CDN's primer on the current state of campaign finance laws in the U.S. by our resident expert.
WASHINGTON, May 1, 2016 — The following is an historical and current discussion of giving money to support your candidate. Oh, the tangled web we have woven.
It would seem that the more money that is spent on, by, or for a candidate for political office, the better that candidate’s chance of winning would be. Some candidates have “taken the high road” (a tacit and sometimes openly direct statement that political finance laws are broken) declaring that they are not taking contributions and are instead funding their candidacies by themselves.
In the case of a local Maryland candidate, David Trone, who ran for Congress in Maryland’s 8th District, his fortune proved to be not enough to put him over the top Trone spent over $12.4 million of his own money, but still lost to a three-term state senator, Jaime Raskin, who raised about $2 million.
Donald Trump is advertising that he is using his own money in his bid for the oval office. Technically, he is making loans to his candidacy, allowing him to potentially recover that money later with campaign financing.
It is clear that money is important in running a political candidacy. But as we’ve just seen, the amount spent does not always determine the outcome. Clearly, however, the amount of money put forth by or for a candidate can influence a given political outcome. So why all the concern? For most candidates then, reliance on the money of others is seen as critical.
In a perfect world, elections would be determined by a competition of ideas and all candidates would have the exact same amount of money at their disposal, from all quarters, to use to convey their message to the voters. In the real world of the United States of America, however, fundraising, wealth and access are more often the determining factors.
Thus, since 1907, when questions about which corporations funded Theodore Roosevelt were raised, the Tillman Act was passed, becoming the first-ever campaign finance law. It banned corporate contributions for national campaigns.
Laws and court decisions followed. Today, two disparate camps provide continuing debate on several campaign finance issues. In one corner are those who believe that campaign contributions should be a protected form of free speech, and they advocate for an unlimited ability to donate as well as the right to conceal their identities in the process. In the other corner are those who favor limits and disclosure, seeing unattributed donations as giving the wealthy undue political influence.
The world of campaign finance evolved with the passage of the Federal Election Commission Act in 1971. The Act was re-written in 1974 after it was learned that Richard Nixon used corrupt funds in his re-election campaign. The Federal Election Commission was born, and was tasked to regulate matters on the federal level. The new law put limits on individual contributions to candidates, contributions to PACs, total campaign expenditures and spending by individuals or groups to a specific candidate.
The Act was challenged and the Supreme Court eventually addressed the issue. In 1976 the Court ruled in the landmark case, Buckley v. Valeo, that free speech included allowing individuals to spend unlimited political money, that ads for or against a candidate had to be financed with regulated money, and that corporations, unions and individuals could contribute “soft” money (money given to a political party rather than directly to a candidate) to political parties in an effort to influence campaigns. Many companies then set up political action committees (PACs) to channel their donations.
In 2002 the Bipartisan Campaign Reform Act (BCRA) was passed. Wealthy Democratic donors had previously received special privileges and the Party had illegally accepted foreign money. Also called the McCain-Feingold Act, it stopped corporations and unions from donating directly to candidates.
In 2010, the Supreme Court served up a true bombshell. In a 5-4 split decision, ruling on Citizens United v. Federal Elections Commission, the Court declared that corporations are people, and that the government cannot prohibit corporations and unions from spending money for political purposes. It gave the green light for corporations and unions to spend as much as they wanted on campaigns. This ruling led to the rise of super PACs, formally known as “independent-expenditure only committees.” These groups have no legal limit on the funds they can raise from various sources.
The most recent Supreme Court ruling on campaign finance came in 2014, in another 5-4 decision. In McCutcheon v. FEC the Supremes struck down caps on what individuals can contribute to federal candidates in any two-year election cycle, saying that the caps restricted the democratic process and violated the First Amendment’s right to free speech.
So, what is the geography of the law now? There are basically two “groups” of donors, and each has rules by which they must abide. The rules address amounts of money that can be donated, by whom, and whether or not the donors must be identified.
Group 1 – The following must abide by federal limits on the amount of money they can receive and donate.
- Candidate’s Committees
- Parties and their subsidiaries – Republican National Committee or the Democratic Congressional Campaign Committee
- Traditional Political Action Committees (PACs)
Group 2 – All of the following must disclose all expenditures and the identity of donors. These groups can collect and spend in unlimited amounts as long as they do not coordinate with or contribute to political campaigns.
- Super PACs – Such as the House Majority PAC
- 527’s – Under the federal tax code, these tax exempt organizations raise money for political causes
Super PACs and 527’s regularly disclose to the IRS all of their expenditures and the identity of donors.
- The “501-c” groups:
501-c-4s – Social welfare non-profits such as NRA, Planned Parenthood
501-c-5s -Labor unions, such as AFL-CIO
501-c-6s – Trade and business associations, such as U.S. Chamber of Commerce
501-c organizatgions disclose money expressly spent to defeat or elect a candidate, but are not required to disclose donors (i.e., “dark” money).
Ingenuity has always been the adjective best used to describe doing something a different way if the obvious way doesn’t work. So it is in the world of campaign finance. Want to donate money and keep your identity secret?
- There are no caps on the amount someone can give a Super PAC, but that person’s name will be disclosed;
- Individuals can funnel contributions through Limited Liability Corporations (LLCs) they can set up which can then be sent to Super PACs. LLCs have fewer disclosure requirements and individuals can shield their names.
- “Dark” money can also enter the system through the IRS rules governing 501-c contributions, if the organization’s main activity is defined as “social welfare.”
A penny for your thoughts?
Paul A. Samakow is an attorney licensed in Maryland and Virginia, and has been practicing since 1980. He represents injury victims and routinely battles insurance companies and big businesses that will not accept full responsibility for the harms and losses they cause. He can be reached at any time by calling 1-866-SAMAKOW (1-866-726-2569), via email, or through his website.
His book “The 8 Critical Things Your Auto Accident Attorney Won’t Tell You” can be instantly downloaded, for free, on his website: http://www.samakowlaw.com/book.Click here for reuse options!
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