Federal Election Campaign Act of 1974

APGAP Everything You Need to Know About Campaign Finance (until they go and change it again!) complied and edited from various sources by Steven Anderson, revised 12/21/08

The FEC and the Federal Campaign Finance Law As early as 1905, President Theodore Roosevelt recognized the need for campaign finance reform and called for legislation to ban corporate contributions for political purposes. In response, Congress enacted several statutes between 1907 and 1966 which, taken together, sought to: -Limit the disproportionate influence of wealthy individuals and special interest groups on the outcome of federal elections; -Regulate spending in campaigns for federal office; and -Deter abuses by mandating public disclosure of campaign finances. In 1971, Congress consolidated its earlier reform efforts in the Federal Election Campaign Act (FECA), instituting more stringent disclosure requirements for federal candidates, political parties and political action committees (PACs). Still, without a central administrative authority, the campaign finance laws were difficult to enforce.

WATERGATE: THE WAKE-UP CALL Campaign finance reform didn't become a major issue in the United States until the 1970s, when the Watergate scandal convinced citizens and lawmakers that something needed to be done to stem the flow of special interest money to politicians and their campaigns. The introduction of television advertising as a campaign tool in the 1950s and 1960s dramatically increased the cost of campaigning for public office. The ensuing scramble for funds left many concerned that American democracy was not being served. Watergate served to confirm people's worst suspicions.

REFORM'S FIRST STEPS: FECA and THE FEC President Richard M. Nixon signed the Federal Election Campaign Act (FECA) of 1972 into law before the Watergate scandal became public. The law did very little, however, to slow the steady rise in campaign spending. Legislators revisited the issue after President Nixon resigned in 1974 and passed the 1974 FECA amendments. These amendments were the most comprehensive campaign finance legislation ever adopted. Among other things, the new law strengthened disclosure requirements, set strict new limits on contributions and spending in federal elections, and created a system of public financing for presidential elections. The law also created an independent agency, the Federal Election Commission (FEC), to enforce the new rules.

TAKE IT TO THE LIMIT The Federal Election Campaign Act, as amended, places specific monetary limits on contributions to support candidates for federal office. An individual, for example, can give up to $1,000 to a candidate during one election cycle, while the limit on political action committee (PAC) giving is $5,000 per candidate per election. These limits on campaign contributions to federal candidates are considered "hard money" limits; they establish ceilings on the amounts that can be given directly to candidates to support their campaigns.

Federal Election Campaign Act of 1974 Following reports of serious financial abuses in the 1972 Presidential campaign, Congress amended the FECA in 1974 to set limits on contributions by individuals, political parties and PACs. The 1974 amendments also established an independent agency: the Federal Election Commission (FEC) to enforce the law, facilitate disclosure and administer the public funding program. Congress made further amendments to the FECA in 1976 following a constitutional challenge in the Supreme Court case Buckley v. Valeo ; major amendments were also made in 1979 to streamline the disclosure process and expand the role of political parties. Public funding of federal elections originally proposed by President Roosevelt in 1907 began to take shape in 1971 when Congress set up the income tax checkoff to provide for the financing of Presidential general election campaigns and national party conventions. Amendments to the Internal Revenue Code in 1974 established the matching fund program for Presidential primary campaigns. The FEC opened its doors in 1975 and administered the first publicly funded Presidential election in 1976.

Commissioners The FEC has six voting members who serve staggered six-year terms. The Commissioners are appointed by the President with the advice and consent of the U.S. Senate. No more than three Commissioners may belong to the same political party. The Commissioners elect two members each year to act as Chairman and Vice Chairman. Campaign Finance Campaign Finance Information in this guide is based on The FEC and Federal Campaign Finance Law, published in August 1996 by the Federal Election Commission. The following information does not include changes enacted by the Shays-Meehan Campaign Finance Overhaul bill /Bipartisan Campaign Finance Act (BCFA), signed into law in March 2002, which is currently facing legal challenges such as the USSC case of McConnell v. U.S. (2003). If the bill's constitutionality is upheld, this information will change. I. Major Rules Who Can Contribute? Any American citizen can contribute funds to a candidate or a political party except for individuals and sole owners of proprietorships that have contracts with the federal government. Foreigners with no permanent US residency are prohibited from contributing to any political candidates at any level. Cash contributions over $100 are prohibited, no matter what their origin. No candidate can accept an anonymous contribution that is more than $50. Corporations, labor unions, national banks and federally chartered corporations are also prohibited from contributing to federal campaigns or parties. (since 1907) Political action committees operated by foreign-owned corporations may contribute to campaigns as long as American citizens are the only contributors to the PAC.

Federal Campaign Spending Limits According to the Federal Election Campaign Act of 1974: To any candidate or To any national party To any PAC or other Total candidate committee committee political committee Time Period per election* per calendar year per calendar year per calendar year Individual can give... $1,000 $20,000 $5,000 $25,000 Multicandidate Committee can $5,000 $15,000 $5,000 No limit give...** Other Political $1,000 $20,000 $5,000 No limit Committee can give... SOURCE: The Federal Election Commission * Primary and general elections count as two separate elections; so this contribution can be effectively doubled during a normal election year in sates with primaries. ** Multicandidate committees are those with more than 50 contributors, that have been registered for at least six months, and (with the exception of state party committees) have made contributions to five or more federal candidates.

II. What is a PAC? A Political Action Committee (PAC) is a committee set up by and representing a corporation, labor union, or special interest group that raises and spends campaign contributions on behalf of one or more candidates or causes. The first modern PAC was formed by the Congress of Industrial Organizations in 1943 in response to Congress decision to ban direct contributions from labor unions to federal candidates. The funds that are distributed from PACs come not from the organization but from voluntary contributions from individual members. While such an arrangement was not explicitly sanctioned by federal law, neither was it prohibited. Over the next 30 years the idea gradually caught on as other labor unions then corporations and business groups, formed PACs of their own. But many groups held back. PACs were still a loophole in federal election laws which were tolerated but not officially sanctioned. In 1974 the Federal Election Campaign Act was amended and specifically sanctioned the formation of "political committees" to enable the employees of corporations, members of labor unions, or members of professional groups, trade associations or any other political group to pool their dollars and give to the candidates of their choice. At the same time, it gave PACs higher contributions limits than individual contributors, and set up the Federal Election Commission (FEC) to oversee elections and to collect and monitor campaign finance reports filed by PACs and candidates. The FEC officially recognized over 600 PACs by the end of 1974 giving about $12.5 million to campaigns. By 1992 that number had more than tripled with over 4,700 individual PAC recognized contributing over $189 million.

AND ALONG COMES BUCKLEY In 1976, the Supreme Court dealt a blow to the new law with its decision in Buckley v. Valeo. The Court's ruling declared that mandatory campaign spending limits such as those in the FECA Amendments of 1974 violated the Constitution's free speech protections. In the Buckley decision, the Court made an important distinction between spending limits and contribution limits, asserting that contributions can be limited in order to fight corruption or the appearance of corruption. The Court let the contribution and spending limits for presidential candidates who accepted public funds stand, asserting that such "voluntary" limits on spending pass constitutional muster.

HELLO, SOFT MONEY In 1979 Congress passed additional amendments to the FECA. In response to politicians' complaints about the old law's requirements for reporting and disclosure, the amendments reduced the amount of paperwork required and limited what financial information had to be included in candidates' reports. More important to the future of campaign finance, however, were the new provisions allowing state and local political parties to spend money from the national party organizations on grassroots "party-building" activities such as voter registration drives. These provisions created the "soft money" loophole that has since been used to channel hundreds of millions of dollars from the political parties to their candidates' campaigns.

Hard vs. Soft Money: Summary of Key Features

Hard Money Soft Money Raised and spent for use in state and local elections, according to restrictions Raised and spent for use in federal and regulation of state laws; would not elections, according to restrictions and be permitted if spent in federal regulation of federal election law elections (often raised and spent in a way that suggests an intent to indirectly influence federal races) Must be used if for express advocacy in May NOT be used for express advocacy federal elections (e.g., "vote for [or in federal elections if aimed at general against]" specific candidates) and public (unions and corporations may aimed at the general public (including use express advocacy to restricted for contributions made to or classes) coordinated with federal candidates) Sources: Sources: Individuals, PACs, and parties (subject In general, source restrictions to extent to contribution limits) of various state laws; common sources: unions, corporations, and individuals in Candidates (not subject to contribution amounts above $25,000 in a year limits) Disclosure:

(1) Non-federal accounts of national Disclosure: parties and of state and local parties (for spending on mixed activities), and All money must be disclosed to FEC (2) union and corporate internal communications over $2,000 - disclosed to FEC; other forms may be disclosed in states

Common Forms: Common Forms:

Receipts and Expenditures by - federal Party soft money - raised by national parties through non-federal accounts and sent to state parties for use in generic, party-building, and voter operations candidates; federal accounts of PACs; and Labor/Corporate Exempt Activities party committees' federal accounts -treasury money allowed for spending (through contributions and coordinated aimed at restricted classes on setting up expenditures) and running a PAC; non-partisan get-out- the-vote and registration drives; and internal communications (i.e., express advocacy) Independent Expenditures - for express advocacy of federal candidates' Issue Advocacy - By not using election or defeat, without any triggering terms for express advocacy, coordination with a federal candidate groups and parties may use soft money (no limit on amounts spent, but for public issue communications, amounts must be disclosed, cannot be independent of any candidate (not from prohibited sources or in amounts disclosed or federally regulated) beyond contribution limits)

Mixed Activities

Operations of parties and some PACs that benefit candidates at both the federal and state/local levels; subject to allocation requirements, to insure only hard money is spent in federal elections; hence, a certain percentage of expenditures by committees (at any level) must use hard money; the rest may use soft money

THE PROLIFERATION OF PACS Despite enactment of the FECA law and all its amendments, political campaign costs continued to surge throughout the 1980s. The rise of PACs established by corporations and labor unions to raise money for favored candidates produced new concern. Originally set up to enable small contributors to participate in elections, PACs rapidly became the preferred channel for special interest contributions. The 1979 amendments had placed restrictions on giving by individual PACs, but the law did nothing to address the problem that PAC money generally went to incumbents. Moreover, the proliferation of PACs provided a flood of new money to candidates, effectively undermining the post-Watergate reforms.

A STANDOFF ON CAPITOL HILL Congress has acted on several campaign finance reform bills since 1979- most notably the McCain-Feingold Campaign Finance Reform Bill which floated around Congress from the late 1990’s until 2001, was a major issue in the Presidential Election of 2000 (in which McCain sought the Republican nomination) and would have, among other things, banned the use of soft money- but none has become law. Lawmakers have debated voluntary spending limits, partial public financing of congressional elections, a constitutional amendment overturning the Supreme Court's Buckley decision and new restrictions on PACs, among other reforms. Ultimately, partisan disagreements stopped each new proposal. Senator Mitch McConnell of Kentucky led Senate filibusters of numerous reform measures. This standoff has caused many Americans to doubt that members of Congress really wanted to change the system. Were they are merely paying lip service to the public?

AN ELECTION THAT WILL LIVE IN INFAMY In the 1996 election, congressional and presidential candidates and the political parties channeled record amounts of money into their campaign coffers. Many thought that the widespread public disgust with the role of money in the 1996 races might translate into congressional action on the issue. Despite a public promise from President Clinton and House Speaker Newt Gingrich to create a bipartisan commission on the issue, nothing happened in the 105th Congress that began in January 1997. The 1979 reforms, flawed as they are, remain the law of the land. Both the Clinton and Dole campaigns were charged with using soft money for hard money purposes and both campaigns were fined and forced to return millions. The Clinton campaign was charged with numerous fundraising irregularities and abuses (refer to Frontline video shown in class). THE STATES STEP IN In the absence of federal action to reform campaign financing, a number of states - including California, Colorado and Oregon - have passed strict contribution limits that have since been challenged in court. In Oregon, a judge threw out a $100 limit on individual contributions as unreasonable. The state receiving the most attention in recent years for its reform efforts is Maine. The 1996 Maine Clean Elections Act severed the connection between private money and candidates for state office. Candidates in Maine must raise a specified amount of five-dollar contributions. The number varies with each position and the funds must be raised from eligible voters for that candidate. For example, a candidate for governor in order to participate under the clean money system must raise twenty-five hundred five-dollar contributions. Candidates who do not qualify are not eligible for the benefits offered by the public financing system. In the 1998 election, Arizona and Massachusetts each passed clean elections initiatives. Many campaign finance reform advocates now believe that the best hope for campaign finance reform is at the state and local levels and that grassroots success will convince federal policy makers that the public supports reform.

Recent Developments in Campaign Finance Regulation On March 27, 2002, President Bush signed into law the Bipartisan Campaign Reform Act of 2002 (BCRA), Public Law No. 107-155. The BCRA contains many substantial and technical changes to the federal campaign finance law. The Shays-Meehan campaign finance bill, H.R. 2356, passed the Senate 60-40 Wednesday, March 20. The same bill had passed the House by a 240-189 vote on February 14, 2002. The bill now goes to the White House, and President Bush has signaled he will sign it. The bill represents the most significant changes to campaign finance laws since those enacted after the Watergate scandal more than 25 years ago. However, the bill's provisions do not take effect until AFTER the 2002 election, so the remainder of this election cycle will be fought entirely under the current laws. It may also not take effect until all legal challenges have been met. Additionally, if one part of the bill is ruled unconstitutional, it may void the entire bill, something outspoken opponents such as Senator McConnell and President Bush are well aware of. If upheld in court challenges in its current form, the law would: -ban soft money contributions to the national political parties; -increase individual hard money contribution limits; -leave PAC contribution limits unchanged; and -restrict the ability of corporations (including non-profit corporations) and labor unions to run "electioneering" ads featuring the names and/or likenesses of candidates close to an election.

Soft Money Ban: The chief component of the bill is its ban on soft money —the term for donations made to national political party committees (e.g., the Democratic National Committee, Republican National Committee, and the Senatorial and Congressional campaign committees) in amounts and from sources (corporations and unions) not permitted in federal elections. Under current law, parties may raise unlimited amounts of soft money, which they have been using not only for party-building activities such as get-out-the-vote efforts, candidate recruitment, and administrative expenses, but also for candidate-specific broadcast advertising. Under the bill parties will not be able to accept soft money after November 6, 2002, and must dispose of all soft money in their accounts by December 31, 2002.

Hard Money Increases: Hard money refers to funds raised and reported in accordance with federal election laws and regulations. Individuals will no longer be able to give soft money to national party committees. The proposed new limits on hard money contributions by individuals are as follows: -Increases from $1,000 to $2,000 per candidate per election; -Remains $5,000 per year to a political action committee ("PAC"); -Increases from $20,000 to $25,000 per national party committee (e.g., Democratic National Committee, Republican National Committee) per year; -Increases from $5,000 to $10,000 per state or local party committee per year; and -Increases the aggregate limit on individual contributions from $25,000 per year to $95,000 per two-year election cycle, of which only $37,500 may be contributed to candidates over the two years. The two-year election cycle starts on January 1 of odd-numbered years and extends to December 31 of even-numbered years. The limits on PAC contributions to candidates and parties remain unchanged and are not indexed for inflation ($5,000 per candidate per election; $5,000 per outside PAC per year; $15,000 per national party committee per year; and $5,000 per state or local party committee per year). There are no annual aggregate limits on PACs.

Restrictions on Electioneering Communications: The bill prohibits corporations, trade associations, and labor organizations from financing "electioneering communications" within 60 days of a general election and 30 days of a primary election using "treasury money." An electioneering communication is one that refers to a clearly identified federal candidate and is targeted to the candidate's state or district. (A corporation's, trade association's or union's PAC may still run or finance such ads because its funds are, by definition, hard money). This provision also would require non-corporate or non-union persons or entities that spend in excess of $10,000 on electioneering communications during a calendar year to file disclosure reports listing the person(s) making or controlling the disbursements and the custodian of the records, all contributors who gave more than $1,000 to finance the communications, and those to whom disbursements of more than $200 have been made.

Coordination: The bill requires the FEC to issue new regulations that will ultimately determine the reach of the prohibition on corporations and unions coordinating campaign activities with federal candidates.

Impact: The bill's most predictable impact on the campaign finance world will be to enhance the relative influence of corporations, trade associations, and other organizations with large hard-money PACs, while diminishing the influence of entities that have relied primarily or solely on large soft-money contributions. It also should greatly mitigate the pressure many corporations and wealthy individuals feel to make large donations to the political parties in response to requests from Members of Congress and Executive Branch officials. However, pressure for smaller donations of hard dollars will increase in light of the higher individual contribution limits, especially in Washington.

Challenges to Campaign Finance Reform McConnell v. FEC (2003) Do new limits on donations and election activity violate the Constitution's guarantee of free speech? The appeals court ruling in McConnell v. FEC sets the stage for an appeal by the losing side to the Supreme Court.

Nixon v. Shrink Missouri Government PAC (2000) Review the Supreme Court's recent decision with respect to Missouri's limits on campaign contributions.

Colorado Republican Federal Campaign Committee v. Federal Election Committee (1996) Read why the majority opinion of the Supreme Court found that party expenditures were independent of the candidate, and thus not covered by legislative caps, but rather entitled to First Amendment protection.

Communication Workers of America v. Beck (1988) Understand why a union may not, over the objections of dues paying nonmember employees, spend funds collected from them on activities unrelated to collective bargaining.

Buckley v. Valeo (1976) Learn more about the landmark decision that rejected portions of the Federal Election Campaign Act claiming that it violated the First Amendment.

And Even BCRA Has Its Loopholes (527’s)

527 Groups. A 527 group, named after a section of the United States tax code, is a tax-exempt organization for the purpose of electioneering. Although PAC’s are also created under Section 527 of the Internal Revenue Code, the term is generally used to refer to political organizations not regulated by the FEC and not subject to the limitation of PAC’s.

A 527 group is permitted to be exempt from federal expenditures, but because 527 groups are not regulated by the FEC, they may NOT make contributions to directly advocate a specific candidate or to defeat a specific candidate for office (similar to one of the old restrictions under FECA of soft money). Many 527’s however are run by SIG’s and used to raise unlimited amounts of funds spend on issue advocacy or voter mobilization—but, just as was the case with soft money under FECA, what is issue advocacy is a gray area.

Controversy in the Presidential Election of 2004. 527’s in the 2004 election included groups such as Swift Boat Veterans for Truth, Texans for Truth, Moveon.org and the November Fund. Under federal election law, there can be no coordination between an election campaign and a 527group, but there was heavy spending in the 2004 election by the above groups and others and numerous complaints to the FEC that 527 money made its way into the Bush and Kerry campaigns. Republicans accused MoveOn.org, the Media Fund and several other groups of coordinating their efforts with the Kerry campaign while Democrats charged that Swift Boat Veterans for Truth was working with the Bush campaign. Several people working for 527 groups and political campaigns had to resign to avoid violating campaign law—for example, Washington attorney Joe Sandler represented both the Democratic National Committee, MoveOn.org and the Media Fund. Coincidence? The same occurred on the Republican side as well.

Expenditures of some individual 527 groups in the 2004 election topped $75 million dollars with 11 groups raising and spending over $10 million each. 527’s posed an additional problem in that they are exempt from the “attack ad” provision of BCRA and were able to run numerous campaign ads at times that would have been barred under BCRA’s provisions.

The FEC is currently investigating the use of 527’s.

The Election of 2008—more on this record-breaking one in class!

WHEW!!! GASP!!! No wonder no one understands politics and there are so many violations!!!