Campaign finance
Source:
http://www.fec.gov/pages/brochures/contriblimits.shtml
Disclosure rules
Current campaign finance law at the federal level requires candidate committees, party committees, and PACs to file
periodic reports disclosing the money they raise and spend. Federal candidate committees must identify, for example,
all PACs and party committees that give them contributions, and they must provide the names, occupations, employers
and addresses of all individuals who give them more than $200 in an election cycle.
One consequence of the limitation upon personal contributions from any one individual is that campaigns seek out
"bundlers"—people who can gather contributions from many individuals in an organization or community and present
the sum to the campaign.
Federal law allows for multiple types of Political Action Committees.
 Leadership PACs: Elected officials and political parties cannot give more than the federal limit directly to
candidates. Leadership PACs makes independent expenditures as the expenditure is not coordinated with the
other candidate, this type of spending is not limited. Under the FEC rules, leadership PACs are non-connected
PACs, and can accept donations from individuals and other PACs.
 Since current officeholders have an easier time attracting contributions, Leadership PACs are a way dominant
parties can capture seats from other parties.
 A leadership PAC sponsored by an elected official cannot use funds to support that official's own campaign.
However, it may fund travel, administrative expenses, consultants, polling, and other non-campaign expenses.

"Super PACs": They are officially known as "independent-expenditure only committees," because they may not
make contributions to candidate campaigns or parties, but rather must do any political spending independently
of the campaigns. Unlike other PACs, there is no legal limit to the funds they can raise from individuals,
corporations, unions and other groups, provided they are operated correctly.
 January 2010 the U.S. Supreme Court held in Citizens United v. Federal Election Commission that government
may not prohibit unions and corporations from making independent expenditure for political purposes.
 Two months later, in Speechnow.org v. FEC, the Federal Court of Appeals for the D.C. Circuit held that
contributions to groups that only make independent expenditures could not be limited in the size and source of
contributions to the group..
527 organizations
A 527 organization is a type of American tax-exempt organization named after "Section 527" of the U.S. Internal
Revenue Code. Technically, almost all political committees, including state, local, and federal candidate committees,
traditional political action committees, "Super PACs", and political parties are "527s." However, in common practice the
term is usually applied only to such organizations that are not regulated under state or federal campaign finance laws
because they do not "expressly advocate" for the election or defeat of a candidate or party. When operated within the
law, there are no upper limits on contributions to 527s and no restrictions on who may contribute. There are no
spending limits imposed on these organizations. However, they must register with the IRS, publicly disclose their donors
and file periodic reports of contributions and expenditures.
Political parties
Political party committees may contribute funds directly to candidates, subject to the contribution limits listed above.
National and state party committees may make additional "coordinated expenditures," subject to limits, to help their
nominees in general elections. National party committees may also make unlimited "independent expenditures" to
support or oppose federal candidates.
The Rules That Govern 501(c)(4)s
by Emma Schwartz
Nearly a century ago, Congress created the complicated legal framework that governs these tax-exempt nonprofits,
also known as 501(c)(4)s for the part of the tax code they fall under. That rule said they were supposed to operate
“exclusively for the promotion of social welfare” — a definition that includes groups ranging from local fire
departments to the Sierra Club to the National Right to Life Committee.
While these nonprofits have always been allowed to lobby for change, in 1959,regulators opened the door to
political activity by interpreting “exclusively” to mean that groups had to be “primarily” engaged in social welfare and
helping the community.
But regulators never defined exactly how they would measure this balance. Part of the reason, said Marcus Owens, a
former head of the IRS division overseeing nonprofits, is because the IRS didn’t want to limit what it could evaluate in
deciding what was political activity.
However, the lack of clarity has created a unique type of organization when it comes to politics — chief among those
differences being what the public must be told about these nonprofits’ donors.
501(c)(4) organizations are defined by the IRS as "social welfare" organizations. Unlike 501(c)(3) charitable
organizations, they may also participate in political campaigns and elections, as long as the organization's "primary
purpose" is the promotion of social welfare and not political advocacy. 501(c)(4) organizations are not required to
disclose their donors publicly. This aspect of the law has led to extensive use of 501(c)(4) organizations in raising and
donating money for political activity. The NAACP, Planned Parenthood, Sierra Club, and National Rifle Association are
well known examples of organizations that operate 501(c)(4) social welfare organizations that engage in political
advocacy.
PACs and Super PACs are required by law to disclose all of their donors of over $200. However, 501(c)(4) organizations
are only required to disclose their spending on political activity, and not information on their donors unless those donors
give for the express purpose of political advocacy. The use of 501(c)(4) organizations for political advocacy has
contributed to the sharp rise in outside spending that occurs without disclosure of donors.
Traditionally 501(c)(4) organizations have been civic leagues and other corporations operated exclusively for the
promotion of social welfare, or local associations of employees with membership limited to a designated company or
people in a particular municipality or neighborhood, and with net earnings devoted exclusively to charitable,
educational, or recreational purposes.
Why Don’t 501(c)(4)s Have to Disclose Their Donors?
Social welfare nonprofits don’t fall under the Federal Election Commission’s standard definition of a political
committee, which, under FEC guidelines, must disclose its donors. Because 501(c)(4)s say their primary purpose is
social welfare, they can keep their donors secret. The only exception is if someone gives them money and specifically
states the funds are for a political ad.
And unlike political committees, social welfare nonprofits have a legal right to keep their donors secret. That stems
from the landmark 1958 Supreme Court case, NAACP v. Alabama, which held the NAACP didn’t have to identify its
members because disclosure could lead to harassment.
Fast forward to the post-Citizens United world of campaign finance where outside groups can now spend unlimited
amounts of money to influence elections so long as they are independent of candidates. Seeing the advantages
offered by groups that can engage in political activity while keeping their donors secret, both Democrats and
Republicans have seized onto this opening in the tax code.
That’s why in recent years, many new 501(c)(4)s have popped up right before the election season, focusing heavily
on television advertising, usually attacking, though sometimes promoting, candidates running for office.
These nonprofits do have to report some of their activities to the FEC. When they run ads directly advocating for the
election or defeat of a candidate, they have to tell regulators how much and what they spend money on — but not
where the money comes from.
Since they can’t make these types of ads their sole activity, many 501(c)(4)s focus on so-called issue ads, which they
only have to report to the FEC in defined windows before an election.
The Debate Over “Issue Ads”
But what exactly defines an issue ad?
The key starting point is a 1976 Supreme Court case, Buckley v. Valeo, in which the court speculated in a footnote
that if certain words were used in an ad, it was clearly a campaign ad. The eight phrases listed in the footnote –“vote
for,” “elect,” “support,” “cast your ballot for,” “Smith for Congress,” “vote against,” “defeat,” and “reject” — became
known as the “magic words” and for decades served as a bright line test between an issue ad and a campaign ad.
But many campaign finance reformers saw that distinction as a sham, especially as increasing amounts of federal
campaign dollars headed to political parties where the soft money loophole allowed unlimited money to be spent on
issue ads. While avoiding the magic words, these issue ads typically focused on one candidate running for office and
ran just before an election. In other words, the reformers argued, they were clearly trying to influence elections.
The reformers tried to address this loophole in the Bipartisan Campaign Finance Reform Act of 2002, otherwise
known as the McCain-Feingold bill. In a 2003 case, McConnell v. FEC, the Supreme Court appeared to agree, saying
that the magic words were “functionally meaningless.”
But the decision didn’t bar states from using the magic words and the court has since backed away from its earlier
stance. And so legal debate continues. For instance, earlier this year, the Colorado Supreme Court upheld the magic
words test as the bright line between issue ads and direct campaign ads.
Today, both the FEC and the IRS use tests broader than just the magic words to determine what counts as an issue
ad. The FEC says that any ad that mentions a candidate during defined windows before an election must be
disclosed, even if it doesn’t include the magic words. The IRS looks at what it calls “the facts and circumstances”
surrounding an ad. Tax experts say that many of the issue ads that fall outside FEC reporting windows would be
considered political by the IRS.
But the reality on the ground for groups like 501(c)(4)s is less clear: Because three of the FEC commissioners
sympathize with the magic words test they have “refused to apply the broader test in recent years,” says Paul Ryan,
senior counsel at the Campaign Legal Center, a group that pushes for more campaign finance reforms.
And some outside groups are trying to keep it that way.
What that means for 501(c)(4)s is this: by avoiding the magic words, social welfare nonprofits have a better chance of
convincing regulators they are focused on issues and not politics.
Of course, the IRS could revoke a nonprofit’s tax-exempt status if it engages in too much political activity. In practice,
that hasn’t happened much. But the IRS has indicated it is starting to look into some of these groups and recently
sent a letter (pdf) to Congress saying it had more than 70 “ongoing examinations” of 501(c)(4)s.
Whatever it does, the IRS remains limited in what it can do to watch over these groups. As a recent ProPublica
investigation found: “One reason the IRS struggles is that it can’t match the speed of politics.” In other words, by the
time these groups submit tax returns, they have often stopped operating or created new groups under new names.
______ / 20 pts possible
NOTES ON CAMPAIGN FINANCE READING
Define:
1.
Leadership PAC
2.
SUPER PAC
3.
527
4.
501(c)4
5.
FEC
6.
Bundler
7.
Citizens United v. Federal Elections Commission, 2010
8.
NAACP v. Alabama, 1957 -
9.
McConnell v. FEC, 2003. -
10.
Buckley v. Valeo, 1976 -
11.
Issue Ads
http://www.pbs.org/wgbh/pages/frontline/big-sky-big-money/
______________ /30
Frontline: Big Sky, Big Money
As you watch the program, answer the following questions.
1A.
What is “American Bridge”?
1B.
What is “opposition research”?
1C.
What is a “tracker”?
2A.
According to Professor Erika Franklin Fowler, what is the difference between a 501(c) 4 group and a Super-PAC?
2B.
What are 4 “magic words” that she refers to?
3.
What do we know about the group “Citizens for Strength and Security”?
4.
According to lawyer Jim Bopp, why is “secrecy” okay for those giving campaign contributions?
5.
In 1912, the Corrupt Practices Act was passed in Montana. What did it do?
6A.
What is the job of the Commissioner of Political Practices in Montana?
6B.
According to Commissioner Dennis Unsworth, why was he suspicious of the last-minute flyers sent out attacking
John Ward?
7.
In the end, what was WTP’s goal?
8A.
What arguments did Montana Attorney General Steve Bullock use to defend Montana’s Corrupt Practices Law?
8B.
How did the Montana State Supreme Court rule?
9A.
9B.
Who appealed the Montana State Supreme Court ruling to the US Supreme Court?
How did the US Supreme Court rule?
10.
According to the Citizens United court ruling, are independent groups running issue ads allowed to coordinate
with candidate campaigns?
11A. Do you think independent spending by outside groups corrupts the political system? Yes? No? Why? To what
extent? 3 – 4 good sentences.(4)
11B. Do you think groups/individuals who contribute to various political groups should be able to do so
anonymously? Why or why not? 3- 4 good sentences. (4)
CHECK OUT THIS WEBSITE:
http://www.vox.com/2014/7/30/5949581/money-in-politics-charts-explain