Electioneering Communication

A concept found in BCRA. Definition created to allow Congress to regulate “sham issue ads”. Rendered practically irrelevant by Wisconsin Right to Life (WRTL) decision.

An Electioneering Communications (EC) is a broadcast advertisement (television or radio) which refers to a clearly identified federal candidate, is broadcast before an election (30 days before a primary or 60 days before a general) which includes that candidate, and is targeted to the relevant electorate[1].

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[1] "Electioneering Communications Brochure." Federal Election Commission. Jan. 2010. Web. 11 Dec. 2011. <http://www.fec.gov/pages/brochures/electioneering.shtml>.

501(c)(6) - Business Leagues, Chambers of Commerce, Real Estate Boards, etc.

Trade associations (example: American Bar Association, American Medical Association, etc) are made of members with a common business interest. They may advertise their respective industries and spend unlimited amounts on lobbying. Business leagues may conduct political activity, but expenditures may be subject to tax. Most 501(c)(6) organizations establish Political Action Committees or other tax advantaged entities to conduct political activity.

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501(c)(5) - Labor, Agricultural, and Horticultural Organizations

Labor Unions are organized as 501c5’s. These organizations are allowed to organize and operate a union, organize employee committees within a business, conduct animal and plant research, and promote farm clubs. Similar to a 501(c)(4), these groups may not primarily be engaged in political activity. Most establish a Political Action committee or other entity to conduct political activity.

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501(c)(4) - Civic Leagues, Social Welfare Organizations, and Local Associations of Employees

501(c)(4) organizations defined as “social welfare” organizations. A 501(c)(4) may not be primarily engaged in political activity. A commonly held legal interpretation is that these organizations must spend at least 51% of their activity on non-political activity. However this interpretation has been disputed. Political activity does not include general advocacy to influence public opinion or lobbying to influence legislative activity.

Contributions to a 501(c)(4) are not disclosed. Donors to 501(c)(4)s remain anonymous. These organizations file with the IRS. Donations to these organizations are not tax deductible. Donations may be subject to gift tax.

501(c)(4)s are controversial because they may accept unlimited contributions from both individuals and corporations (including unions), do not have to disclose who contributes, and report their overall income and expenses on an annual basis set by the IRS[1]. The IRS timeline for reporting is much longer than a political campaign cycle. It is possible for all of a 501(c)(4)’s political activity to be disclosed after the election has already occurred.

501(c)(4)s can also contribute to Super PACs. This allows individuals, corporations, and unions to contribute unlimited amounts to a 501(c)(4) without disclosure, which can then contribute to a Super PAC. The 501(c)(4)’s contribution to the Super PAC will be disclosed, but it may be unclear where the funds originally came from.

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[1] "A Guide to Political Donations." The New York Times. Sept. 2011. Web. 11 Dec. 2011. <http://www.nytimes.com/interactive/2011/10/17/us/politics/a-guide-to-political-donations.html?hp>.

501(c)(3) - Religious, Educational, Charitable, and Other Qualified Organizations

A 501(c)(3) organization is prohibited from political campaign activity. These entities may not make campaign contributions or speak in favor or against candidates for public office. The closest that these tax-exempt organizations may get to political activity is through non-partisan voter education efforts, such as public forums or voter education guides. Contributions to these groups are tax deductible. These groups are often extremely careful if ever interacting with political candidates so as to not risk losing their tax exempt status.

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Tradeoffs

There are tradeoffs associated with each type of PAC. 

Connected PACs can devote 100% of their funds to making contributions to candidates. But they can only solicit (and accept) contributions from individuals with a "connection" to the PAC (executives, employees, shareholders, members). But they are allowed to use funds from the connected organization to cover expenses such as legal fees, office space, and supplies- which would typically come from the PACs funds. 

Non-connected PACs may accept funds from anyone (who isn't otherwise prohibited from contributing to political committees). However, they must pay for all expenses (including legal fees, office space, and supplies) from PAC funds. This effectively means that contributions to non-connected PACs do not go 100% to candidate contributions; some funds are used for operational expenses. 

Super PACs (Independent Expenditure Only PACs) can accept unlimited contributions from individuals, corporations, and unions. But they may not contribute directly to political candidates; they may only fund Independent Expenditures.

What can Political Action Committees Do?

A political action committee (PAC) may give direct contributions to candidates. PACs solicit contributions from interested individuals. Individuals may contribute a maximum of $5,000 per calendar year to a PAC. Connected PACs are limited to soliciting members of their restricted class. Corporations and unions may not make contributions to a PAC from treasury funds; however they may absorb the administrative expenses related to running the PAC. These absorbed administrative expenses do not constitute a contribution or expenditure.

A PAC may also make expenditures in support or opposition to a political candidate or a political issue. A PAC may conduct political research through polling, produce and distribute a television advertisement, send a mailer or other campaign activity. Publicly distributed materials must contain the correct disclosure statement indicating the political committee which funded the material or advertisement.

Since the Citizens United vs. FEC Supreme Court ruling and subsequent rulings from the FEC, PACs which intend to only make Independent Expenditures may solicit unlimited contributions from individuals, corporations, and unions. Because these PACs are only allowed to make independent expenditures, and never make contributions, they may accept unlimited contributions.