Eleanor Finch
Political campaigns are costly affairs, with candidates for political office raising millions, even billions, of dollars to fund their campaigns and demonstrate their support base. This money is often raised from individuals, political party committees, and political action committees (PACs). With such large sums of money involved, it is not uncommon for campaigns to end up in debt, and there are rules in place to dictate how this money can be spent and repaid.
| Characteristics | Values |
|---|---|
| Political campaigns are expensive | Candidates in the 2020 presidential cycle drew $4.1 billion in donations |
| Candidates raise money from | Individuals, political party committees, and political action committees (PACs) |
| Corporations, labor organizations, and membership groups cannot contribute directly to federal campaigns | They can influence federal elections by creating political action committees (PACs) |
| Rules for leftover money after a campaign ends | Charitable donations, donations to other candidates, saving it for a future campaign, or creating a leadership PAC |
| Rules for refunds | If a candidate drops out before the general election, contributions must be refunded to individual donors within 60 days |
| Rules for personal use | Prohibited |
| Rules for donations to other candidates | A maximum of $2,000 to another federal candidate, and donations to state or local candidates subject to state law |
| Rules for donations to political parties | Unlimited transfers to a local, state, or national political party committee |
| Rules for public funding | Presidential candidates can receive federal government funds for primary and general election campaigns if they agree to spending and fundraising restrictions |
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What You'll Learn
- Candidates can donate leftover funds to charity or other campaigns
- Candidates can save leftover funds for a future campaign
- Leadership PACs have been criticised for functioning as slush funds
- Presidential campaigns are funded in part by taxpayers
- Campaign finance laws vary at the state and federal levels
Candidates can donate leftover funds to charity or other campaigns
Political campaigns can often be left with a substantial amount of money at their conclusion. There are rules in place that dictate how this money can be spent, and personal use of leftover funds is prohibited. Candidates can donate leftover funds to charity, as long as they do not receive any compensation from the organisation and the charity does not use the money to benefit the candidate. Candidates can also donate to other campaigns or candidates, with a maximum donation of $2,000 to another federal candidate, and donations to state or local candidates subject to state law. There are no limits on how much they can give to a national, state or local political party committee.
Alternatively, candidates can save leftover funds for a future campaign. For instance, if a candidate is running for reelection to their Senate seat, they can transfer the remaining money to their senatorial reelection campaign fund. If they want to run for president again in the future, they can transfer the funds to a committee for the next campaign season. A former candidate can also use any excess funds to create a "leadership PAC", a political committee that backs a political agenda and other candidates that the former candidate supports. Leadership PACs have been criticised for functioning as "slush funds" for politicians to spend on travel and entertainment.
If a candidate receives contributions for a general election but does not make it past the primary, they must refund general election contributions within 60 days. They may also redirect the funds elsewhere with the donor's permission. Some candidates may also choose to refund contributions to donors for moral or ethical reasons, or for legal purposes if a donor has exceeded the maximum allowable contribution. All political organisations are subject to taxation under section 527 of the Internal Revenue Code. Donors should note that contributions to political campaigns do not count as charitable donations and cannot be used to claim a tax deduction.
Super PACs have fewer restrictions on what can be done with leftover funds, although they often return them after winding down costs.
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Candidates can save leftover funds for a future campaign
Political campaigns can be costly affairs, with candidates for the 2020 presidential cycle drawing $4.1 billion in donations. When a campaign ends, there may be leftover funds, and there are rules in place that dictate how this money can be spent.
There are, however, rules in place regarding the use of leftover funds. The Federal Election Commission (FEC) has rules to control how money raised by candidate campaign committees is spent after a candidate bows out or after an election is over. For example, if a candidate receives contributions for a general election but drops out of the race before the election, they must refund the contributions to individual donors within 60 days. They can also choose to redistribute their general election funds with the contributor's permission.
The FEC also has rules regarding the personal use of campaign funds. Personal use is defined as "a commitment, obligation, or expense of any person that would exist irrespective of the candidate's campaign or responsibilities as a federal officeholder." This means that campaign funds may not be used for an expense that exists independent of the campaign. For instance, campaign funds cannot be used to pay for food purchased for daily consumption inside the home or supplies needed to maintain the household. However, there are exceptions to this rule. Campaign funds may be used to pay for the reasonable cost of security measures for a federal candidate, federal officeholder, or members of their family and employees as long as the security measures address ongoing dangers or threats that would not exist irrespective of the individual's status or duties.
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Leadership PACs have been criticised for functioning as slush funds
Leadership PACs, or political action committees, are formed by lawmakers to raise extra money to give to fellow politicians. They are frequently criticised for functioning as slush funds, with 92% of lawmakers having leadership PACs. These committees have been accused of being used to fund lavish lifestyles, with the money coming from corporate PACs and business executives. This includes spending on meals at upscale restaurants, stays at elite resorts, sporting events, concerts, and luxury hotel stays.
The Federal Election Commission (FEC) has been criticised for its failure to regulate this practice, with the FEC's six commissioners often deadlocking on the issue of whether the personal use rules apply to leadership PACs. In a recent decision, a majority of FEC commissioners voted that the personal use rules do not apply to leadership PACs, setting a dangerous precedent.
Leadership PACs have also been criticised for opening the door to corruption, as their funding often comes from special interest groups with business before Congress. This has led to concerns about the integrity of the political system, with trust and confidence in government suffering when candidates misuse their supporters' donations.
To address these concerns, there have been calls for legislative intervention to clarify that leadership PAC funds cannot be used for personal expenses. Past bills, such as the Political Accountability and Transparency Act and Leadership PAC Limitation Act, have failed to gain traction, but members of Congress are urged to reintroduce similar legislation to stop leadership PAC abuse.
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Presidential campaigns are funded in part by taxpayers
Running for office is an expensive affair, with candidates collecting millions of dollars in contributions from donors and political action committees (PACs). Candidates in the 2020 presidential cycle drew $4.1 billion in donations. However, presidential campaigns are also funded in part by taxpayers who voluntarily contribute to the Presidential Election Campaign Fund.
The 1040 federal income tax form gives taxpayers the option to designate $3 of their taxes to the Presidential Election Campaign Fund. Checking "yes" does not increase the amount of tax owed nor does it decrease any refund due. This fund is used to match the first $250 of each contribution from individuals that an eligible presidential candidate receives during the primary campaign. It also funds the major party nominees' general election campaigns and assists eligible minor party nominees. Between 1976 and 2012, the fund also supported the major parties' presidential nominating conventions and provided partial funding to qualified minor parties.
To be eligible for these funds, candidates must agree to spending and fundraising restrictions. For example, presidential nominees may receive public funds only if they agree not to use private donations. Additionally, candidates may owe a repayment to the Treasury if they used public funds for non-campaign-related expenses, exceeded expenditure limits, maintained a surplus of public funds, or received more public funds than they were entitled to receive.
While taxpayers voluntarily contribute to the Presidential Election Campaign Fund, candidates can also raise funds from various other sources. These include donors large and small, political party committees, and PACs. Candidates who make donations to their campaigns are not subject to funding limits, but the contributions must be reported. Additionally, certain expenses, such as fundraising costs and legal and accounting fees, are exempt from spending limits.
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Campaign finance laws vary at the state and federal levels
Campaign finance laws in the United States vary at the state and federal levels. The Federal Election Commission (FEC) administers federal campaign finance laws, but it has no jurisdiction over laws relating to ballot access, voter fraud, intimidation, or the Electoral College. The FEC's mission is to protect the integrity of the federal campaign finance process by providing transparency and fairly enforcing and administering federal campaign finance laws.
At the federal level, laws regulating campaign donations, spending, and public funding are enacted by Congress and enforced by the FEC. The FEC requires candidate committees, party committees, and political action committees (PACs) to file periodic reports disclosing the money they raise and spend. Federal candidate committees must identify all PACs and party committees that contribute to them and provide detailed information about individuals who contribute more than $200 in an election cycle.
Election campaigns for non-federal offices, on the other hand, are governed by state and local laws. As of 2021, over half of the states allow some level of corporate and union contributions, with several states having no limits at all. State laws and procedures also govern how candidates appear on election ballots, and each state has its own chief election official to contact for information.
It is important to note that there are extensive loopholes in campaign finance disclosure rules, and various organizations track and aggregate data on political contributions to provide insight into the influence of various groups. Additionally, certain expenses, such as fundraising and legal and accounting expenses, are exempt from spending limits.
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Frequently asked questions
Once a political campaign is over, there are rules in place that dictate how the leftover money can be spent. Permitted uses include charitable donations, donations to other candidates, and saving it for a future campaign. Personal use is prohibited.
If a candidate receives contributions for a general election but drops out before the race, contributions must be refunded to individual donors within 60 days. Alternatively, the candidate can redistribute their general election funds with the contributor's permission.
Candidates who lose an election often have leftover money from their campaigns. They can donate this money to other campaigns or candidates, or transfer the funds to a committee for a future campaign season.
Yes, taxpayers can choose to direct $3 of their taxes to the Presidential Election Campaign Fund. Presidential nominees may receive public funds only if they agree not to use private donations.
