Omar Bennett
Political campaigns are expensive, and candidates need to raise money to fund them. In the US, the money often comes from individuals, political party committees, and political action committees (PACs). Corporations, labour organisations, and membership groups cannot contribute directly to federal campaigns, but they can create PACs to influence elections. These PACs solicit donations from members and associates to make campaign contributions or fund campaign activities. There are also Super PACs, which first arose in 2010, that are independent expenditure-only political committees. They are not allowed to make contributions to candidates or parties but must do any political spending independently of the campaigns.
| Characteristics | Values |
|---|---|
| Who can contribute to a federal candidate | Individuals, partnerships, PACs, minors |
| Who cannot contribute to a federal candidate | Corporations, labor organizations, federal government contractors, foreign nationals |
| Who can contribute to a federal candidate's campaign account | Unincorporated tribal entities, party committees, SSFs |
| Who can receive public funds | Eligible presidential candidates, major party nominees, minor party nominees |
| Who cannot receive public funds | Candidates not seeking nomination by a political party to the office of President |
| Who can donate money to political campaigns | Political parties, outside groups that aren't political parties, traditional PACs |
| Who cannot donate money to political campaigns | National banks, federally chartered corporations, incorporated charitable organizations |
| Who can make contributions to candidates | Political party committees, Super PACs, Hybrid PACs |
| Who cannot make contributions to candidates | Super PACs, independent-expenditure-only committees |
| Who can raise funds for campaigns | Individuals, political party committees, political action committees (PACs) |
| Who cannot raise funds for campaigns | Corporations, labor organizations, membership groups |
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What You'll Learn
- Corporations, labour unions, and membership groups cannot contribute directly to federal campaigns
- Political campaigns are funded by taxpayers who direct $3 to the Presidential Election Campaign Fund
- Super PACs are legally required to disclose their donors, but some remain anonymous
- Campaigns may not accept contributions from the treasury funds of corporations, labour organisations, or national banks
- Foreign nationals are prohibited from contributing to any federal, state, or local election
Corporations, labour unions, and membership groups cannot contribute directly to federal campaigns
Political campaigns require a lot of funding, and there are strict rules about who can contribute money and how much they can give. In the United States, corporations, labour unions, and membership groups cannot contribute directly to federal campaigns. This is because the Federal Election Campaign Act prohibits corporations and labour organizations from making contributions in connection with federal elections.
The Act also prohibits any incorporated organization, including non-stock corporations, trade associations, incorporated membership organizations, and incorporated cooperatives, from donating to federal campaigns. This means that the owner of a small incorporated business, for example, cannot use their business account to make contributions. They must use a personal account.
There are, however, some ways that corporations and labour unions can indirectly support federal campaigns. For example, they can establish a separate segregated fund (SSF) or a political action committee (PAC). An SSF is a type of political committee that a corporation or labour union can use to raise and spend money on political activities, as long as it is not directly contributing to a candidate or campaign. PACs are organizations that raise and spend money for campaigns or support or oppose political candidates or ballot initiatives. Traditional PACs can donate directly to a candidate's official campaign but are subject to contribution limits.
In 2010, a federal appeals court ruled that outside groups, known as "super PACs," could accept unlimited contributions from individual donors and corporations as long as they did not give directly to candidates. This has led to a surge in secret spending from outside groups in federal elections, with dark money expenditures increasing from less than $5 million in 2006 to over $1 billion in the 2024 presidential election.
Where Does Political Campaign Money Go?
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Political campaigns are funded by taxpayers who direct $3 to the Presidential Election Campaign Fund
Political campaigns are funded by a variety of sources, and while taxpayers can contribute, there are strict rules in place to prevent corruption and undue influence. In the United States, taxpayers are given the option to direct $3 of their tax payments to the Presidential Election Campaign Fund (PECF). This is done via a check-off box on Form 1040, and it does not increase the amount of tax owed or decrease any refund due. The PECF was designed to encourage public financing of elections and limit the influence of large donors and special interest groups.
The PECF is administered by the Federal Election Commission (FEC), which determines eligibility for funding. To qualify for matching funds, candidates must demonstrate broad-based public support by raising at least $5,000 in each of 20 states, with a maximum of $250 per individual contributing to the $5,000 threshold in each state. The FEC will then match up to $250 of an individual's total contributions to an eligible candidate. Candidates must also agree to an overall spending limit, abide by state spending limits, use funds only for legitimate campaign expenses, keep financial records, and permit an extensive campaign audit.
The PECF is not the only source of public funding for presidential campaigns. The FEC also provides funds to eligible candidates to pay for qualified expenses in both the primary and general elections. This includes matching the first $250 of each contribution from individuals during the primary campaign and funding the major party nominees' general election campaigns. Minor party candidates may also receive partial public funding. To be eligible for this funding, candidates must agree to limit spending and may not accept certain types of contributions, such as those from federal government contractors or foreign nationals.
While the PECF aims to reduce the influence of large donors, it is worth noting that the lack of a federal cap on individual political donations may disincentivize candidates from utilizing these public funds. Additionally, the share of taxpayers opting into the PECF has been declining, which could impact the availability of funds for future campaigns.
Campaign Finance Laws: Why They Matter
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Super PACs are legally required to disclose their donors, but some remain anonymous
Political campaigns may receive funding from various sources, including individuals, corporations, and organisations. However, there are restrictions on who can contribute to political campaigns, and certain sources are prohibited. For example, campaigns may not accept contributions from federal government contractors or foreign nationals. Similarly, incorporated charitable organisations are prohibited from contributing to federal elections.
One type of entity that contributes significantly to political campaigns is the Political Action Committee (PAC). PACs are organisations that pool funds from various sources to support or oppose political candidates. There are different types of PACs, including Super PACs and Hybrid PACs, which are independent expenditure-only political committees. Super PACs are permitted to raise unlimited funds from individuals or corporations and spend unlimited amounts on independent expenditures. However, they are not allowed to contribute directly to candidates or political party committees. Federal law prohibits Super PACs from donating to or coordinating with specific candidates to prevent a small group of wealthy special interests from influencing elections.
While Super PACs are required by campaign finance laws to publicly disclose their donors and expenditures, some have found ways to keep their donors anonymous. This is often done by accepting contributions from "dark money" groups, which are typically nonprofit organisations that claim tax-exempt status. These groups can accept unlimited contributions without disclosing their donors, allowing Super PACs to hide the true source of their funding. This lack of transparency has raised concerns about political corruption and the influence of wealthy special interests on elections.
To address this issue, legislation such as the DISCLOSE Act and the For the People Act have been proposed to increase transparency and reveal the true funders behind election campaigns. These measures aim to ensure that voters are informed about the sources of funding and protect the integrity of the democratic process.
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Campaigns may not accept contributions from the treasury funds of corporations, labour organisations, or national banks
Political campaigns in the United States are generally exempt from paying sales tax. However, there are strict rules about who can contribute to a campaign and how.
However, a campaign may accept contributions from Political Action Committees (PACs) established by corporations, labour organisations, incorporated membership organisations, trade associations, and national banks. These PACs are nonconnected committees that solicit and accept unlimited contributions from individuals, corporations, labour organisations, and other political committees.
It is important to note that corporations and labour organisations may contribute to independent expenditure-only committees (Super PACs) and noncontribution accounts maintained by Hybrid PACs. They can also pay the expenses of setting up, administering, and soliciting contributions for their own PACs, called separate segregated funds (SSFs or PACs).
Additionally, there are public funding programs available for eligible presidential candidates, funded by taxpayers who have agreed to designate $3 of their taxes to the Presidential Election Campaign Fund.
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Foreign nationals are prohibited from contributing to any federal, state, or local election
Political campaigns in the United States are generally exempt from paying sales tax. While there are no restrictions on who can make purchases for a political campaign, there are, however, laws in place that govern who can contribute to these campaigns.
The Federal Election Campaign Act (FECA) prohibits foreign nationals from contributing to any federal, state, or local election in the United States. This includes any person who is not a US citizen or a lawful permanent resident, as well as foreign corporations and foreign-owned subsidiaries. Foreign nationals are also prohibited from participating in decisions involving election-related activities and from making contributions to political party committees or organizations, including for the purchase or construction of office buildings.
The FECA is enforced by the Federal Election Commission (FEC), which may impose civil fines or refer cases to the Department of Justice (DOJ) for criminal prosecution if violations are found. One loophole to this law is that Social Welfare Organizations (SWOs), such as the NRA and AARP, are exempt from disclosing their donors.
While foreign nationals are prohibited from contributing to US elections, there are certain exceptions. For example, a US domestic corporation that is a subsidiary of a foreign corporation may establish a separate segregated fund to make contributions to federal candidates, provided that the subsidiary is incorporated in the US, has its principal place of business in the US, and does not receive financing for election-related activities from its foreign parent. Additionally, foreign-owned subsidiaries of US corporations are permitted to donate to state and local elections, although they must establish a separate segregated fund for this purpose.
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Frequently asked questions
Candidates for political office receive contributions from individuals, political party committees, and political action committees (PACs). Corporations, labor organizations, and membership groups cannot contribute directly to federal campaigns but can influence elections by creating PACs.
Campaign finance laws vary at the state and federal levels, but they generally dictate who can contribute, contribution limits, and reporting requirements. The Federal Election Campaign Act (FECA) is the primary legal guidance for federal campaign finance law.
The amount of money raised in a political campaign can vary significantly. For example, in the 2019-2020 election cycle, U.S. presidential campaigns raised and spent $4.1 billion. However, a Caltech study showed that a large portion of those funds were likely grassroots contributions, or gifts under $200.
Presidential campaigns can be funded by taxpayers who choose to direct $3 to the Presidential Election Campaign Fund when filing tax returns. To be eligible for these funds, candidates must agree to spending and fundraising restrictions, including not accepting private donations. Many major-party candidates decline public funding in favor of private fundraising.
Corporations cannot donate directly to individual campaigns, but they can contribute through corporate Political Action Committees (PACs).
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