Summary of the Rules Governing Campaign Financing The New Rules of the Game

Four Modes of Campaign Regulation Expenditure Restrictions Contribution Restrictions Public Financing Disclosure

Expenditures The Supreme Court’s ruling in Buckley and Citizens United generally prohibit government from restricting expenditures Campaigns and parties are free to spend as much as they can raise, borrow, or obtain from the candidate’s own personal funds Categories of expenditures include: express advocacy, electioneering communications, issue ads, and member communication costs

Express Advocacy -- FEC regulations define independent expenditures as communications that expressly advocate for the election or defeat of a clearly-identified federal candidate and is not made in coordination with a campaign or party.

Electioneering Communications -- Created by the Bipartisan Campaign Reform Act of Created as a way of capturing advertisements that do not expressly advocate the election or defeat of a candidate, but that are nevertheless aimed at influencing the outcome of an election

Issue Ads -- An advertisement that at least purports to address a policy issue – rather than expressly advocating for or against a candidate

Member Communication Costs -- Mostly a tool for unions, trade associations, and other membership organizations, although they are sometimes used by corporations as well -- These organizations can communicate with their members and stockholders on any subject, but when the communication expressly advocates the election or defeat of a clearly identified federal candidate, the directly associated costs have to be reported to the FEC.

Contributions Most federal political organizations are subject to contribution limitations, both in the form of a cap on the amount of money they can receive from any one place and as a restriction on the source of the money. Super PACs, nonprofit and other organizations that make independent expenditures, whether in the form of express advocacy or electioneering communications, are not subject to contribution limits.

Public Financing At the federal level, public financing is limited to presidential elections Presidential public financing scheme is an optional program available for both party nomination contests and general elections.

Disclosure Some, but not all, of the money raised and spent for federal political activity is reported to the FEC and made public –Political committees of all stripes file electronic reports of different aspects of their activity with the FEC. –Some organizations, such as nonprofit organizations and 527s, must also file reports including information about their campaign related activities with other agencies such as the IRS

Coordination There is a critical distinction between contributions and expenditures. While contributions can be limited, expenditures cannot be, so long as they are independent – that is not coordinated with a candidate’s campaign FEC regulations describe a 3-prong test to determine whether a communication is coordinated between an outside group and a House or Senate campaign

The Players Various types of groups are now engaged in the enterprise of trying to influence federal elections. –Candidates –Party Committees –Traditional PACs –Super PACs –Nonprofits

527s One other section of the tax code is important for understanding the rules for outside spending – Section 527 Section 527 of the tax code clarifies that political money is not subject to taxation – the donors do not pay a gift tax and the recipient organizations do not pay tax on their political income