Jonah Patel
The ability of for-profit subsidiaries to donate to political campaigns is a complex issue that varies depending on the specific circumstances and location. In the United States, the Federal Election Campaign Act (FECA) prohibits corporations and labour organizations from contributing to federal elections. However, domestic subsidiaries of foreign corporations are permitted to donate to state and local elections, and corporations may donate to tax-exempt political committees organized under Section 527 of the Internal Revenue Code. Additionally, individuals, including minors, can contribute to party committees within specified limits. Nonprofit organizations, on the other hand, are prohibited from directly campaigning for or against political candidates under the Johnson Amendment, but they can engage in non-partisan activities such as voter education and registration drives. Understanding the regulations surrounding political contributions is crucial for ensuring compliance with the law and maintaining transparency in the political process.
| Characteristics | Values |
|---|---|
| Can a for-profit subsidiary donate to political campaigns? | Yes, but only to state, district, and local party committees of a particular state party and within certain limits. |
| Can a non-profit donate to political campaigns? | No, but they can contribute to politics by providing non-partisan support to registration drives, voter education programs, and candidate debates. |
| Can individuals donate to political campaigns? | Yes, but donations to a political party, campaign committee, newsletter, or even admission to dinners or programs that benefit a political party or candidate are not tax-deductible. |
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What You'll Learn
Non-profits and the Johnson Amendment
The Johnson Amendment, passed by Congress in 1954, prohibits tax-exempt organisations from campaigning for or against political candidates. This includes charitable nonprofits, foundations, and religious organisations. The amendment is a provision in the federal tax code Section 501(c)(3) and states that these entities "may not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office".
The Johnson Amendment has been the subject of several attempts to repeal or weaken it, including through executive orders and stand-alone legislation. These efforts have been criticised as they would effectively politicise charitable organisations, foundations, and houses of worship, erasing the public's trust in these entities. Additionally, it would allow for tax deductions for political campaign contributions funnelled through 501(c)(3) organisations, which would not be disclosed due to the reporting exemption for churches.
Despite the prohibition on campaigning for or against political candidates, nonprofit organisations can still contribute to the field of politics in non-partisan ways. For example, nonprofits have provided non-partisan support to registration drives, voter education programs, and candidate debates, which helps to keep the organisation objective.
It is important to note that the Johnson Amendment only applies to tax-exempt organisations. For-profit subsidiaries are not covered by this amendment and may have different rules regarding political contributions.
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Tax-deductible donations
In 1954, Congress passed the Johnson Amendment, prohibiting tax-exempt organisations from campaigning for or against political candidates. Nonprofit entities are subsidised by the government in the form of tax exemptions, so political campaigning by these groups would be equivalent to the federal government subsidising political ideologies.
Political contributions, whether to candidates, parties, or PACs, are not tax-deductible. This includes monetary donations, in-kind contributions, and volunteer expenses. Businesses cannot deduct political contributions on their tax returns.
Charitable donations are generally tax-deductible, but only if they are made to organisations that are tax-exempt under §501(c)(3) of the Internal Revenue Code. These organisations are specifically barred from attempting to influence legislation or participating in any political campaign.
Nonprofit advocacy groups, such as the American Civil Liberties Union and the Sierra Club, have a 501(c)(4) designation and cannot receive tax-deductible donations because they may engage in political activity. While these groups must operate primarily to promote the common good, they can also weigh in on government policy and endorse candidates.
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Federal Election Campaign Act
The Federal Election Campaign Act (FECA) is a piece of legislation adopted in the United States in 1971 to regulate the raising and spending of money in U.S. federal elections. The Act imposes restrictions on the amounts of monetary or other contributions that can be made to federal candidates and parties, and it mandates the disclosure of contributions and expenditures in campaigns for federal office. FECA also introduced outright bans on certain corporate and union contributions, speech, and expenditures.
FECA has been amended several times since its enactment. The first amendment came in 1974 following the Watergate scandal, and again in 1976 after the Supreme Court struck down several provisions as unconstitutional in Buckley v. Valeo. In 2002, the Bipartisan Campaign Reform Act (BCRA) amended FECA, which went into effect immediately following the 2002 elections. The BCRA included several provisions designed to end the use of nonfederal, or "soft money" (money raised outside the limits and prohibitions of federal campaign finance law) for activity affecting federal elections.
In 2010, the Supreme Court's decision in Citizens United v. Federal Election Commission invalidated the BCRA's restrictions on corporate and union spending on independent political advertising. Two years prior, in 2008, the Federal Election Commission (FEC) determined that a domestic subsidiary of a foreign corporation could donate to state and local elections. However, the FEC has also stated that the Federal Election Campaign Act prohibits corporations and labor organizations from making contributions in connection with federal elections.
In past advisory opinions and enforcement cases, the FEC has determined that an unincorporated tribal entity can be considered a "person" under the Federal Election Campaign Act and is thus subject to the various contribution prohibitions and limitations. Party committees may support federal candidates by making contributions, and generally, nonconnected Political Action Committees (PACs) may make contributions to influence federal elections, subject to the Act's limitations and reporting requirements.
It is important to note that the Federal Election Campaign Act and its amendments do not address whether for-profit subsidiaries can donate to political campaigns. However, the Act's provisions regarding corporate contributions and prohibitions may be relevant to this question.
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Unincorporated tribal entities
In general, for-profit subsidiaries are prohibited from donating to political campaigns. Domestic subsidiaries of foreign corporations may donate to state and local elections, but they are prohibited from contributing to federal elections.
Now, when it comes to unincorporated tribal entities, the Federal Election Commission (FEC) has determined that they can be considered "people" under the Federal Election Campaign Act. This means they are subject to the same contribution prohibitions and limitations as individuals. Unincorporated tribal entities are allowed to make contributions to federal candidates and their authorized committees, but these contributions are subject to limitations.
It is important to note that, while unincorporated tribal entities can contribute, they must ensure that they do not fall under the category of a tax-exempt organization, as these are prohibited from campaigning for or against political candidates due to the Johnson Amendment passed by Congress in 1954. This includes small tax-exempt organizations operated by or on behalf of Indian tribal governments.
Additionally, unincorporated tribal entities must also abide by the rules that apply to individuals. For example, an individual under 18 years old may make contributions to party committees, provided that the decision is made knowingly and voluntarily, and the funds are owned or controlled by the minor. Furthermore, the contribution must not be made with funds given as a gift for the specific purpose of contributing to a political campaign.
In summary, unincorporated tribal entities are allowed to contribute to political campaigns as long as they comply with the regulations outlined by the FEC and ensure they are not classified as tax-exempt organizations.
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Corporate donations
Corporations may also use treasury funds for direct independent expenditures, allowing them to fund advertising that targets or promotes a specific candidate, as long as it is done independently of the candidate's campaign or party committee. Domestic subsidiaries of foreign corporations may donate to state and local elections, and state-level contributions must be disclosed and can be found on state campaign finance databases.
The Federal Election Commission (FEC) also allows unincorporated tribal entities to be considered "people" and therefore subject to contribution prohibitions and limitations. Party committees may support federal candidates and make contributions, and Super PACs and Hybrid PACs, as nonconnected committees, do not make contributions to candidates but can accept unlimited contributions from individuals, corporations, and other political committees.
It is important to note that political contributions are not tax-deductible for individuals or businesses. While nonprofits cannot endorse a specific candidate, they can contribute to the political field by providing non-partisan support to registration drives, voter education programs, and candidate debates.
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Frequently asked questions
Yes, for-profit subsidiaries can donate to political campaigns, but only at the state and local levels. Domestic subsidiaries of foreign corporations are also allowed to donate to state and local elections.
Yes, there are some restrictions. For example, donations must be made within certain limits and must be disclosed to varying degrees. Additionally, corporations are prohibited from reimbursing employees for their contributions.
No, nonprofits are prohibited from donating to political campaigns. The Johnson Amendment, passed in 1954, prohibits tax-exempt organizations from campaigning for or against political candidates.
Violating the rules may result in denial or revocation of tax-exempt status and the imposition of excise taxes.
Yes, individuals can donate to political campaigns, but these donations are not tax-deductible. Minors under 18 years old can also donate, provided they meet certain conditions, such as having control over the funds contributed.
