With election season in full swing and plenty of state, local and federal elections occurring in November, businesspeople often consider providing financial support for candidates and causes that will be best for their particular industry. There are some rather stringent rules for corporations (and unions) in election law, though, so businesses need to be wary of how they are funding political issues.
Very simply put, corporations cannot make political contributions in federal elections. Laws regarding state elections vary across the country, but PA law also prohibits corporations from making political scontributions.
If your corporation wants to be politically active, you do have some options. The easiest is that the shareholders (or other employees) of the corporation make a personal contribution to a political campaign or a political action committee (PAC). The Federal Election Commission (FEC) has limits on how much an individual can contribute, so these need to be respected. Many businesses belong to trade associations or organizations that have PACs. Again, contributions to a trade association PAC must be made by an individual, not a corporation.
Corporations may sponsor PACs, but this can become a little troublesome as there are strict regulations about ensuring that there are no comingling of corporate funds and PAC funds. The corporation can solicit funds from its owners, employees and their families, but the solicitations require very specific language that may be best left to those who have some experience in the matter.
Perhaps you are reading this and think that you are hearing a lot about candidate accepting donations from big business. How is that possible? The simple answer is the so-called Super PAC.
A Super PAC is technically not a PAC at all. It is a committee that spends money independently of a campaign, without making a direct donation to either a specific politician or political party. Super PACs are in the news so much because they can exert great influence in elections due to having no limit on solicitation or spending.
Over the next few months, you will hear and/or see a handful of commercials sponsored by Super PACs. There will be little doubt as to who these advertisements support, but you will not hear, “I’m Candidate XYZ and I approve this message,” because the material is coming from a Super PAC and not a candidate or party.
Supporting a cause or candidate can be good for business, especially as elections draw nearer, but if corporations ignore FEC and state laws, they may be subject to fines that counteract the benefit of supporting a cause, candidate or party.
By Dan Massey, CPA, Manager