Understanding Political Action Committees: Governing Laws Explained

Political Action Committees (PACs) are organizations that pool campaign contributions from members and donate those funds to campaigns for or against candidates, ballot initiatives, or legislation. In the United States, they are tax-exempt 527 organizations that are governed by federal laws and the Federal Election Campaign Act of 1971, as amended by the Bipartisan Campaign Reform Act of 2002 (McCain-Feingold Act). However, the 2010 Supreme Court decision in Citizens United v. Federal Election Commission allowed corporations and unions to make independent expenditures from their general treasuries, and for non-connected PACs to operate independently of corporations, unions, and political parties. This has led to the emergence of Super PACs, which can receive unlimited contributions from various entities and spend large amounts of money to influence elections.

Characteristics and Values of Laws Governing Political Action Committees (PACs)

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Federal Election Campaign Act of 1971

The Federal Election Campaign Act of 1971 (FECA) is a federal law in the United States that regulates political campaign fundraising and spending. It was enacted on February 7, 1972, and signed into law by President Richard Nixon. The Act imposes restrictions on the amounts that can be contributed to federal candidates and parties, mandates disclosure of contributions and expenditures, and bans 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, which led to the creation of the Federal Election Commission (FEC). The Act was amended again in 1976 after the Supreme Court struck down several provisions as unconstitutional in Buckley v. Valeo, and again in 1979 to allow parties to spend unlimited amounts of hard money on activities like increasing voter turnout and registration.

In 2002, the Bipartisan Campaign Reform Act (BCRA), also known as McCain-Feingold, made major revisions to FECA. However, in 2007, 2008, and 2010, the Supreme Court struck down significant portions of McCain-Feingold on constitutional grounds in several cases, including Federal Election Commission v. Wisconsin Right to Life, Inc., Davis v. Federal Election Commission, and Citizens United v. Federal Election Commission. The Citizens United ruling also overturned FECA's complete ban on corporate and union independent spending.

FECA defines a Political Action Committee (PAC) as an organization that receives or spends more than $1,000 to influence a federal election and registers with the FEC. PACs are political committees that pool campaign contributions from members and donate those funds to campaigns for or against candidates, ballot initiatives, or legislation. They can take on various forms, such as connected PACs, non-connected PACs, and Super PACs, each with different sources of funding and purposes.

Bipartisan Campaign Reform Act of 2002

The Bipartisan Campaign Reform Act of 2002 (also known as the McCain-Feingold Act or BCRA) is a United States federal law that amended the Federal Election Campaign Act of 1971 (FECA), which regulates the financing of political campaigns. The Act was designed to address two issues: the increased role of soft money in campaign financing and the proliferation of issue advocacy ads that targeted candidates close to elections.

The BCRA sought to close the soft money loophole by putting an end to soft money contributions in federal elections. It prohibited national political party committees from raising or spending any funds not subject to federal limits, even for state and local races or issue discussion. The Act also required disclosure by state and local parties of spending on federal election activities, including any soft money permitted to be used for such activities.

Additionally, the BCRA amended the Communications Act of 1934 to prohibit federal candidates from using corporate and union funding to launch television ads on satellite or cable within 30 days of a primary and 60 days of a general election. This provision is known as the "electioneering communication" provision.

The chief sponsors of the Act were senators John McCain (R-AZ) and Russ Feingold (D-WI), and it was signed into law by President Bush in March 2002. The law became effective on November 6, 2002, and the new legal limits became effective on January 1, 2003.

In the years following its enactment, the BCRA has been challenged and partially overturned by several Supreme Court decisions, including Citizens United v. FEC (2010) and FEC v. Ted Cruz for Senate (2022).

The legal definition of a PAC

In the United States, a Political Action Committee (PAC) is a tax-exempt 527 organization that pools campaign contributions from its members and donates those funds to campaigns for or against candidates, ballot initiatives, or legislation. The term PAC was created in pursuit of campaign finance reform in the United States. Democracies of other countries use different terms for the units of campaign spending or spending on political competition.

At the federal level, an organization becomes a PAC when it receives or spends more than $1,000 for the purpose of influencing a federal election, and registers with the Federal Election Commission (FEC), according to the Federal Election Campaign Act as amended by the Bipartisan Campaign Reform Act of 2002 (also known as the McCain-Feingold Act). Federal law formally allows for two types of PACs: connected and non-connected. Judicial decisions added a third classification, independent expenditure-only committees, which are colloquially known as "super PACs".

Most of the active, registered PACs, named "connected PACs", are sometimes also called "corporate PACs". They are established by businesses, non-profits, labor unions, trade groups, or health organizations. These PACs receive and raise money from a "restricted class", generally consisting of managers and shareholders in the case of a corporation or members in the case of a non-profit organization, labor union, or other interest groups. As of January 2009, there were 1,598 registered corporate PACs, 272 related to labor unions, and 995 to trade organizations.

Groups with an ideological mission, single-issue groups, and members of Congress and other political leaders may form "non-connected PACs". These organizations may accept funds from any individual, connected PAC, or organization. As of January 2009, there were 1,594 non-connected PACs, the fastest-growing category. Elected officials and political parties cannot give more than the federal limit directly to candidates. However, they can set up a leadership PAC that makes independent expenditures.

Super PACs, officially known as "independent expenditure-only political action committees," are unlike traditional PACs in that they may raise unlimited amounts from individuals, corporations, unions, and other groups to spend on, for instance, ads overtly advocating for or against political candidates. However, they are not allowed to either coordinate with or contribute directly to candidate campaigns or political parties. Super PACs are subject to the same organizational, reporting, and public disclosure requirements as traditional PACs.

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Rules governing PAC fundraising and disclosure

Political Action Committees (PACs) are governed by a set of rules and regulations that vary across different jurisdictions. In the United States, PACs are subject to federal laws and regulations that outline the permitted structures, fundraising practices, and disclosure requirements. Here is an overview of the rules governing PAC fundraising and disclosure:

Fundraising Rules

• Contribution Limits: Federal law imposes limits on the amount of money that PACs can contribute to political campaigns. For example, federal multi-candidate PACs may contribute up to $5,000 per election to a federal candidate committee.
• Sources of Funding: PACs are typically funded through contributions from individuals, corporations, labor unions, and other political committees. The Federal Election Campaign Act, as amended by the Bipartisan Campaign Reform Act of 2002 (McCain-Feingold Act), prohibits direct contributions from corporate or labor union treasuries to PACs. However, these entities may sponsor a PAC and provide financial support for its administration and fundraising.
• Types of PACs: PACs can be classified as connected or non-connected. Connected PACs are established by businesses, non-profits, labor unions, or trade groups, and they receive funds from a restricted class, such as managers and shareholders. Non-connected PACs are formed by groups with ideological missions, single-issue groups, and political leaders, and they can solicit contributions from a broader base.
• Super PACs: Super PACs, or independent expenditure-only political committees, can receive unlimited contributions from individuals, corporations, labor unions, and other groups. However, they are prohibited from coordinating with or contributing directly to candidate campaigns or political parties.
• Hybrid PACs: Hybrid PACs maintain two separate accounts. One account accepts unlimited contributions from various entities for independent expenditures, while the other account is subject to statutory limits and can contribute directly to federal candidates.

Disclosure Requirements

• Registration and Reporting: To operate as a PAC, an organization must register with the Federal Election Commission (FEC) if it intends to influence federal elections. PACs are required to file regular reports with the FEC, disclosing donations received and providing transparency around funding sources.
• Donor Disclosure: The Federal Election Campaign Act of 1971 established rules for disclosure, requiring PACs to report donations of at least $200. This helps to ensure transparency and compliance with campaign finance laws.
• Leadership PACs: Leadership PACs, established by political leaders to support other candidates, must disclose the sponsoring candidate. They are subject to specific rules regarding the use of funds, such as restrictions on funding the official's own campaign.

These rules governing PAC fundraising and disclosure aim to promote transparency and fairness in the political process by regulating the flow of money in political campaigns.

Judicial expansion of PAC classifications

In the United States, a Political Action Committee (PAC) is a tax-exempt 527 organization that pools campaign contributions from its members. These funds are then donated to campaigns for or against candidates, ballot initiatives, or legislation. The term PAC was created in pursuit of campaign finance reform. Federal law formally allows for two types of PACs: connected and non-connected.

Judicial decisions, however, have expanded the classifications of PACs beyond the two types recognized by federal law. A third classification, "independent expenditure-only committees," or "super PACs," was created by judicial rulings. Super PACs are permitted to receive unlimited contributions from individuals, corporations, labor unions, and other PACs to finance independent expenditures and other independent political activities. They are not, however, allowed to coordinate with or contribute directly to candidate campaigns or political parties.

The emergence of super PACs can be traced to the 2010 Supreme Court decision in Citizens United v. Federal Election Commission, which overturned sections of the 2002 Campaign Reform Act (also known as the McCain-Feingold Act). The Court ruled that it was unconstitutional to prohibit corporations and unions from spending from their general treasuries to promote candidates or contribute to PACs. This decision effectively allowed corporations and unions to indirectly influence elections by contributing unlimited amounts to super PACs, which in turn can spend extensively on political activities without coordinating with any particular candidate or party.

Another type of PAC that has emerged is the hybrid PAC, which is similar to a super PAC in that it can accept unlimited contributions from individuals, corporations, labor organizations, and other political committees. However, hybrid PACs maintain a separate bank account that is subject to statutory amount limitations and source prohibitions, allowing them to make direct contributions to federal candidates and committees while still making independent expenditures.

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