A federal appellate court ruled Tuesday that requiring small groups who promote ballot initiatives to file campaign finance reports is so burdensome that it's unconstitutional, dealing the latest blow to open-government advocates.

A libertarian legal group, the Institute for Justice, believes the 10th U.S. Circuit Court of Appeals' ruling in a case over Colorado requirements for campaign reporting could help overturn similar laws in other states.

Steve Simpson, an attorney for the Arlington, Va.-based group, said it is the first ruling in the nation where reporting requirements for issues groups were deemed so burdensome that they violate the First Amendment. He said the latest decision splits from a 9th U.S. Circuit Court of Appeals ruling last year that dealt with small amounts of money, but didn't examine the burden the reporting requirements placed on the First Amendment.

The Colorado case could set up the issue to go before the U.S. Supreme Court, which earlier this year lifted prohibitions against corporations and unions from airing candidate ads. The state case affects groups campaigning for or against ballot measures.

At issue in the state case is a voter-approved amendment that requires groups of two or more people who spend more than $200 to report their spending. The appellate court ruled that the government cannot justify imposing campaign limits on such small groups, saying the burden outweighs the government's interest in ensuring fair elections.

The judges cited the amendment's preamble that the reporting requirement is meant to limit large campaign contributions that unfairly influence elections.

"It is unlikely that the Colorado voters who approved the disclosure requirements ... were thinking of the No Annexation committee," the panel wrote in their opinion.

The case stemmed from a complaint filed against a group of six homeowners who fought a proposal to have their subdivision annexed by the city of Parker, 20 miles south of Denver. The group raised and spent less than $1,000, prompting annexation supporters to allege a violation of Amendment 27.

Although the 10th Circuit panel declined to establish a "bright line" for determining the monetary limit that would require issues groups to file campaign reports, Simpson said there was "no distinction between a little group and a large group spending money."

"I think the court was trying to issue a narrow ruling that applied to these facts, but I think its reasoning applies to everyone," Simpson said.

Supporters of the law disagree with Simpson's assessment.

Simpson's group "failed" in its attempt to overturn Colorado's amendment, Jenny Flanagan, Colorado Common Cause Executive Director said in a statement. "It is important to look for ways to make sure that voters have comprehensive and accurate information about the interests seeking to influence their votes."

Rich Coolidge, a spokesman with Colorado's secretary of state that is responsible for enforcing election laws, said they are reviewing the ruling and haven't decided whether to appeal.

"We did that action because those (annexation opponents) refused to debate us," said David Hopkins, an annexation proponent who filed the original election complaint in 2006. "The purpose of the law is to get the debate on what the issues are and not just have a group putting out propaganda without accountability."