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Government 101: Campaign Finances
There are three main ways in which private entities can influence the political system through the means of spending money.
- Campaign contributions - donations directly to a candidate’s campaign fund.
- Outside spending/Independent expenditures - money spent to influence elections that has no technical affiliation with candidates. Groups in this category range from conventional party committees to the more controversial super PACs and 501(c) "dark money" organizations. Outside spending groups can legally sums of money to influence the outcome of elections.
- Lobbying - the act of an individual or group attempting to influence politicians. The term “lobbyist” is most frequently associated with legal firms whose goal is to influence politicians on behalf of their clients, who are often times private corporations and unions. Although corporations and unions are banned from directly donating to political campaigns, their workers and CEOs can give money to a lobbyist, who then donates to a campaign. Lobbyists are also notorious for offering politicians highpaying careers with their firm once politicians leave office.
While most individuals are free to make political contributions, three categories of individuals are prohibited by law from making contributions: foreign nationals, federal government contractors and, in some instances, minors. These and other prohibitions on contributions are explained below.
Foreign nationals may not make contributions in connection with any election Federal, State or local. This prohibition does not apply to foreign citizens who are lawfully residing in the United States (those who have "green cards").
Federal Government Contractors
Federal government contractors may not make contributions to influence federal elections. For example, if you are a consultant under contract to a federal agency, you may not contribute to federal candidates or political committees. Or, if you are the sole proprietor of a business with a federal government contract, you may not make contributions from personal or business funds. But, if you are merely employed by a company (or partnership) with federal government contracts, you are permitted to make contributions from your personal funds.
Corporations and Unions
The law also prohibits contributions from corporations and labor unions. This prohibition applies to any incorporated organization, profit or nonprofit. For example, the owner of an incorporated "mom and pop" grocery store is not permitted to use a business account to make contributions. Instead, the owner would have to use a personal account. A corporate employee may make contributions through a nonrepayable corporate drawing account, which allows the individual to draw personal funds against salary, profits or other compensation.
Contributions in the Name of Another
Contributions made in the name of another are prohibited. For example, an individual who has already contributed up to the limit for a candidate's election may not give money to another person to make a contribution to the same candidate. Similarly, a corporation is prohibited from using bonuses or other methods of reimbursing employees for their contributions.
Limits on Campaign Contributions
Outside Spending/Independent Expenditures
Outside spending refers to money spent to influence elections that has no technical affiliation with candidates. Groups in this category range from conventional party committees to the more controversial super PACs and 501(c) "dark money" organizations. Outside spending groups can legally raise and spend unlimited sums of money to influence the outcome of elections.
The outside spending landscape is in constant flux. In 2002, Congress passed the Bipartisan Campaign Reform Act commonly referred to as McCainFeingold which set limits on "soft money" contributions and banned special interest groups from making issue ads. But in the years that followed, federal court decisions, including Citizens United v. FEC and Speechnow.org v. FEC have dismantled or eroded parts of the law, giving rise to super PACs and "dark money" organizations politically active nonprofits that do not have to disclose their donors. These organizations alone spent hundreds of millions of dollars in recent elections and almost never revealed where their money was coming from.
Notable Supreme Court Cases
Citizens United v. FEC
Resulted in unions, corporations, and associations being able to spend unlimited sums of money directly from their treasuries on “electioneering communications”. Electioneering communications are defined by the FEC as “ broadcast ads (television, radio, cable, satellite), made by people or groups who do not file regular reports with the FEC, that refer to a federal candidate, are targeted to voters and appear within 30 days of a primary or 60 days of a general election.”
SpeechNow v. FEC
Resulted in 527 groups ,which are defined as “a party, committee or association that is organized and operated primarily for the purpose of influencing the selection, nomination or appointment of any individual to any federal, state or local public office, or office in a political organization,” being able to raise unlimited sums of money.
Together, SpeechNow v. FEC and Citizens United v. FEC allowed for the creation of organizations commonly known as super PACS. Technically known as independent expenditureonly committees, super PACs may raise unlimited sums of money from corporations, unions, associations and individuals, then spend unlimited sums to overtly advocate for or against political candidates.
There are several ways in which lobbying relates to campaign finance, the most notable of them being “bundled contributions” and “the revolving door.”
Although it is illegal for corporations and unions to donate directly to political campaigns, it is completely legal for them to hire legal professionals known as lobbyists to represent their interests to politicians holding or running for public office. Lobbyists may also receive contributions from several of their clients, bundle them together, and then donate to a political campaign this process is known as “bundling contributions.”
The Revolving Door
Receiving campaign donations is not the only way that politicians benefit from working with lobbyists. They also have the potential to walk through what is known as the “revolving door.” It is extremely common for politicians and federal workers to find careers with lobbying firms once they leave government positions, and visa versa. The firms who hire politicians are often the same firms who lobbied them while in office, and almost exclusively offer much higher salaries than the government does.