U.S. Federal Campaign Finance Laws

Finances have always played a significant role in American politics. Although George Washington did not even campaign for the office of president in the first American presidential election, the control and movement of resources was a key issue. Federal political campaigns since then have only become more complex and expensive.

As the size of the nation and the electorate have increased, the amount of money in American politics has increased as well. In an attempt to regulate the political influence of the wealthy and to retain voting equality among citizens, the U.S. government has enacted numerous campaign finance laws.

At their core, these laws attempt to determine what entities can contribute to political election campaigns. They also determine what limits should be placed on their contributions and if there should be limits at all.

A Brief History of Early Campaign Finance Laws

The first piece of legislation to directly address and regulate federal campaign contributions was the Tillman Act. Signed into law in 1907 by President Theodore Roosevelt, the Tillman Act was written to "prohibit corporations from making money contributions in connection with political elections." However, even though the Act prohibited campaign contributions from certain entities, there was no agency to enforce the new regulations.

Over the next several decades, various pieces of additional legislation established spending limits for some campaigns and mandatory disclosure for different types of campaign contributions and spending. They also prohibited labor unions from making contributions to federal election campaigns.

The Federal Election Campaign Act

It was not until 1971, with the passage of the Federal Election Campaign Act (FECA), that Congress passed legislation specifically regulating federal elections. This act also created an agency to enforce these new laws.

The primary accomplishments of FECA include:

• Required disclosure for candidates and campaigns
• Established limits on contributions to candidates and campaigns
• Established limits on campaign expenditures
• Established limits of spending on behalf of a candidate
• Founded the Federal Election Commission (FEC) in 1974

The Federal Election Commission

The creation of the FEC represented the first point at which an independent government agency was created specifically to monitor federal election campaigns and to enforce existing campaign finance law.

While the FEC continues to regulate federal campaign finance, multiple court cases have altered certain key regulations and restrictions regarding contributions and disclosures.

Campaign Requirements

Because federal election campaigns and their levels of funding can vary so much from candidate to candidate, candidates must begin reporting their finances to the FEC as soon as a campaign crosses an established financial threshold.

As soon as an individual collects or spends $5,000 as part of an effort to acquire federal office, that individual is considered a federal candidate and must begin reporting their campaign finances to the FEC.

Additionally, the candidate must also create a principal campaign committee to be in charge of all campaign contributions and expenditures.

Who Can Contribute to Federal Election Campaigns?

Broadly speaking, individuals and groups and contribute to federal election campaigns. Each entity is subject to its own spending limitations.

Individuals Can Contribute

Although there are limits on contribution amounts, individuals can contribute their funds to any candidate or organization of their choosing.

The contribution limits for individuals vary depending on the committee(s) and/or candidate(s) the individual is contributing to.

Contributing Groups

The regulations governing group contributions vary widely, depending on the respective group's structure and affiliations.

Political Action Committees

When individuals organize to collect funds in order to elect or defeat a political candidate, that organization is known as a Political Action Committee (PAC).

PACs can be broken down into multiple categories depending on which criteria they do or do not meet. Even though the primary purpose of these different PACs is largely the same, the contribution limitations are different depending on the type of PAC.

Super PACs

Officially known as "independent expenditure-only committees," Super PACs do not collect money for a specific candidate. Instead, Super PACs raise money to pay for advertising and party-building on behalf of a particular candidate's party or cause.

These advertisements may contribute to a particular candidate's success or failure even though the super PAC does not officially coordinate with the candidate.

Super PACs are officially known as independent expenditure-only committees because they raise and spend funds independently of a specific candidate's campaign.

Because Super PACs are not technically affiliated with a candidate's campaign or a separate political organization, they are not limited by any collection or spending constraints. This means there is no legal limit on the amount of money they can collect and spend.

Hard Money vs. Soft Money

Regardless of who or what organization is contributing money, the final location of the funds also determines how much can be contributed. Campaign contributions —for the most part— are known as either "hard money" or "soft money" depending on the location.

Hard Money

"Hard money" is money given directly to a political candidate. Because it is a direct campaign contribution, hard money is regulated by the Federal Election Commission. Hard money can come from either individuals or organizations.

Soft Money

"Soft money" is money given to a political party or organization. Unlike hard money, which goes to a specific candidate, soft money goes to political groups. It cannot be used to explicitly advocate for a particular candidate's success or defeat.

There are no limits on the amount of soft money that can be collected. Additionally, soft money can come from any source. This means it can come from individuals, organizations, unions, corporations, etc., and does not need to be reported to the Federal Election Commission.

Campaign Finance Law Violations

U.S. campaign finance laws are complex. They are so complex and numerous, in fact, that campaigns sometimes violate them without knowing they have done so by not reporting contributions correctly.

Some examples of more overt campaign finance law violations include:

• Failing to report campaign contributions
• Reporting inaccurate donation amounts
• Using campaign funds for non-campaign expenses
• Accepting contributions from non-nationals or non-national entities

What Is the Penalty for Violating Campaign Finance Laws?

The penalty for violating U.S. campaign finance laws depends on:

• Which law was broken
• Who broke it (hard vs. soft money)
• The degree to which it was broken
• Whether the person who broke it did so knowingly

Presidential campaign finance law violations can result in a sentence of up to five years in prison and/or fines up to $50,000 or 1,000% of the amount of money involved in the violation.

Campaigns must follow the state campaign finance laws in their respective states, in addition to all relevant federal campaign finance laws. As is the case with most state laws, specific state campaign laws vary from state to state.

Campaign finance law can be challenging to navigate, and the consequences of violating it can be significant. Additionally, if an individual or organization violates federal campaign finance laws, they may also be in violation of state and/local laws as well.

Anyone with questions regarding federal campaign law should consider contacting an attorney experienced in campaign finance laws who can provide assistance and advice.