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Who can and can't contribute to a nonconnected PAC

Who can contribute to a traditional nonconnected PAC

Individuals

An individual may make contributions to political committees, subject to the limit of $5,000 per calendar year.

Minors

  • The decision to contribute is made knowingly and voluntarily by the minor;
  • The funds, goods or services contributed are owned or controlled by the minor, proceeds from a trust for which he or she is a beneficiary or funds withdrawn by the minor from a financial account opened and maintained in his or her name; and
  • The contribution is not made using funds given to the minor as a gift for the purpose of making the contribution, and is not in any way controlled by another individual.

Partnerships and limited liability companies (LLCs)

Partnerships are permitted to make contributions according to special rules. Likewise, if an LLC is considered a partnership for tax purposes, it is subject to the contribution limits for partnerships.

Who can’t contribute to a traditional nonconnected PAC

Corporations and labor organizations

The Act prohibits corporations and labor organizations from making contributions and expenditures in connection with federal elections.

This prohibition applies to all types of incorporated organizations, except political committees that incorporate only for liability purposes.

The transactions described result in prohibited corporate or labor contributions and therefore must be avoided.

Use of general treasury funds

Corporations and labor organizations may not use their general treasury funds to make contributions to political committees or candidates.

In addition, national banks and federally chartered corporations may not make contributions in connection with any U.S. election—federal, state or local. 

Reimbursements of contributions

A corporation or labor organization may not reimburse individuals who make contributions to a political committee.

Extensions of credit

A corporate vendor may not extend credit to a political committee for a longer period of time than is normally practiced in the creditor’s trade. (Credit is permissible only if it is extended in the ordinary course of business.)

When a political committee fails to pay a debt owed to a corporate vendor within the time specified by the vendor, a prohibited contribution by the vendor may result if:

  • The vendor fails to make a commercially reasonable attempt to collect a debt from the committee; or
  • The terms of the credit were not substantially similar to similar extensions of credit by the vendor to nonpolitical clients.

Any settlement of a debt between a creditor and a political committee for less than the full amount owed must comply with the debt settlement procedures prescribed by FEC rules.

Discounts

If a corporation or labor organization sells goods or services to a political committee at a price below the usual and normal charge, a prohibited contribution results in the amount of the discount. A reduced price is not considered a contribution, however, if it is offered by the vendor in the ordinary course of business and at the same amount charged to nonpolitical clients.

Compensation for services

If a corporation or labor organization pays for services rendered to a nonconnected committee, a prohibited contribution results. There is an exception, however, for legal and accounting services.

Federal government contractors

Political committees and candidates may not accept contributions from federal government contractors.

The prohibition applies to contributions from:

  • A partnership with a government contract;
  • The personal or business funds of an individual under contract with the federal government; and
  • Sole proprietors with government contracts.

Stockholders, officers, members or employees of an entity that is a federal contractor may, however, make contributions from their personal funds.

Foreign nationals

Foreign nationals are prohibited from making contributions, donations or expenditures in connection with any election—federal, state or local. Also, foreign nationals may not donate to any party committee building fund or fund electioneering communications.

The Act prohibits knowingly soliciting, accepting or receiving contributions or donations from foreign nationals. In this context, “knowingly” means that a person:

  • Has actual knowledge that the funds solicited, accepted or received are from a foreign national;
  • Is aware of facts that would lead a reasonable person to conclude that there is a substantial probability that the funds solicited, accepted or received are likely to be from a foreign national; or
  • Is aware of facts that would lead a reasonable person to inquire whether the source of the funds solicited, accepted or received is a foreign national, but the person failed to conduct a reasonable inquiry.

Examples of facts which may be pertinent include, but are not limited to, the use of a foreign passport or passport number for identification purposes, the contributor providing a foreign address, the contributor making a contribution by means of a check or other written instrument drawn on a foreign bank (or by wire transfer from a foreign bank) or the contributor or donor residing abroad.

It is also unlawful to knowingly provide substantial assistance to foreign nationals making contributions or donations in connection with any U.S. election. “Substantial assistance” refers to active involvement in the solicitation, making, receipt or acceptance of a foreign national contribution or donation with the intent of completing the transaction successfully. This prohibition includes, but is not limited to, individuals who act as conduits or intermediaries.

Definition of foreign national

The following entities are considered foreign nationals and are therefore subject to the prohibition: foreign governments, foreign political parties, foreign corporations, foreign associations, foreign partnerships and individuals with foreign citizenship unless they have “green cards” indicating they have been lawfully admitted for permanent residence.

Safe harbor provision

In some cases, a committee may have questions regarding whether or not a contribution is from a foreign national. For example, the contributor may have a foreign address or bank. In this case, a committee has made reasonable assurances that the individual is not a foreign national if the committee obtains current and valid U. S. passport papers for the contributor.

The safe harbor cannot be relied on if the committee has actual knowledge the contribution is from a foreign national.

Domestic subsidiaries of foreign corporations

A political committee may accept contributions from the PAC (separate segregated fund) of a United States corporation that is a subsidiary of a foreign corporation as long as:

  • The foreign parent does not finance the PAC’s activities through the subsidiary; and
  • No individual foreign national participates in the operation of the PAC (including the selection of persons to run the PAC) or makes any decisions regarding PAC contributions or expenditures.

Contributions in the name of another

Contributions by one person in the name of another person are prohibited. This means that no one may make or help someone to make a contribution in the name of another. Knowingly accepting a contribution in the name of another is also prohibited.

Who can and can’t contribute to a Super PAC or Hybrid PAC

Political committees that make only independent expenditures may solicit and accept unlimited contributions from individuals, corporations, labor organizations and other political committees. They may not accept contributions from foreign nationals, federal contractors, national banks or federally chartered corporations.

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