Omar Bennett
Political campaigns and charitable organizations are subject to credit card processing fees, which can range from 1.5% to 3.5% of the total donation amount. These fees are typically paid by the campaign or organization, although some platforms, such as Crowdpac, pass the fee on to the donor. In the case of Crowdpac, the donor pays the credit card fee, while other platforms like ActBlue charge a processing fee on donations to the campaign. This fee is an essential aspect of the cost of doing business, and it is important to be aware of it when considering the use of credit cards for political campaigns or charitable donations.
| Characteristics | Values |
|---|---|
| Credit card processing fees for political campaigns | 1.5% to 3.5% of the donation amount |
| Who pays the processing fees? | Usually the campaign, but sometimes the donor |
| Examples of processing fees | PayPal: 2.9% + $0.30 per transaction; Raise The Money: 4.9% + $0.25 per contribution; Crowdpac: 2.9% + $0.30 per transaction; ActBlue: 3.95% on donations |
| Total amount spent on processing fees by political committees since 2017 | Over $212 million |
| Total amount spent on processing fees by political committees between 2017 and July 2020 | $98 million |
| Who can contribute to political campaigns? | Only US citizens or permanent legal residents (green card holders) |
| Can corporations contribute? | No, but funds from a corporate separate segregated fund are permissible |
| Can labor organizations contribute? | No, but funds from a separate segregated fund are permissible |
| Can trusts contribute? | Yes, but the beneficial owner must have control over the use of the funds, and the contribution must be reported as coming from the beneficial owner |
| Can unincorporated tribal entities contribute? | Yes, they are considered "persons" under the Federal Election Campaign Act and are subject to contribution prohibitions and limitations |
| Can state PACs, unregistered local party organizations, and nonfederal campaign committees contribute to federal candidates? | Yes, under certain circumstances, but the funds must come from permissible sources under the Act |
| Can nonfederal committees contribute? | Yes, but they may need to register with the FEC as a federal political committee, subject to federal laws and regulations |
| Can candidates use their personal funds for campaigns? | Yes, and these contributions are not subject to any limits |
| Can political committees conduct raffles to raise funds? | No, any monies received through a raffle must be refunded to the participants |
| Are there any restrictions on how political committees can spend their funds? | Yes, expenses must be related to seeking and/or holding office, and cannot be converted for personal use |
| Are there any reporting requirements for contributions and expenditures? | Yes, contributions and expenditures must be reported to the NYSBOE or FEC, depending on the jurisdiction |
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What You'll Learn
Political campaign donations via credit card
Political campaigns are costly affairs, and the ability to accept donations via credit card is an important aspect of fundraising. However, it is important to be aware of the various rules, regulations, and fees associated with this type of donation.
Firstly, it is important to note that only citizens of the United States or permanent legal residents (green card holders) may contribute to political campaigns. Campaigns are prohibited from accepting contributions from certain types of organizations and individuals, including corporations and labor organizations.
When it comes to credit card donations, processing fees will apply. These fees are typically around 1.5% to 3.5% of the donation amount, although they can vary depending on the platform used. For example, PayPal charges a processing fee of 2.9% plus $0.30 per transaction, while Crowdpac charges 2.9% plus $0.30 and passes this fee directly to the donor. ActBlue, a not-for-profit fundraising platform, charges a 3.95% processing fee. These fees can quickly add up, especially for small-dollar contributions, so donors should be mindful that not all of their money will reach the campaign.
To ensure the security of donors' personal information, campaigns should prioritize using trusted services like PayPal and secure connections (look for "https" in the browser). It is also recommended to visit the official website of the campaign or candidate to avoid fraud. Keeping track of spending and regularly checking credit card statements can help identify any potential problems or unauthorized charges.
In addition to processing fees, it is worth noting that using credit card rewards for political campaign donations can impact the tax status of those donations. It is advisable to consult a tax professional for guidance in this area.
Overall, while credit cards offer a convenient way to donate to political campaigns, donors should be aware of the associated fees and take steps to ensure the security of their personal information.
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Credit card processing fees for political campaigns
Political campaigns are costly affairs, and the way donations are made can significantly impact the amount of money that ends up in the campaign's coffers. Credit card donations are a convenient method for donors, but they come with processing fees that reduce the value of the contribution. These fees are typically paid by the campaign, although some platforms, like Crowdpac, pass them on to the donor.
When an individual uses a credit card to donate to a political campaign, the campaign has to pay a processing fee, usually a percentage of the donation amount. For instance, PayPal, a commonly used payment platform, charges a processing fee of 2.9%, plus $0.30 per transaction. This means that a $50 contribution would effectively become $47.30 by the time it reaches the campaign's account. The per-transaction fee remains the same regardless of the donation amount, so smaller contributions are more heavily impacted by these fees. For instance, a $10 donation would incur a processing fee of nearly 30%, leaving only $7 for the campaign.
Some funding platforms have their own fee structures. For example, ActBlue, a popular electronic payment platform, charges campaigns a processing fee of 3.95% on donations. This platform has been a significant recipient of donations, taking in almost $98 million from processing fees between 2017 and July 2020. Another platform, Raise The Money, has a processing fee of 4.9%, plus $0.25 per contribution.
The choice of payment platform can significantly impact the amount of money a campaign receives from credit card donations. It is worth noting that crowdfunding sites like Crowdpac pass the credit card fees on to the donor, which are typically 2.9% plus $0.30 per transaction. This approach ensures that the campaign receives the full donation amount without incurring additional expenses.
While credit card donations are convenient, they may not be the most cost-effective method for supporting a political campaign. Donors can consider alternative payment methods, such as direct transfers or checks, to ensure that their entire contribution reaches the campaign. Additionally, consolidating smaller donations into a larger, less frequent contribution can help reduce the impact of processing fees.
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Rules for accepting contributions
Political campaigns are subject to various rules and regulations regarding the acceptance of contributions. These rules are in place to ensure compliance with federal laws and to maintain transparency in the campaign financing process. Here are some key rules that political campaigns must follow when accepting contributions:
- Limits on Contribution Amounts: Federal law imposes limits on the amount of money that can be contributed to a political campaign. These limits apply to contributions from individuals, political action committees (PACs), and party committees. It's important to note that contributions made from a candidate's personal funds are not subject to these limits.
- Prohibited Sources: Campaigns are prohibited from accepting contributions from certain types of organizations and individuals. These prohibited sources include corporations (with the exception of funds from corporate separate segregated funds), labour organizations (unless they are separate segregated funds), and nonprofit corporations.
- Disclosure Requirements: Political campaigns are required to disclose information about the contributions they receive. This includes reporting the names, occupations, employers, and addresses of individuals who contribute more than a specified amount, typically $200, in an election cycle. Campaigns must also disclose expenditures made to individuals or vendors.
- Handling Excessive Contributions: In the event that a campaign receives contributions that exceed the specified limits, special procedures must be followed. Campaigns are prohibited from retaining excess contributions and must follow specific guidelines to handle such funds.
- Accepting Contributions from Trusts: Campaigns can accept contributions from trusts, but certain conditions must be met. Neither the committee nor any of its officers, directors, employees, or affiliated organizations should serve as trustees or exert control over the trust corpus or interest amount. The committee must disclose the trust's name and the name of the decedent in its report.
- Leadership PACs: Leadership PACs are a type of non-connected PAC sponsored by elected officials or political parties. They can accept donations from individuals and other PACs without being subject to the same contribution limits as direct contributions to candidates. However, a leadership PAC sponsored by an elected official cannot use funds to support that official's own campaign.
- Super PACs: Super PACs, or Independent Expenditure-Only Political Committees, can accept unlimited contributions from individuals, corporations, unions, and other groups. However, they are not allowed to make contributions directly to candidates. Instead, they influence elections by making independent expenditures.
These rules outline the key guidelines for accepting contributions in political campaigns. It is important for campaigns to stay informed about the specific regulations and requirements to ensure compliance with federal laws and maintain transparency in their financing activities.
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Nonprofit credit card processing rates
Political campaigns and nonprofits have different rules and requirements regarding credit card processing and the associated fees. Nonprofits have access to a range of payment processing options, including third-party payment processors, merchant accounts, and specialised software. While some platforms, such as Square, charge a standard fee for all transactions (2.6% + $0.10 for credit card transactions), others like PayPal offer discounted rates for registered 501(c)(3) organisations (2.2% + $0.30 per transaction). Interchange fees, which are determined by credit card networks like Visa and Mastercard, are another cost incurred by nonprofits and are comprised of a percentage of the transaction amount and a flat fee. These fees are important to consider as they directly impact the net amount received by nonprofits.
When it comes to political campaigns, the rules are different. In the United States, the Federal Election Commission (FEC) regulates contributions to political campaigns, and there are restrictions on accepting funds from certain entities, including nonprofit corporations. Political campaigns may be charged a processing fee on donations, which varies depending on the fundraising platform. For example, ActBlue, a platform for left-leaning organisations, charges a 3.95% processing fee.
It is worth noting that while credit card processing fees for nonprofits are typically in the range of 2.2% to 3.95%, these fees can add up, especially for larger transactions. Therefore, it is essential for both nonprofits and political campaigns to carefully consider the fees associated with different payment platforms and select the one that best suits their needs and helps them maximise their fundraising efforts.
Additionally, security is a crucial aspect of online donations, and both nonprofits and political campaigns must ensure their online donation pages are secure to prevent cyberattacks and fraudulent donations made with stolen credit cards. While accepting credit cards may expand the donor base, it is important to be aware of the associated fees to ensure that the organisation receives the maximum benefit from each donation.
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Tax implications of credit card donations
Credit card donations to political campaigns are subject to processing fees, which can range from 1.5% to 3.95% of the donation amount. These fees are typically paid by the campaign, although some platforms may pass the cost on to the donor. For example, ActBlue, a fundraising platform for left-leaning organizations, charges a 3.95% processing fee on donations.
When claiming tax deductions for charitable contributions, individuals must consider the following:
- Qualified Organizations: Only donations to qualified charitable organizations are tax-deductible. To determine if an organization qualifies, individuals can refer to the IRS's Tax Exempt Organization Search Tool.
- Record-Keeping: For cash donations, individuals must maintain records such as bank statements or written communication from the organization, indicating the organization's name, donation amount, and date. For non-cash contributions exceeding $250, individuals must obtain a contemporaneous written acknowledgment from the organization, describing the donated property and any goods or services provided in exchange.
- Deduction Limits: The deduction amount may be reduced if the donor receives a benefit in exchange for the contribution, such as merchandise or admission to an event. In such cases, only the amount exceeding the fair market value of the benefit received can be deducted.
- Timing: The processing date of the donation determines the tax year for which it can be claimed. Year-end credit card donations can be claimed for the tax year in which they were processed, regardless of when the donor pays their credit card bill.
- Non-Deductible Contributions: Certain contributions are not tax-deductible, including donations to non-qualified organizations, political contributions, and cash donations without a receipt. Money spent on fundraisers, such as bingo games or raffles, also does not qualify for a deduction.
- Special Rules: Specific rules apply to donations of certain types of property, such as automobiles, inventory, and other readily valued property. In some cases, individuals may be able to claim tax credits for adoption expenses or exclude reimbursement for such expenses from their gross income.
It is important to note that the use of credit card rewards for business, charity, or political campaign-related expenses can impact the tax status of those purchases, and it is advisable to consult a tax professional for guidance.
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Frequently asked questions
Yes, political campaigns can accept credit card donations, but they are subject to processing fees, which are typically between 1.5% and 3.95% of the donation amount.
No, political campaigns cannot be considered nonprofits and therefore cannot apply for a nonprofit credit processing rate.
There are often processing fees associated with credit card donations, which can be paid by either the donor or the campaign, depending on the platform. Additionally, there may be fees associated with the fundraising platform itself, which can vary.
Yes, only US citizens or permanent legal residents (green card holders) may contribute to political campaigns. Contributions from other individuals must be refunded, and the refund must be reported.
Yes, campaigns are prohibited from accepting contributions from certain types of organizations, including corporations and labor organizations. There are also limits on the amount that can be contributed by authorized committees of other federal candidates.
