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By Terry Baynes

(Reuters) - A Minnesota law that requires companies to track and disclose the amount of money they spend on political campaigns likely violates the U.S. Constitution, a federal appeals court ruled on Wednesday.

In a 6-5 ruling, the 8th U.S. Circuit Court of Appeals in St. Louis temporarily blocked the law, saying it burdens companies' free speech, in violation of the U.S. Supreme Court's 2010 decision Citizens United v. Federal Election Commission. That case removed limits on what companies and unions can spend to support or oppose political candidates.

"After Citizens United, it is clear Minnesota may not suppress political speech on the basis of the speaker's corporate identity," Judge William Riley wrote for the majority.

The Minnesota law requires companies and other organizations to establish a political fund if they spend more than $100 a year on political speech. The fund must have a treasurer who segregates political funds, keeps detailed records and files reports with the state. Failure to comply can result in fines and imprisonment up to five years.

Two nonprofit organizations, Minnesota Citizens Concerned for Life Inc and The Taxpayers League of Minnesota, and a for-profit travel company, Coastal Travel Enterprises, challenged the law in July 2010. The groups claimed that the burdensome reporting requirements deterred them from making any political expenditures and chilled their political speech.

A federal court in Minnesota rejected the groups' request to temporarily block the law, and a divided three-judge panel of the 8th Circuit affirmed that decision in May 2011. But a larger 8th Circuit panel agreed to review the case, and on Wednesday issued a preliminary injunction and sent the case back to the lower court for further proceedings.

Wednesday's decision found that Minnesota's law effectively treats companies that make political expenditures the same as political action committees, in violation of the Supreme Court's decision in Citizens United.

The court refused to block another part of the law, which bans companies from donating directly to political candidates.

Five judges dissented, accusing the majority of disregarding the voting public's right to know where political money is coming from.

A spokesman for the Minnesota Attorney General said the office was reviewing the ruling.

DIVIDED RULINGS

James Bopp, a lawyer for the plaintiffs who also brought the Citizens United case, said the ruling was a significant one in the fight over whether states and federal regulators can impose the requirements for political action committees on companies and other associations.

Courts disagree over whether such requirements are constitutional, Bopp said. Six courts that have ruled on the issue are evenly split, he said.

Among them, a three-judge panel of the 4th Circuit in June rejected a suit brought by the nonprofit group The Real Truth About Abortion that challenged Federal Election Commission disclosure requirements. Bopp, who also brought that case, said he will appeal that decision to the Supreme Court in coming weeks.

The 8th Circuit case is Minnesota Citizens Concerned for Life Inc et al v. Swanson et al, No. 10-3126.

(Reporting By Terry Baynes; Editing by Eddie Evans and Cynthia Osterman)

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