Campaign Spending 101

In 2016, hundreds of groups will spend money in attempts to influence the election. This guide describes the types of groups playing a major role and identifies some of their key features.

Traditional Organizations 

Federal Candidate Campaign Committees

Each political candidate has a committee that can accept donations from individuals. While candidates have some leeway to ‘test the waters’, “once the individual has raised or spent more than $5,000, he or she must register as a candidate.”[1] Traditionally, the candidates’ committees have been primarily responsible for costs such as staff and advertising. Donors to these committees are limited to $2,700 per election. Thus, individuals who wish to ‘max out’ their donations to candidate committees can contribute a total of $5,400: $2,700 for the primary and $2,700 for the general election.[2]

Party Committees

The political parties also have committees that collect and spend money for party activities and to help candidates. Examples of major party committees include the Democratic National Committee, the Republican National Committee, the Democratic Senatorial Campaign Committee, the National Republican Senatorial Committee, the Democratic Congressional Campaign Committee, and the National Republican Congressional Committee. These committees can spend unlimited money on ‘party-building activities’ and can also spend on activities such as advertising that help the candidates they support. Due to Congress’ raise of donation caps in 2014, each party’s committees can accept a total of $777,600 per year from each donor.[3] However, these party committees are limited in how much they can spend in coordination with each candidate; after these thresholds are reached, any further financial help must be in the form of an independent expenditure. During budget negotiations in late 2015, Senator Mitch McConnell (R-KY) proposed a policy rider that would have eliminated these coordination limits.[4] The rider was unsuccessful. 

PACs

Political Action Committees, or PACs, collect money from numerous donors to disburse to multiple candidates and/or party committees. PACs can be organizationally-based (since corporations, unions and non-profits cannot donate directly to campaigns and must do so through PACs), issue-based, or created by a politician to support his or her colleagues. For instance, End Citizens United PAC is an example of an issue-based PAC. Per the Center for Responsive Politics, “PACs can give $5,000 to a candidate committee per election (primary, general or special). They can also give up to $15,000 annually to any national party committee, and $5,000 annually to any other PAC. PACs may receive up to $5,000 from any one individual, PAC or party committee per calendar year.”[5] PACs are also required to disclose their donors and their expenditures.

527 Groups

‘527 groups’ are permitted by section 527 of the IRS Code. The IRS notes that “Political parties; campaign committees for candidates for federal, state or local office; and political action committees are all political organizations subject to tax under IRC section 527.”[6] In practice, the term has been used to refer to groups that raise and spend unlimited amounts of money, but that are forbidden from coordinating with federal campaigns. These groups are not permitted to advocate directly for or against the election of a candidate, though 527 groups such as Swift Boat Veterans for Truth famously circumvented that rule. Unlike PACs and Super PACs, they report their donors to the IRS.[7]

New Developments

Since the Supreme Court handed down its Citizens United decision in 2010, dozens of “independent” groups have taken advantage of it to pour unlimited money into politics. These groups exist in two forms: non-profits and Super PACs.

Politically active non-profits

Most politically active non-profits are ‘social welfare’ nonprofits, bounded by section 501(c)(4) of the IRS Code. Non-profits are a convenient mechanism for many big-money donors since the groups do not have to disclose the identities of their donors. Since the Supreme Court’s 2007 decision in Wisconsin Right to Life v. FEC, these groups have considerably increased their ability to spend money on politics.[8] While such groups are only permitted by law to spend an “insubstantial” amount of money on politics, IRS Commissioner John Koskinen has suggested that, in practice, this term means less than half of a group’s expenses.[9] Furthermore, the IRS will reportedly avoid changing this stance before the 2016 election.[10] In spite of this permissive threshold, available tax filings and records indicate that many groups have flouted this requirement.

The other types of non-profits that act politically are 501(c)(3) ‘educational or research’ groups, 501(c)(5) unions, and 501(c)(6) business associations. Gifts to 501(c)(3) groups are tax-deductible. These groups are prohibited from “directly or indirectly participating in… any political campaign.”[11] Thus, they are generally used for ‘voter education’ (in some cases, “issue ads” that effectively criticize or praise a candidate) and other efforts that complement the direct advocacy of 501(c)(4) and other groups. 501(c)(3) groups can also pay some expenses of associated 501(c)(4) groups, which allows the c4 groups to spend more money on political activity.

Many 501(c)(5) unions are politically active, and some form associated Super PACs. 501(c)(6) business associations, such as the U.S. Chamber of Commerce, are comparatively rare but are able to avoid disclosure of their donors in the same manner as 501(c)(4) groups.

All told, dark money spending on elections by 501(c)(4) and 501(c)(6) groups has skyrocketed from $5.2 million in 2006 to more than $300 million in the 2012 elections and another $174 million in the 2014 midterms.[12] This dark money spending is disproportionately conducted by Republican-backing groups. According to the Center for Responsive Politics, “the $124 million in reported spending by conservative dark money organizations in 2014 [was] more than the combined spending of all liberal dark money groups going back to 1990.”[13]

Super PACs

Since the Citizens United and SpeechNow court decisions, ‘Super PACs’ can raise and spend unlimited amounts of money while directly advocating for or against candidates. Unlike ‘regular’ PACs, Super PACs cannot donate directly to political candidates or parties. They are required to remain financially and strategically independent, though they can declare whom they support. In the opinion of the New York Times editorial board, “Super PACs are supposedly independent of the candidate’s campaign, but that distinction has just about vanished.”[14] In the lead-up to the 2016 election, several candidate-backing Super PACs have taken over functions such as staffing, event organization, voter contact, and advertising that previously were primary functions of candidate committees.[15]

Super PACs are required to disclose their donors, though some donors have taken steps to obscure their identity by contributing through shell corporations.[16] As of December 8, 2015, the top 1% of Super PAC donors had given 60% of the groups’ money for the 2016 cycle.[17]

Hybrid PACs 

Hybrid PACs are also called “Carey committees,” after the Carey v. FEC decision that permitted their creation. These PACs have two sides: a regular PAC that is constrained by donation limits, and a Super PAC that is not.[18] Unions and corporations are not permitted to establish hybrid PACs.[19]

Summary

Money in the political system is increasingly flowing into and through Super PACs and 501(c)(4) nonprofits. In turn, these groups are rapidly expanding their roles. For instance, several Super PACs are circumventing legal prohibitions on coordination between campaigns and Super PACs and have taken on traditional campaign roles.[20] The scope of these groups’ spending is similarly growing. “Independent” groups supporting Republicans spent a whopping $720 million in the 2012 election cycle and another $305 million in the 2014 midterms.[21][22]

In Citizens United, Justice Kennedy asserted that “independent expenditures… do not give rise to corruption or the appearance of corruption.”[23] However, media investigations of known donors to Super PACs and political non-profits have revealed that these individuals and companies frequently have a motive of potential gain for their contributions. Others have already benefited from their relationships with their chosen candidates. This hardly correlates with Justice Kennedy’s reasoning.

End Citizens United PAC is committed to overturning the mistaken Citizens United decision and, in the meantime, to countering these “independent” groups’ efforts to undermine our democracy and benefit their donors.

[1]Congressional candidates and committees.” Federal Election Commission, 06/2014

[2]Contribution limits for 2015-16 federal elections.” Federal Election Commission, accessed 12/09/15

[3]G.O.P. angst over 2016 led to provision on funding.” Nicholas Confessore, The New York Times, 12/13/14

[4]Democrats oppose new effort to loosen campaign finance rules.” Paul Blumenthal, The Huffington Post, 12/03/15

[5]What is a PAC?” The Center for Responsive Politics, accessed 12/08/15

[6]Tax information for political organizations – filing requirements.” Internal Revenue Service, 09/22/15

[7]A glossary of campaign finance in the U.S.” Libby Watson, The Sunlight Foundation, 02/17/16

[8]Justices loosen ad restrictions in campaign finance law.”Linda Greenhouse and David D. Kirkpatrick, The New York Times, 06/26/07

[9]IRS expected to stand aside as nonprofits increase role in 2016 race.” Eric Lichtblau, The New York Times, 07/05/15

[10]IRS expected to stand aside as nonprofits increase role in 2016 race.” Eric Lichtblau, The New York Times, 07/05/15

[11]The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations.” Internal Revenue Service, 12/15/15

[12]Political nonprofits (dark money).” The Center for Responsive Politics, accessed 11/12/15

[13]As FEC window opened, subjects of dark money ‘issue ads’ became targets for defeat.” Robert Maguire, The Center for Responsive Politics, 11/03/14

[14]How Super PACs Can Run Campaigns.” The New York Times, 04/27/15

[15]When a Super PAC acts like a campaign.” Emma Roller, National Journal, 09/10/15

[16]Another way to mask super rich donors.” Zachary Mider, Bloomberg, 08/21/15

[17]2016 Super PACs: How Many Donors Give?” The Center for Responsive Politics, accessed 12/08/15

[18]Meet the super super PAC.” Dave Levinthal, Politico, 01/21/12

[19]A glossary of campaign finance in the U.S.” Libby Watson, The Sunlight Foundation, 02/17/16

[20]Presidential Super PACs push campaign limits.” Fredreka Schouten, USA Today, 09/22/15

[21]2012 outside spending, by group.” The Center for Responsive Politics, accessed 11/12/15

[22]2014 outside spending, by group.” The Center for Responsive Politics, accessed 11/12/15

[23] Citizens United v. Federal Election Commission, 558 U.S. 310, 5

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