a candidate running for federal office. In 2007, the FEC ruled that only contributors whose donations were "made for the purpose of furthering electioneering communications" had to be identified; those who gave unrestricted money did not have to be identified. The FEC regulation came in response to a Supreme Court ruling that gave more latitude to nonprofit groups—like the Karl Rove-backed Crossroads GPS and the President Barack Obama-leaning Priorities USA—on pre-election ads.

Rep. Chris Van Hollen, D-Md., sued the FEC over the regulation, which he called a "loophole" that made the disclosure requirements meaningless. He won a summary judgment from Jackson, who was appointed by Obama. The judge ruled that "Congress spoke plainly" in passing the McCain-Feingold campaign finance law—and did not delegate authority to the FEC to narrow the disclosure requirement.

But the appeals court ruled that Jackson erred in concluding that Congress spoke plainly. "The statute is anything but clear," the court ruled.

"It was due to the complicated situation that confronted the agency in 2007 and the absence of plain meaning in the statute that the FEC acted pursuant to its delegated authority ... to fill 'a gap' in the statute," the panel added. Two of the judges—Janice Rogers Brown and A. Raymond Randolph—were nominated by Republican presidents. The other judge, Harry T. Edwards, was appointed by Democrat Jimmy Carter.

The FEC didn't appeal its loss at the lower court, but two interveners did—the Center for Individual Freedom and the Hispanic Leadership Fund. While siding with those groups, the appeals court said that the FEC regulation "has raised as many questions as it purported to resolve," and that the agency's failure to participate in the appeal made it impossible to fully understand the FEC's position on numerous issued raised by the parties.

"Therefore, the court is in no position to assess the parties' arguments on whether (the regulation) is reasonable, and thus entitled to deference," the court said.

When the FEC takes up the issue again, the court ruled, it will be up to the agency to explain the meaning and scope of the regulation or do additional rulemaking.

"The Court of Appeals' decision today will keep the American people, for the time being, in the dark about who is attempting to influence their vote with secret money," Van Hollen said in a statement.

Campaign-finance regulations have received new scrutiny this election cycle, following a handful of federal court rulings that stripped away long-established limits on how much individuals and organizations may contribute to groups favoring certain candidates. One Supreme Court ruling, known as Citizens United, gave a green light for corporations and labor unions to spend unlimited cash on campaign ads.

Under McCain-Feingold, groups that spend more than $10,000 per year on such campaign ads must file reports with the FEC. Some groups later testified before the FEC that disclosing all donors—not ones who specifically earmarked their money for ads—would be an administrative burden.

"We're pleased with the ruling today," said Mario H. Lopez, president of the Hispanic Leadership Fund. "We have to wait and see how the rest of the case is resolved. We're proud to be defending the First Amendment rights of not just our organization but all Americans."

But Common Cause President Bob Edgar said the decision killed voters' last chance of finding out who was pouring millions of dollars into the elections.

"With 49 days to go, there's still no sheriff in town, it's the wild, wild west," he said in a statement. "People and companies making six- and seven-figure investments in candidates and causes will want something in return for their money, and the candidates who benefit from their generosity will have a powerful incentive to deliver it. That's why disclosure is so important; before we go to the polls, voters should know to whom the candidates we choose will be beholden."

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