By Nate Raymond

(Reuters) - A federal appeals court on Monday upheld an Illinois state law that requires advocacy groups to disclose their donors, even in the case of an organization whose main purpose is unrelated to elections.

In a 2-1 ruling, the 7th U.S. Circuit Court of Appeals in Chicago rejected claims by the Center for Individual Freedom that the state's law restricted the group's freedom of speech.

The ruling added to a mixed bag of decisions by other appeals courts, which have both upheld and rejected state laws on campaign disclosure based on the U.S. Supreme Court's 2010 decision Citizens United v. Federal Election Commission.

The Center for Individual Freedom, an advocacy group based in Alexandria, Virginia, said it was planning to run advertisements in 2010 addressing "judicial matters" and "legal reform" issues regarding incumbents running for re-election.

But the center contended that Illinois campaign finance laws would require it to register as a political committee and disclose its donors, who wanted to remain anonymous.

Illinois's disclosure law mirrors federal regulations, with some exceptions. The Illinois law covers ballot initiatives, which only exist at the state level. And, unlike the federal regulations, Illinois does not exempt groups whose "major purpose" is something other than influencing elections. It also covers campaign-related Internet advertising.

As a result of the law's donor disclosure requirements, the center said it skipped any advertising in Illinois in 2010. It sued the state, saying the Illinois law violated the 1st and 14th Amendments rights for free speech and equal protection.

U.S. District Judge William Hart in Chicago dismissed the lawsuit in November 2011.

The 7th Circuit on Monday affirmed Hart's decision.

Judge David Hamilton wrote that Illinois' campaign finance disclosure law strikes a balance between protecting individual speakers from invasions of privacy and harassment on the one hand and enabling transparency and accountability in political campaigns on the other.

Hamilton, writing for himself and Judge Ilana Rovner, said comprehensive disclosure was "especially valuable after Citizens United," noting that outside spending in the 2012 federal elections had already hit $300 million.

The Citizens United decision removed limits on corporate and union spending in elections, on free speech grounds.

"Amidst this cacophony of political voices — super PACs, corporations, unions, advocacy groups, and individuals, not to mention the parties and candidates themselves — campaign finance data can help busy voters sift through the information and make informed political judgments," Hamilton wrote.

Judge Richard Posner wrote a separate opinion in which he concurred in part but said "several provisions of the Illinois statute seem to me to burden the plaintiff's freedom of speech unduly" and should be invalidated.

"It's pretty clear this is headed to the Supreme Court," said Frederick Lowell, an election law attorney at Pillsbury Winthrop Shaw Pittman.

In addition to the 7th Circuit, five appeals courts have rejected lawsuits challenging disclosure, according to a footnote in Monday's ruling.

The 10th Circuit in Denver has by contrast twice nixed disclosure laws, in New Mexico and Colorado, in 2010, the footnote said. Monday's decision by the 7th Circuit did not mention a ruling last by the 8th Circuit that temporarily blocked Minnesota's law.

Timothy Lee, vice president of legal and public affairs for the Center for Individual Freedom, declined to comment on Monday's decision.

Natalie Bauer, a spokeswoman for Illinois Attorney General Lisa Madigan, said, "We're pleased that the court upheld these critical campaign finance disclosure provisions."

The case is Center for Individual Freedom v. Madigan, No. 11-3693, U.S. Court of Appeals for the 7th Circuit.

(Reporting by Nate Raymond in New York; editing by Eddie Evans and Carol Bishopric)