Federal Election Campaign Funding
Depending on when you read this, we are about 670 days away from the 2016 U.S. presidential elections. Why should prospect researchers and major gift officers care about the election? The answer is simple: Research shows that federal election campaign contributors are more likely to make charitable gifts—some studies indicate they are 14 times more likely to give than the average person. See my blog of April 30, 2013 (from the side navigation bar, click on Top Five Indicators of Philanthropy) and Donor Search’s Prospect Research Statistics for more about federal election contributions as a philanthropy indicator.
Given the charitable nature of campaign contributors, researchers and major gift officers may find good information about federal election contributors at the following two websites:
There are rules concerning who may give to political candidates, how much they can give, and to whom they can give; we need to understand those rules in order to better understand contributions made by our prospects.
Only American citizens (and immigrants with green cards) may contribute to federal politics. Prior to the 2010 Supreme Court’s decision Citizens United vs Federal Election Commission, corporations and unions were not able to contribute to political campaigns. Technically, these groups are still not allowed to contribute directly to a candidate or a political party, however through Super PACs (Political Action Committees), these groups may contribute an unlimited amount of money as long as they don’t coordinate the Super PAC’s action with the candidate.
Let’s take a look at the contribution limits:
Limits for individuals:
- Up to $2,600 per candidate per election (primaries or general or special) directly to the candidate
- Up to $32,400 to national parties each calendar year
- Up to $5,000 to a PAC per calendar year
- Unlimited amount to Super PACs
- Unlimited amounts to 527s.
Limits for corporations, unions, associations, and other organizations:
- Unlimited amount to Super PACs
- Unlimited amounts to 527s.
What is the difference between a PAC and a Super PAC? PACs generally represent business, labor unions, or specific beliefs/interests, and PAC money generally comes from voluntary contributions. PACs are also known as “separate segregated funds” because, while a corporation may not directly contribute to a PAC, a corporation may start and maintain a PAC as a separate and segregated fund. For example, a labor union PAC generally receives contributions from union members rather than union treasuries. PACs can give $5,000 to a candidate/committee per election (primary, general, or special) and PACs may give up to $15,000 annually to any national party committee. PACs may also give up to $5,000 annually to any other PAC. PACs may receive up to $5,000 from any one individual, another PAC, or party committee per calendar year. American divisions of foreign companies may also form PACs, but those divisions may collect contributions only from their American employees.
Super PACs, technically known as “independent expenditure-only committees,” may spend unlimited sums of money to overtly advocate for or against political candidates, however, Super PACs may not give directly to a candidate or political party. There are no limits or restrictions on the sources of funds for Super PACS; individuals, corporations, associations, unions, and other organizations may contribute unlimited amounts of money to Super PACs. Super PACs are rapidly proliferating; as of January 6, 2015, over 1,280 groups have organized as Super PACs.
Both PACs and Super PACs have Federal Election Commission mandatory reporting requirements, which include disclosing the names of contributors.
Now let’s turn our attention to the 527, which is a group created primarily to influence the selection, nomination, election, appointment, or defeat of candidates to federal, state, or local public office. Political parties and campaign committees for candidates for federal, state, or local office, and political action committees may file for tax exemption under Internal Revenue Code section 527. Since they are advocacy groups whose activities may not instruct the voter to vote for or against a specific candidate, 527s often will try to shape your opinion of a political candidate or party in the context of a specific issue. Such organizations can raise unlimited funds from individuals, corporations, or labor unions, but these organizations must register with the IRS and disclose their contributions and expenditures.
Technically, all PACs and Super PACs are 527s, but because PACs and Super PACs are regulated by federal and/or state campaign finance laws, they are generally referred to as PACs; the term 527 is often reserved for those organizations that are not regulated under state or federal campaign finance laws because they do not expressly advocate for a candidate. Click here to search for 527 contributors.
Future trends
In the recent 2014 mid-term elections, there was increased spending by dark money nonprofits, a descriptive phrase referring to there being no requirement to disclose—or bring to light—public donations. Dark money nonprofits are typically 501(c)(4) social welfare nonprofits which have no requirement to publicly disclose donor names and are only required to disclose their congressional-race spending within 60 days of House and Senate elections and their presidential-race spending following the national party conventions. According to IRS regulations, the nonprofit’s primary purpose cannot be to influence elections, but the group can spend up to half of its money on political campaigning. The Sunlight Foundation, which has been following this trend, reported that “Through November 1 [2012], at least $213.0 million has been spent in the general election by dark money groups to influence the 2012 elections.” While the $213 million is less than half of the money spent by Super PACs, it is likely that it will continue to increase in future elections. Last year, the IRS issued revisions for 501(c)(4) reporting of contributions, but it quickly withdrew the revisions because of criticism from both those who favor disclosure of contributions and those who do not. The IRS is expected to release new rules for 501(c)(4) dark money contributions, but pundits don’t expect those revisions to be issued until after the 2016 Presidential election.
In putting together this article, I turned to the following resources, which I list for your further use:
One final note for my prospect research readers…
My federal elections campaign financing research uncovered the top 10 companies the presidential candidates used in the 2012 election cycle for list generating. You will most likely recognize many on the list (presented in order of the most dollars spent to the least dollars spent by the candidates):
- CMDI
- NGP
- Lexis Nexis
- Walter Karl
- Preferred Communications
- Blue State Digital
- Data Trust
- Pinnacle List Company
- FLS Connect
- Infogroup
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