Simone Lawson
Political campaigns can raise millions, even billions of dollars, through personal and business donations. The amount of money spent on campaigns has been increasing faster than inflation over time, with an estimated $16.7 billion spent on the 2021 and 2022 election cycle. With the cost of campaigns rising, it is important to understand the rules and regulations surrounding campaign donations. This includes contribution limits, who can and can't donate, and what happens to leftover funds after an election. So, is it too late to donate to a political campaign?
| Characteristics | Values |
|---|---|
| Who can donate | Individuals, corporations, labor unions, trusts, unincorporated tribal entities, federal candidates, state and local candidates, charities, and political committees |
| Who cannot donate | Federal government contractors, foreign nationals, and federal candidates' authorized committees |
| Limits | $2,000 per election from another federal candidate's authorized committee; $1,000 per election for expenses on behalf of a candidate; $2,000 per year for expenses on behalf of a political party |
| Rules for leftover funds | Charitable donations, donations to other candidates, saving for a future campaign, refunds to donors, gifts, or transfers to political parties |
| Rules for personal donations | Cannot be used for personal use; must be used for campaign-related expenses such as travel, administration, and salaries |
| Timing | The date of receipt is the date the campaign receives the contribution and is used for reporting purposes; contributions must be deposited within 10 days |
| Designations | Contributions should be designated for specific elections to ensure compliance with contribution limits |
| Super PACs | Can accept unlimited contributions from individuals and corporate donors for independent expenditures; cannot coordinate with candidates |
| Disclosure | Political committees must register within 10 days of raising or spending more than $1,000 in contributions or expenditures during a calendar year |
| Dark Money | The amount of undisclosed funding has been increasing rapidly in recent years, reaching hundreds of millions in U.S. presidential elections |
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What You'll Learn
Who can and can't contribute to political campaigns
Political campaigns in the US are financed by donations from individuals, political party committees, and political action committees (PACs). The Federal Election Commission (FEC) enforces the Federal Election Campaign Act (FECA) of 1971, which limits the amount of money individuals and political organizations can donate to a candidate running for federal office. These laws also prohibit certain types of organizations and individuals from donating to political campaigns.
Who can contribute to political campaigns
Individuals can contribute to political campaigns, even if they are under 18 years old, as long as the decision to contribute is made knowingly and voluntarily by the minor, and the funds, goods, or services contributed are owned or controlled by the minor.
Political party committees can also contribute to campaigns, and they are subject to contribution limits.
Political action committees (PACs) are organizations that raise and spend money for campaigns or support/oppose political candidates or ballot initiatives. Traditional PACs can donate directly to a candidate's official campaign but are subject to contribution limits. Super PACs, or independent expenditure-only political committees, cannot directly contribute to or coordinate with campaigns and candidates. However, they can accept unlimited contributions from individuals and corporations.
Who cannot contribute to political campaigns
Campaigns are prohibited from accepting contributions from certain types of organizations and individuals. Federal law prohibits contributions from foreign nationals in connection with any federal, state, or local election. Campaigns may not accept contributions from federal government contractors, the treasury funds of corporations, labor organizations, or national banks. This prohibition applies to all types of incorporated organizations, including nonstock corporations, trade associations, incorporated membership organizations, and incorporated cooperatives.
Corporations and labor organizations are prohibited from making contributions in connection with federal elections. However, they can contribute to Super PACs and noncontribution accounts maintained by Hybrid PACs.
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Contribution limits
Political campaigns in the US are subject to federal campaign finance laws, which include contribution limits. These laws are enforced by the Federal Election Commission (FEC) under the Federal Election Campaign Act of 1971 (FECA). The FEC sets contribution limits for individuals and groups, which vary depending on the type of committee and the office being sought.
For example, a national party committee's accounts are subject to limits for the presidential nominating convention, election recounts, contests and other legal proceedings, and national party headquarters buildings. In this case, a national party committee and its senatorial campaign committee can contribute up to $62,000 combined per campaign to each Senate candidate.
The FEC also recommends that campaigns encourage contributors to designate their contributions for specific elections. This ensures that the contributor's intent is clear and helps to avoid the appearance of excessive contributions. Undesignated contributions count against the donor's contribution limits for the candidate's next election.
There are also restrictions on who can contribute to political campaigns. For instance, federal government contractors, foreign nationals, and incorporated charitable organizations are prohibited from making contributions in connection with federal elections. Additionally, contributions made by one person in another's name are not allowed.
It is important to note that contributions to political campaigns are not tax-deductible. This includes donations to political candidates, campaigns, or causes. While the word "donation" can be misleading, only certain charitable contributions are tax-deductible, specifically those made to organizations that are tax-exempt under §501(c)(3) of the Internal Revenue Code.
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How to report PACs and other political committee contributions
Political Action Committees (PACs) are political committees that are organised for the purpose of raising and spending money to elect and defeat candidates. Most PACs represent business, labour, or ideological interests. PACs can give $5,000 to a candidate committee per election and can also give up to $15,000 annually to any national party committee. They must register with the FEC within 10 days of their formation, providing their name, address, treasurer, and any connected organisations.
To report PACs and other political committee contributions, the FEC has outlined specific guidelines. Firstly, it is important to note that contributions from political committees must be itemised and disclosed. This includes disclosing the election to which the contribution is designated (by checking "primary", "general", or "other" in the election designation box). The date of receipt, which is the date the campaign or a person acting on its behalf receives the contribution, is crucial for reporting purposes and must be accurately recorded. This date also affects the application of the net debts outstanding rule. For electronic contributions, the date of receipt is when the committee obtains the contributor's authorisation of the transaction. In the case of in-kind contributions, the date of receipt is when the goods or services are provided, even if the payment is made afterwards.
When itemising a contribution from a political committee, the reporting committee must include the PAC's name and mailing address, the date of receipt, the amount of receipt, the election designation, and the aggregate election cycle-to-date total for the contributor. Additionally, the reporting committee should include the PAC's FEC identification number, if available.
It is recommended that campaigns encourage contributors to designate their contributions for specific elections. This ensures that the contributor's intent is clear and promotes consistency in reporting, avoiding the appearance of excessive contributions. Written designations are also important for compliance and reporting purposes.
It is important to note that there are restrictions on who can contribute to PACs and political campaigns. For example, federal government contractors, foreign nationals, and incorporated charitable organisations are prohibited from making contributions in connection with federal elections. Additionally, contributions from trusts are allowed as long as no one affiliated with the political committee serves as a trustee or exercises control over the trust corpus or interest amount.
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What happens to campaign contributions after elections
In the US, the Federal Election Commission (FEC) has rules in place to govern how money raised by candidate campaign committees is spent after a candidate drops out or an election is over.
Firstly, it is important to note that a campaign is prohibited from retaining contributions that exceed the limits. In the event that a campaign receives excessive contributions, it must follow special procedures for handling such funds. The Federal Election Campaign Act (FECA) caps contributions at $3,300 per election for the 2023-2024 federal election cycle. The primary election and general election count as two separate elections, so it is possible for someone to contribute $6,600 to a federal candidate—once during the primary and another time during the presidential campaign.
If a candidate does not make it past the primary, they must refund general election contributions to donors within 60 days. They may also redirect the funds elsewhere with the donor's permission. 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.
Leftover campaign funds can be used for any lawful purpose other than personal use. "Personal use" would include things like paying for groceries, a mortgage, tickets to a concert, or a personal loan payment. Candidates may use the funds to defray any expenses incurred in connection with their duties as a public office holder, contribute to another committee, or give to charity.
Super PACs cannot coordinate with a federal candidate or donate to a national political party committee. There are no regulations on how a super PAC uses funds after the candidate drops out or the election is over. They can continue to use the money to support the same candidate in future elections, or another federal candidate in future elections. They can also donate the money to other organizations aligned with their political cause. Although a super PAC's treasurer isn't legally obligated to refund any of the money to donors, they often do.
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The rise of Super PACs
The emergence of Super PACs, or "independent expenditure-only committees", marks a new era in politics, where the outcome of elections is influenced by the influx of substantial financial resources. Super PACs, which came into existence in 2010, are a type of political action committee (PAC) that can raise and spend unlimited funds from various sources, including corporations, unions, individuals, and associations. This development has shifted the power dynamics in elections, giving more influence to wealthy individuals and entities while diminishing the impact of the average voter.
The Citizens United decision had a significant impact on campaign finance law. It invalidated decades-old laws that prohibited corporate and union expenditures in political campaigns, allowing for the emergence of a new campaign vehicle that was not primarily dependent on corporate or union funds. While Super PACs are not allowed to directly coordinate with or contribute to specific candidate campaigns or political parties, they can spend vast sums of money on advertisements and other forms of media marketing to advocate for or against certain candidates.
The role of Super PACs in elections has evolved since their inception. Initially, they served as general ideological or partisan committees. However, they have gradually transformed into vehicles for promoting or opposing specific candidates. This evolution has raised concerns about the potential erosion of the limits on contributions to candidates, which has been a cornerstone of federal campaign finance regulation since the Watergate scandal. The impact of Super PACs is evident in the significant amounts they have raised and spent in recent election cycles, such as the $1.1 billion they raised and $292 million they spent in the 2020 cycle.
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Frequently asked questions
It is not too late to donate to political campaigns as long as the campaign is still running. However, if the campaign has ended, donations can no longer be accepted.
Yes, there are restrictions on who can donate to political campaigns. For example, federal government contractors and foreign nationals are prohibited from making contributions to federal, state, or local elections. Additionally, charitable organizations and corporations are also restricted from contributing to federal elections.
Yes, there are limits to how much can be donated by individuals and organizations. For example, a group of persons must register as a political committee if they raise or spend more than $1,000 in contributions for federal campaigns in a calendar year. For individuals, expenses on behalf of a candidate are limited to $1,000 per election.
Leftover funds from a political campaign must be used in accordance with specific rules and cannot be used for personal gain. Permitted uses include charitable donations, donations to other candidates, and saving for future campaigns.
Yes, you can donate to a specific candidate within a political party. The Federal Election Commission (FEC) allows an authorized committee to accept up to $2,000 per election from another federal candidate's authorized committee.
