Company Political Spending: What’s Allowed, What’s Illegal

Corporations are prohibited from tapping their treasuries for direct contributions to federal candidates and national political parties. They may, however, engage in electioneering spending. This includes funding advertising that targets or promotes a specific candidate as long as it’s independent from the candidate and party committees.

Corporations can give to Super PACs, which can accept unlimited contributions and make unlimited independent expenditures. Direct contributions to a Super PAC must be disclosed but indirect contributions may remain undisclosed.

Companies also may give to political committees known as 527s, such as the Republican Governors Association and the Democratic Governors Association. These groups are devoted to elections and may engage in independent spending, but they must disclose their donors.

States have a patchwork of laws dictating when companies may contribute to state campaigns and, if permitted to do so, whether there are donation limits. Click here to see a list of states that allow corporate contributions to candidates; state campaign finance disclosure requirements; and state independent expenditure disclosure requirements.

What’s Dark Money and Why is it a Serious Problem?

Companies may also give unlimited sums to trade associations (called 501(c)(6) groups for their tax code classification) and “social welfare” organizations (called 501(c)(4) groups). These tax-exempt groups must have a “primary purpose” other than elections. Unlike most political committees regulated by federal election law, they don’t have to disclose their donors. Accordingly, corporate donors that wish to remain anonymous in their giving may find these organizations appealing. The money these groups spend is often referred to as “dark money” because the funding sources are unknown.

Much of this dark money shapes both the political agenda and the making of policy. Its impact is seen on climate change, tax breaks, redistricting, and growing income equality.  “Such organizations have spent hundreds of millions of dollars on campaign activities in recent elections while declining to disclose their donors,” noted Ken Doyle of BNA’s Money and Politics Report.

The bottom line: Dark money not only hurts our democracy; it also poses serious legal, reputational and business risks to companies.

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