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 supports or opposes a specific candidate so long as it’s independent from the candidate and party committees.

Companies may also give to political committees known as 527 groups, 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. Corporations may 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 secret.

States have a patchwork of laws dictating when companies may contribute to state campaigns and, if permitted, whether there are contribution limits or disclosure requirements. Click here to see which states 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 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 in elections 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 issues such as climate change, taxation, redistricting, and income equality. “Such organizations have spent hundreds of millions of dollars on campaign activities in recent elections while declining to disclose their donors,” Ken Doyle of BNA’s Money and Politics Report has reported.

The bottom line: Dark money not only undermines our democracy, but also poses serious legal, reputation, and business risks to companies.

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