Politically Active? Get Guidance on Updates to Campaign Contribution Laws

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As part of a series of post-Watergate ethics reforms during the 1970s, Congress enacted a secondary set of federal campaign contribution limits in order to prevent the circumvention of the direct contribution limits. The U.S. Supreme Court is currently considering a constitutional challenge to these limits and the Federal Election Commission (FEC) is deciding whether to proceed with an enforcement action involving these limits. Accordingly, as we head into a federal election year, politically active individuals should be aware of these limits and related legal developments.

What Are the Biennial Campaign Contribution Limits?

The federal overall biennial aggregate limit for 2013-2014 is $123,200 in campaign contributions per individual. In addition to this overall limit, there are sub-limits of $48,600 to all federal candidates and $74,600 to all federal Political Action Committees (PACs) and political parties (federal accounts), of which no more than $48,600 may be contributed to state and local political parties (federal accounts) and federal PACs. The biennial limits are in addition to the direct contributions limits, which currently limit individual contributions to $2,600 per candidate per election; $32,400 per national party per year; $10,000 per state or local party (federal accounts) per year; and $5,000 to federal PACs per year. The biennial limits do not apply to contributions to super PACs, 527 organizations, 501(c)(4) organizations, or state or local candidates (although some states have their own biennial limits). The biennial limits and most federal limits are indexed every two years to inflation.

Apparent Campaign Contribution Violations

Confused yet? You are not alone. While many people are aware of the direct contribution limits, few are aware of the obscure biennial limits and even fewer understand how they work. Evidence of this was a May 3, 2013, Huffington Post article titled "Campaign Contribution Limits Broken Repeatedly in 2012 Election with No FEC Oversight" that documented 49 individuals who may have exceeded the federal biennial limits from 2011 to 2012. The Sunlight Foundation later asserted that up to 2,000 individuals may have violated these limits. Among those accused of violating the biennial limits is noted attorney David Boies — someone who has argued cases before the Supreme Court.

FEC Complaint Focuses on Individuals Who Have Allegedly Exceeded Campaign Contribution Limits

Unfortunately for those involved, the Huffington Post allegations resulted in more than bad press as the Citizens for Responsibility and Ethics in Washington (CREW) and the Campaign Legal Center (CLC) submitted a complaint to FEC based on the article. The investigation is still in its early stages, but already it has presumably caused those involved to hire counsel in order to respond to the allegations. If the investigation moves forward, it could result in significant civil penalties and more negative publicity. However, the outcome of the nascent FEC enforcement case may ultimately depend on the actions of the Supreme Court.

McCutcheon v. FEC Case Shows Complexity of Campaign Finance Laws

On October 8, 2013, the Supreme Court heard oral arguments in McCutcheon v. FEC, which challenges the constitutionality of the biennial limits. It is apparent from the transcript that even the justices struggled at times to understand the biennial limits and their policy underpinnings. In fact, Justice Scalia stated at one point, "I agree — I agree that — that this campaign finance law is so intricate that I can’t figure it out." And while it is impossible to predict whether the court will ultimately strike down or modify the biennial limits, the case raises significant constitutional questions, particularly in light of the court's landmark 2010 campaign finance case, Citizens United v. FEC, which struck down federal expenditure limits.

Donors Must Comply with Current Political Contribution Laws

According to the Sunlight Foundation, 31,385 individuals accounted for 28 percent of all political contributions during 2012, which means there is a small group of people in the U.S. who are extremely active when it comes to making political contributions. It is essential that these individuals, and others who are politically active, be aware of and comply with the federal biennial limits. Exceeding these limits can result in negative publicity and potential legal problems. And while the Supreme Court may eventually strike down or alter the biennial limits, donors must comply with the law until a change occurs. Finally, these types of secondary limits are not the exclusive domain of the federal campaign finance rules. Several states — including Arizona, Connecticut, the District of Columbia, Louisiana, Maine, Maryland, Massachusetts, New York, Rhode Island, Washington, Wisconsin and Wyoming — have similar secondary limits.

Best Practices to Remain Politically Active Yet Compliant with Campaign Contribution Laws

It is an unfortunate fact that political activity, while protected by the First Amendment, comes with significant compliance risks. Accordingly, individuals who are politically active should take steps to protect themselves. This includes vetting their political contributions in advance, tracking political contributions and, as appropriate, including a carefully written cover letter. All of these best practices are even more important for large contributions or contributions to more exotic entities such as super PACs, 527 and 501(c)(4) organizations, and ballot question committees.

Topics:  FEC, Political Campaigns, Political Contributions, SCOTUS

Published In: General Business Updates, Elections & Politics Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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