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. Since then, federal political campaigns have only become more complex and expensive.

As the nation's size has increased, so has the amount of money in American politics. The U.S. government has tried to regulate the political influence of money to maintain equality during elections. The result is campaign finance laws.

 Recently, laws have tried to determine if there should be limits on campaign contributions at all.

A Brief History of Early Campaign Finance Laws

The Tillman Act of 1907 was the first legislation to address federal campaign contributions. President Theodore Roosevelt signed the law, which "prohibit[ed] corporations from making money contributions in connection with political elections." But, because there was no agency to enforce the new regulations, the Tillman Act was more symbolic than useful.

The Federal Election Campaign Act

It wasn't until 1971, with the passage of the Federal Election Campaign Act (FECA), that Congress passed legislation creating an agency to enforce campaign finance laws. The FECA created the Federal Election Commission (FEC), which became active in 1974. Now, the laws had an enforcement agency behind them.

The FECA established several requirements for campaign contributions and spending. Among other important considerations, the FECA ordered:

• Disclosure requirements for candidates and campaign committees
• Limits on individual and aggregate contributions to candidates and campaigns
• Limits on spending for candidates and total campaign expenditures

More election laws and court cases altered the FECA. The FEC remains the primary enforcement agency. It refers criminal violations of the FECA to the U.S. Department of Justice.

The Bipartisan Campaign Reform Act

In the 1990s campaign financing shifted to so-called "soft money" expenditures. "Soft money" is money contributed from otherwise prohibited sources. It gets spent on political activity not directly related to elections. Some of this money went to "issue advocacy," which also fell outside the FEC's mandate. Issue advocacy praised a candidate's record or attacked their opponent. But it didn't mention the election, which would be electioneering.

The Bipartisan Campaign Reform Act, also called the McCain-Feingold Act, closed this loophole. It prohibited soliciting soft money contributions. It also barred corporations and national political committees from financing broadcast advertising in which any federal candidates were identifiable within 60 days of a general election.

The 2010 Supreme Court ruling Citizens United v. FEC struck down portions of the BCRA.

Citizens United and the First Amendment

In 2008, a group of filmmakers released a mockumentary critical of then-candidate Hillary Clinton. The FEC blocked the film's wider release. It cited the BCRA's restriction on electioneering communications. The filmmaking company Citizens United sued, claiming a First Amendment violation.

In a 5-4 decision, the Court said, "corporations, nonprofits, trade unions, and others [may] spend money independently on federal election campaigns." As long as they do not formally "coordinate" with a candidate or political party, these entities may spend as much money as they wish.

A later decision, Speechnow.org v. FEC, gave SuperPACs the ability to accept unlimited contributions from people and corporations. The only rule is that these funds cannot go directly to candidates.

Who Can Contribute to Federal Election Campaigns?

In general, anyone may contribute to federal elections. Contribution limits depend on who the contribution comes from and where it goes. The Court ruled in Citizens United that corporations, businesses, and nonprofit entities may contribute to party committees and political action committees (PACs).

Individuals can donate a set amount per year or election cycle. "Individual" means any single entity, including corporate entities and unions. Individuals can contribute to candidates, PACs, and party committees up to the preset limits.

Candidate committees may contribute to other candidates and their own parties. Parties have unlimited transfers between one another. A candidate committee may donate to their party. The party can donate that sum back to a different candidate without penalty.

Party committees and the national party committee have limits on how much they can donate to candidates. They have unlimited transfer capacity between one another. This unlimited fund transfer is why transparency and disclosure reporting requirements are essential.

Political Action Committees

A fundraising group organized to elect or defeat a political candidate is a political action committee (PAC). PACs are the main form of financing for most campaigns. Any group that meets the FEC requirements for a PAC may collect funds for a candidate or campaign. Members of the Senate or the House of Representatives often form "leadership PACs" to support preferred candidates for federal offices.

Super PACs

Independent expenditure-only committees, known as "Super PACs," emerged after the Citizens United ruling. Super PACs can't collect money for specific candidates. They aim to raise money to buy advertising time and carry out party-building activities for a party or cause. Under the FEC's rules and Citizens United, Super PACs may not coordinate with a candidate or campaign in these activities.

Super PACs have no limits on accepting contributions or expenditures. They carry out a good deal of political advertising on behalf of their national party committee. Super PACs can accept large contributions that state and local elections cannot. The Super PACs then transfer the money back through local and state committees.

Endorsements

Organizations like unions, corporations, and nonprofit agencies may endorse a political candidate. The organization must restrict the endorsement to its "restricted class." In other words, if a presidential candidate visits a union hall, the union may announce its endorsement during the visit.

Endorsements are not campaign donations unless the candidate or the campaign committee coordinates with the endorser for more event coverage. If the candidate calls CNN and asks them to cover the speech, it becomes a campaign event and part of the union's campaign donations.

Campaign Finance Law Violations

The United States has complicated campaign finance laws. Federal laws overlap with state and local regulations. Some of the most important include failing to accurately report donations, using campaign funds for personal expenses, and accepting contributions from foreign nationals.

These rules are so strictly enforced that presidential campaigns report when Canadians or other tourists buy official campaign T-shirts or other souvenirs. No matter the donor's intent, excessive contributions must get refunded or moved to another election or candidate.

Negligent violations may get fined up to 200% of the money involved in the breach. Intentional violations can result in sentences of up to five years in prison and fines of up to $50,000 or 1,000% of the money involved in the violation.

Political Questions? Get Legal Advice.

Running for public office or running a campaign has many legal pitfalls. There are laws at every level you need to follow closely. Before starting any campaign, consult an attorney who knows federal campaign finance laws for advice.