Federal Laws You Need to Know When Running for Office
Running for federal office can be both an energizing but challenging time for potential candidates. After qualifying as a candidate, there is a host of federal laws that regulate the campaign contribution process. Federal election campaign finance laws (1) regulate the amount, frequency, and source of contributions; (2) place limits on campaign contributions and the purposes for which these contributions may be used; and (3) require candidates to maintain adequate records and provide regular disclosures in the form of reports regarding the money that the campaign receives and spends.
The key campaign finance legislations in the United States are the Federal Election Campaign Act (“FECA”) of 1971, followed by the Bipartisan Campaign Reform Act (“BCRA”) of 2002. Both have been amended, party repealed, or dramatically changed by critical Supreme Court opinions over the years. Below is a brief but thorough summary of the main provisions of these legislations.
Federal Election Campaign Act (“FECA”)
FECA has been amended many times, including amendments to reform the campaign finance disclosure requirements or to establish the main enforcement agency, the Federal Election Commission. In 1976, the Supreme Court in Buckley v. Valeo held that FECA’s limits on individual contributions and FECA’s disclosure requirements are constitutional; however, spending limits placed on total expenditures are unconstitutional.
A contribution is defined as anything of value that is provided for the purpose of affecting or influencing a federal election. A contribution can be made in the form of money, goods, services, and loans. Keeping track of campaign contributions and understanding what counts as a campaign contribution is crucial because (1) an individual’s qualification to run for federal office depends on obtaining a certain threshold of contributions and (2) contributions from certain sources do not count as qualified contributions. Additionally, FECA places multiple limits on the amount of contributions.
The main provisions of FECA are as follows:
Federal Candidacy Eligibility
Under FECA, an individual must qualify as a candidate in order to run for federal office. Briefly, an individual who has decided to run for federal office—including House, Senate, and presidential candidacies—becomes a candidate only when he or she is able to raise or spend more than $5,000 in contributions or expenditures. Total campaign contributions raised or spent only begins after the individual has indicated their intention to run for federal office; contributions raised during mere exploratory activities do not count towards this requirement. After an individual becomes a candidate, they must file a Statement of Candidacy and designate a campaign committee within 15 days.
Prohibitions on the Source of Campaign Contributions
Some individuals, groups, and other committees are prohibited by federal law from making campaign contributions to a candidate. Parties who can contribute include the following:
- Individuals (subject to contribution limits);
- Minors (subject to certain conditions such as a knowing and voluntary contribution);
- Certain LLCs (if the LLC is treated as a corporation, it cannot make campaign contributions to a committee unless it establishes a separate segregated fund; if the LLC is treated as a partnership, it is subject to partnership campaign contribution limits);
- Single-member LLCs (treated as a single member contribution);
- Partnerships (subject to partnership campaign contribution limits);
- Indian tribes (treated as a person);
- Political party committees and political action committees (“PACs”);
- Other federal campaigns;
- State political action committees; and
- The candidate when making contributions to their own campaigns.
Campaign contributions cannot be accepted from corporations, labor organizations, foreign nationals, federal government contractors, or campaign contributions that are in another individual’s name.
Federal Campaign Contribution Limits
Most contributions are given to the candidate’s committee or to a political action committee (“PAC”). A PAC is a group organized for the purpose of raising contributions and spending funds to elect candidates. During the 2019-2020 elections, individual donors can contribute up to $2,800 per election and per candidate. In other words, individuals can donate up to $2,800 to one or more candidates in a federal primary election and up to $2,800 to one or more candidates in a federal general election. As demonstrated, these limits apply separately to each federal election that the candidates engaged in—a primary, general, special, and runoff elections are each considered separate elections.
Additionally, an individual can donate up to $5,000 per year to a political action committee—including both separate segregated funds (“SSF”) and nonconnected committees—and $35,000 per year to a national party committee. Different limits apply where the donor is a candidate committee as opposed to an individual person. The 2019-2020 campaign contribution limits are available on the Federal Election Committee’s website.
In the event that a committee receives a contribution that exceeds the donor’s limit or other limits, the committee must follow certain specified procedures. In such cases, the committee can remedy the violation in two ways: (1) refund the excessive contribution or (2) seek a redesignation or reattribution of the amount in 60 days. With a redesignation, either the donor can direct the committee to use the excessive contribution for another election (e.g., primary election versus general election) or the committee may make a presumptive redesignation if it takes certain steps such as notifying the donor. With a reattribution, either the donor can direct the committee in writing to give the excessive contribution of a joint contribution to another individual or the committee may make a presumptive reattribution if certain conditions are met. In both cases, the donor must be informed that they have the option to request a refund of the excessive contribution.
The FEC notes that committees should encourage their donors to designate their contributions for specific elections so that it shows the donor’s intent to the candidate’s campaign. This is important because designated contributions count against the donor’s contribution limits for the candidate’s election that is named, while undesignated contributions count against the donors contribution limits for the next election and can be presumptively redesignated under certain circumstances if the candidate does not run in the future. Donors can designate contributions by specifying in writing which specific election they intend that contribution to apply.
Campaign Financing Recordkeeping Requirements
Under FECA, all receipts must be reported; however, FECA requires recordkeeping only for contributions. Despite this, in order to comply with the reporting provisions of FECA, the candidate committee must keep records for all receipts. Receipts are defined as anything of value—money, goods, services or property—that is received by a political campaign committee and includes both contributions and other forms of income or support for the candidate. A contribution is defined as a gift, subscription, loan, advance or deposit of money or anything else of value that is given to influence a federal election or the payment of compensation for a person’s personal services that are rendered without charge to a political committee.
The three main pieces of information that the committee must maintain include (1) the amount received; (2) the date of receipt; and (3) the name and address of the source. Every person who receives a campaign contribution must forward the contribution and the recordkeeping information to the treasurer of the candidate’s committee within 10 days of receipt. The committee must retain the written copies of the donors’ contributions whether they are designations, redesignations, or reattributions.
Campaign Financing Reporting Requirements
FECA requires candidates to report various information about campaign contributions including where they money raised came from, the amounts of the contribution, where the money is spent, and how much money was spent for each transaction. The authorized committee must file regular reports—along with other candidacy reports—with the FEC. These reports are then made publicly available in the campaign finance data section on the FEC’s website.
Bipartisan Campaign Reform Act (“BCRA”)
Also known as the McCain-Feingold Act, BCRA was designed to end the use of “soft money.” Soft money is money perceived to influence elections though is not regulated by the limits and prohibitions of federal campaign finance law. The two major components of this law were that it (1) prohibited national political party committees from soliciting and spending soft money contributions to influence federal elections and (2) prohibited corporate treasury funds and unions from paying for “electioneering communications”—political advertising.
In 2010, the Supreme Court in Citizens United v. Federal Election Commission ruled that BCRA’s restrictions on political advertising by corporations and unions were unconstitutional. In 2014, the Supreme Court again addressed federal campaign financing in McCutcheon v. Federal Election Commission. In McCutcheon, the Court held that biennial aggregate contribution limits to federal candidates—which both FECA and BCRA imposed upon campaign donors—were unconstitutional.
Federal election campaign finance laws are detailed, convoluted, and riddled with federal exceptions and Supreme Court refinements. The failure to understand or respond appropriately to these laws can be devastating to one’s campaign and political undertaking.
The best course of action an individual can take to maximize their success during the campaign process is to hire a law firm that is not only experienced in handling federal election campaign financing—including the relevant federal legislation and critical Supreme Court opinions—but who is also genuinely dedicated to securing the best outcome for their client. Contact Oberheiden P.C. today.