Eleanor Finch
Political campaigns are a costly affair, and many rely on donations to fund their operations. While some candidates are able to self-fund, most rely on donations from individuals, corporations, or other organizations. In the US, for example, nearly half of Gen Z and millennials planned to donate to a political campaign in 2020, with credit cards being a popular payment method. However, credit card processing fees eat into the actual amount that goes to the campaign. Despite this, many Americans still plan to donate money, time, and effort to political campaigns and candidates.
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What You'll Learn
Political campaign donations are not tax-deductible
The federal tax code is explicit in its stance on the non-deductibility of political contributions. It specifically states that there is no deduction for any amount given to a group that aims to influence an election, lobby for a political agenda, or impact legislation. This includes donations of cash, stocks, cryptocurrencies, or any other assets to candidates, political parties, or PACs.
In-kind contributions, which refer to non-monetary donations, are also not tax-deductible. Examples of in-kind contributions include providing services or allowing the use of one's property (such as a home or private jet) to candidates, political parties, or PACs. Even if you host a political fundraiser at your home, nothing about it will be tax-deductible, including the use of your property, the time spent planning, and the cost of catering.
It is important to distinguish between "nonprofit" and "charity" as they are treated differently for tax purposes. While all charities are generally nonprofit organizations, not all nonprofits are charities. For instance, nonprofit advocacy groups like the American Civil Liberties Union and the Sierra Club have a 501(c)(4) designation and cannot receive tax-deductible donations because they may engage in political activity.
The IRS provides a Tax-Exempt Organization Search Tool to help donors determine if an organization qualifies for tax-deductible donations.
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Credit card fees
It's also important to be cautious when donating by credit card to avoid potential scams. Always go directly to the candidate's official website to make your donation and be wary of providing your credit card information over the phone or on suspicious websites.
From the campaign's perspective, credit card fees can eat into the impact of donations received. Campaigns may have to pay a few cents on the dollar in processing fees, and these fees can add up, especially for small-dollar contributions. While credit card donations are a common and convenient method for donors, campaigns should also consider offering alternative payment methods to reduce these costs.
Additionally, campaigns need to be mindful of the reporting requirements for credit card donations. In the case of electronic payment platforms like PayPal, Venmo, ActBlue, or GoFundMe, the total contribution amount and the fees charged by the platform must be reported separately under the applicable transaction types. Proper documentation of these fees is essential for maintaining transparent and compliant financial records.
Overall, while credit cards offer convenience for donors and campaigns alike, the associated fees can have a significant impact on the effectiveness of donations. Donors and campaigns should be aware of these fees and make informed decisions about their preferred payment methods to ensure that their contributions have the desired impact.
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Who can and cannot donate
Political campaigns are often funded by donations, but there are strict rules about who can and cannot donate. These rules are enforced by the Federal Election Commission (FEC) under the Federal Election Campaign Act of 1971 (FECA). The Act limits the amount of money individuals and political organizations can give to a candidate running for federal office.
Who can donate
Individuals can donate to party committees, subject to limits. Minors can also make contributions, but only if the decision is made knowingly and voluntarily, and the minor owns or controls the funds, goods, or services contributed.
Who cannot donate
The FEC prohibits corporations and labor organizations from making contributions in connection with federal elections. Incorporated charitable organizations are also prohibited from making contributions in connection with federal elections. Charities face additional restrictions on political activity under the Internal Revenue Code. Campaigns may not accept or solicit contributions from federal government contractors. Foreign nationals are prohibited from making contributions in connection with any federal, state, or local election.
Other rules
It is prohibited for a corporation or labor organization to reimburse individuals who make contributions to a political committee. Individuals cannot make contributions in someone else's name. For example, if you have already donated the maximum amount to a campaign, you cannot give money to a friend or family member to donate to the same campaign.
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How to ensure the donation site is safe
When donating to a political campaign, it is important to ensure that the donation site is safe and legitimate. Here are some ways to do that:
Firstly, do your research. Check if the organization is registered as a charity or political committee. In the US, you can use the Internal Revenue Service's (IRS) Tax Exempt Organization Search Tool to confirm this. Be cautious of solicitations that pressure you to donate immediately. Scammers often employ tactics to rush you into making a decision, so take your time to review the organization and campaign.
Secondly, verify the website's security. Look for "https" in the web address, indicating that your information will be encrypted and transmitted securely. Ensure the entire site is protected by an SSL (Secure Sockets Layer) certificate, obtained from a reputable source. This ensures that communications between your browser and the website are encrypted. Additionally, double-check with the website's hosting provider to confirm the use of Transport Layer Security (TLS), which further secures your data.
Thirdly, be cautious of deceptive links. When clicking on a link to donate, hover your mouse over it first without clicking. If the domain name differs from the sender or organization, or if there are misspellings, it may be a scam. Always enter the URL of the charity yourself to confirm you are on the correct website.
Finally, protect your personal information. Only provide essential details and use a credit card for added security. Credit cards offer more protection than debit cards, as they do not draw funds directly from your bank account. Keep a record of your donations and review your statements to ensure you are charged the correct amount and are not signed up for recurring donations without your consent.
By following these steps, you can help ensure that your donation to a political campaign is safe and secure.
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Campaign finance reporting requirements
Record-Keeping and Receipts:
FEC (Federal Election Commission) guidelines emphasize the importance of maintaining detailed records of contributions. For donations exceeding $200, committees must record the contributor's full name, mailing address, occupation, and employer. Smaller contributions below $50 may follow simplified record-keeping methods, but the contributor's name and address must still be documented. Separate records must be kept for primary and general election funds, with specific accounting methods advised to differentiate between the two.
Reporting Deadlines:
Campaign reports are typically due on a quarterly or semi-annually. During election years, additional pre-election reports may be required. Committees must also be mindful of special reports, which may be necessary depending on the timing and amount of contributions or expenditures. Amendments to reports can be made at any time, but it is recommended to do so promptly to avoid potential complaints or fines.
Public Disclosure:
Campaign reports are considered public documents, accessible to election officials, the general public, and other candidates or committees. While online postings of these reports may be redacted at the discretion of the filing officer, hard copies provided upon request must include all information.
Payment Methods and Fees:
The use of credit cards for political donations incurs processing fees, which may be covered by the campaign or the donor, depending on the platform. These fees can range from 2.9% to 6% or more, plus a per-transaction fee. It is essential for donors to be aware of these fees, as they reduce the actual amount contributed to the campaign.
Tax Implications:
Political contributions, whether monetary or in-kind, are generally not tax-deductible. This applies to donations made to candidates, parties, or political action committees (PACs). However, individuals may choose to allocate $3 to the Presidential Election Campaign Fund through their tax returns, which does not affect their taxes or deductions.
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Frequently asked questions
You can donate to a political campaign via check, debit and credit card, or cash. You can also use electronic payment systems such as PayPal, Square, Venmo, Cash App, or most other mobile payment systems. However, be aware that a processing fee is taken as a percentage of your donation, which means not all of your money will go to the campaign.
Yes, there are some restrictions. Federal law prohibits contributions from foreign nationals, federal government contractors, and corporations. Only accept contributions from trusts in which no one affiliated with the political committee serves as a trustee or exercises control over the trust corpus or interest amount.
No, political donations are not tax-deductible. This includes monetary donations, in-kind contributions, and volunteer expenses.
