PACs, Super PACs, and 501(c)4s

A group of people, such as a business, labor union, or ideological group, may create a PAC to raise and disburse voluntary donations directly to a political party or a political candidate’ s campaign. For example, PACs have been created by many corporations, unions, and special interest groups, such as the National Association of Realtors, AT&T, ExxonMobil, Sierra Club, Transport Workers Union, National Rifle Association, and Washington Women for Choice.

In 1944, the Congress of Industrial Organizations established the first PAC in response to the Smith-Connally Act of 1943 which disallowed contributions to federal political campaigns from union treasuries. The Federal Election Campaign Act Amendments (1974) set limits on donations to federal PACs, as well as spending limits which were later repealed (Buckley v. Valeo, 1976). Since the 1970s, campaign finance law has continued to evolve.

PACs are one of four sources of funds for candidates seeking federal office (the other three sources are individual donors,  political parties, and the candidate’s own money).  However, a federal PAC can give only limited amounts to a candidate’s campaign, national political party, or another PAC.  For example, a federal multicandidate PAC can give a maximum of $15,000/year to a national political party, $5000 to a candidate’s campaign for the primary, another $5000 for the general election, and $5000/year to another PAC.  A federal PAC may receive up to $5000 from any one individual, PAC, or national political party per year.  A Super PAC and a 501(c)4 group cannot give any money to a national political party or candidate’s campaign.

Super PACs came into existence shortly after the Supreme Court’s Citizens United decision and the SpeechNow.org decision by the D.C. Circuit Court of Appeals, both decisions in early 2010.  Because of these and other court rulings, the government can no longer restrict the amount of money that unions, corporations, associations, or individuals give to groups making independent political expenditures nor can the government limit independent political spending by these groups.  Super PACs are referred to as independent-expenditure only PACs.  Unlike traditional PACs which cannot accept funds from corporate and union treasuries, Super PACs can accept unlimited funds from them (thanks to the Citizens United and SpeechNow.org decisions).

A Super PAC can raise and spend unlimited sums of money to overtly advocate for or against political candidates or parties, as long as there is no coordination with a candidate or party.  Like PACs, Super PACs also must make timely disclosures to the Federal Election Commission (FEC) concerning donations and spending.  Because Super PACs must report their donors to the FEC, some Super PACs created affiliated 501(c)4 groups to get around this disclosure requirement to encourage big donors to give large sums of money without their identities or donation amounts being publicly revealed.  Since the primary purpose of groups that claim 501(c)4 non-profit status is supposed to be “social welfare”, they are not required to report donations.  Social welfare groups promote the common good and general welfare of the people, primarily for the purposes of civic betterment and social improvements.  Many 501(c)4 groups do this in the form of public “education” and lobbying.  However, it seems evident to most that those 501(c)4 groups associated with Super PACs are not true social welfare groups.  The IRS has started investigating some of them.

Even though there are no limits on how much is raised or spent by an entity that spends independently in an election, there are certain FEC disclosure rules concerning the source of the funds and how they are spent that may apply depending on the type of entity and whether the entity is engaging in “independent expenditures”, “electioneering communications”, or “issue ads” as defined by federal campaign laws. For more details, click the link below: http://www.opensecrets.org/outsidespending/rules.php

According to OpenSecrets.org, 1122 Super PACs have reported total receipts of $661,715,165 and total independent expenditures of $680,355,202 in the 2012 election cycle as of 11/24/12.  In the 2010 election, the first election year in which there were Super PACs, a total of 83 Super PACs reported total receipts of $81,702,382 and total independent expenditures of $62,258,813.

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3 responses to “PACs, Super PACs, and 501(c)4s

  1. Pingback: Corporate Citizenship | John Cashon's Blog

  2. The campaign contribution limit rules seem to have been an effort to allow individuals, business, labor, and special interest groups some influence and yet to assert some limit to that influence. But allowing some influence only encourages them to pursue more. If you give them an inch, they take a mile.. If a federal PAC doesn’t get you what you want, here’s a SuperPAC. If a SuperPAC doesn’t do the trick, try a 501c4. And if you are really wealthy, create them yourself.

    I am seeing what look like so many loopholes in these campaign financing policies and campaign contribution policies–whether we are talking about individuals, the candidate’s own money, the direct contributions of federal PACs, or the indirect contributions of SuperPACs, and the hidden contributions of 501c4‘s.

    1. The fact that all the federal PACs, SuperPACs, and 501c4 groups exist instantly provides a loophole for the limit on an individual’s contribution. All wealthy donors can find groups (or create them) and donate to as many groups as they wish to support their candidate choices or party, surpassing their private donations.

    2. A candidate’s ability to use their own money to fund their campaign seems to be a loophole. Isn’t it simple enough to claim they “earned” money (rather than “raised” money) through their wealthy supporters? I have observed that many politicians get paid for speaking engagements and even for consulting or are appointed to the boards of companies, and serve on those boards even after they are voted or appointed into political office. Many of them write books. Maybe they could “auction” their book that they sign to a wealthy bidder or friend. Or maybe a friend invests in their book signing tour.

    3. I am seeing loophole potential within the federal PACs. What is the purpose of allowing federal PACs to donate to other federal PACs? It seems that if a PAC has reached its maximum contribution level to their candidates and party of choice, they can simply shift their money to other PACs who are supporting their same choices of candidate and/or party, but that haven’t raised enough funds on their own to reach their maximum contributions. And, I imagine multiple PACs could be formed under the same people or groups of people, but under different organization names, so that they can get beyond the spending limits set, simply by establishing multiple federal PACs. Maybe they could be called Siamese Twin PACs or Clone PACs.

    4. A loophole I see within the SuperPACs is that they were originally intended to allow organizations an influence over public opinion — Unions and Corporations and even Special Interest groups. Yet, some of the SuperPACs are invented by and primarily supported by billionaire individuals, such as the one that supported Newt Gingrich‘s campaign (in a non coordinated way)…his billionaire best friend.

    5. And for a final Loophole, a Frontline special recently revealed the 501c4’s can make and present thinly veiled political ads to qualify as issue ads legally by evading certain words that the Supreme Court has pinpointed as defining a political advertisement. And the same Frontline special revealed that at least one 501c4 was definitely partaking in “electioneering communications”. But if it weren’t for a fluke of the paperwork ending up in the “wrong” hands, this never would have been discovered. It will be interesting to see if any real prosecution takes place.

    Every single one of these contribution forms poses threats to a clear functioning democracy. I think we need to take back the thousands of miles of influence the wealthy have gained, by taking back the inch we gave them through the campaign finance participation options. Our politicians won’t like it, simply because it is the game they know how to play. But with every rule allowing the wealthy greater and greater influence, this becomes an ever more complex game that only the rich can afford to attend, play, and win, making the rest of us second class citizens if not flat out losers.

    When determined children abuse the game and will not stop contorting the rules to gain their legal cheats, the teacher does not let them keep playing. The teacher blows the whistle. And everyone loses their recess. Its time to blow the whistle. No more games, no more cheats. No more Citizens United. No more PACs. No more campaign contributing Lobbyists. The stage for a true Democracy needs to be set. It is time for public financing of campaigns. But only the public amassing can make it happen, because the few are too powerful.

  3. Pingback: Montana, WTP, and the Supreme Court: A Tale of Irony | citizens for truth

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