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Election 2016: Keeping Contributions Compliant

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Key Takeaways

  • A political contribution can be more than cash or a check.

  • Individuals have limited ability to contribute to federal candidates.

  • Corporations are prohibited from giving to a federal candidate.

  • Corporations can contribute unlimited amounts to independent expenditures.

  • Volunteerism is regulated based on whether or not it is paid, and by whom.


Introduction

Corporations and employees have a right to engage in the political process. At a minimum, companies should maintain written policies or guidelines regarding political activities. Failure to comply with the rules, even if inadvertently, could result in legal or reputational risk. (For the purposes of this informational article, “corporation” refers to an organization structured as a S- or C-Corp. These guidelines do not include companies such as limited liability companies (LLCs) or limited liability partnerships (LLPs), which may have separate guidelines for political contributions.)

As the United States moves ever closer to the Presidential election in 2016, it is best practice to review and understand the rules that govern political activities involving US federal candidates. Outlined below are general guidelines for some political activities. Companies that do business with government agencies may have more restrictive guidelines based on applicable pay-to-play or other regulations.

Failure to comply with the rules, even if inadvertently, could result in legal or reputational risk.

WHAT IS A POLITICAL CONTRIBUTION?

Generally, anything of monetary or in-kind value (e.g., gift, loan, advance, deposit of money, payment for or rendering of services) made for political purposes.

WHO CAN MAKE CONTRIBUTIONS TO FEDERAL CANDIDATES?

The contributor must be a US citizen or permanent resident alien (green card holder). Foreign nationals are prohibited from making contributions either directly or indirectly.

WHAT ARE THE LIMITS FOR CORPORATE POLITICAL CONTRIBUTIONS?

Corporations are prohibited from making corporate political contributions to incumbents or candidates for U.S. federal office. Many companies have a political action committee (PAC), which may be permitted to make a PAC contribution to federal candidates. A PAC represents the pooled interests of voluntary contributions from qualified employees who want to be involved in the political process.

WHAT IS THE DIFFERENCE BETWEEN AN INDEPENDENT EXPENDITURE AND A POLITICAL CONTRIBUTION?

The Supreme Court held in Citizens United v. Federal Election Commission1 that it was unconstitutional to ban free speech through the limitation of independent communications by corporations, associations, and unions (i.e. that corporations and labor unions may spend their own money to support or oppose political candidates through independent communications like television advertisements).2 This type of expenditure remains independent as long as there is no coordination with a candidate, campaign, or committee. If any coordination occurs, the transaction becomes a political contribution, and thus impermissible for corporations.

Generally, individuals may contribute up to $2,700 per election cycle in races for the U.S. Senate, U.S. House, or U.S. President.

WHAT ARE THE LIMITS FOR PERSONAL POLITICAL CONTRIBUTIONS?

Generally, individuals may contribute up to $2,700 per election cycle in races for the U.S. Senate, U.S. House, or U.S. President. In some instances, individuals with a securities license, doing business with the government, or employed in highly regulating companies that also conduct business with the government may be subject to more restrictive contribution limits or prohibitions.

CAN AN INDIVIDUAL VOLUNTEER IN LIEU OF MAKING A MONETARY CONTRIBUTION?

Yes, provided the individual is not compensated by his/her employer, nor any other individual(s) or any organization other than the committee for which the individual is volunteering. The volunteer must be a US citizen or permanent resident alien (green card holder). Foreign nationals are prohibited from volunteering for US elections.

Conclusion

These basic guidelines will provide any individual or business with the framework for a robust political contributions policy. While they highlight some of the most important compliance areas to address, it is best practice to consult with a subject matter expert in order to fully understand the nuances of political giving rules and restrictions.

1. CITIZENS UNITED V. FEDERAL ELECTION COMMISSION. THE OYEZ PROJECT AT IIT CHICAGO-KENT COLLEGE OF LAW. AVAILABLE AT HTTP://BIT.LY/OYEZ-1

2. ADAM LIPTAK: “COURTS TAKE ON CAMPAIGN FINANCE DECISION”. THE NEW YORK TIMES, MARCH 26, 2010. AVAILABLE AT HTTP://BIT.LY/NY-TIMES-CAMPAIGN

By Patrick M. Callahan. Originally published in the January 2016 issue of Compliance & Ethics Professional, a publication of Society of Corporate Compliance & Ethics.