ARTICLE
19 April 2024

Federal PAC Treasurers Are A Must To Manage Election Fundraising

SJ
Steptoe LLP

Contributor

In more than 100 years of practice, Steptoe has earned an international reputation for vigorous representation of clients before governmental agencies, successful advocacy in litigation and arbitration, and creative and practical advice in structuring business transactions. Steptoe has more than 500 lawyers and professional staff across the US, Europe and Asia.
Election years are busy for political action committees as they raise money and contribute to numerous groups.
United States Finance and Banking
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Election years are busy for political action committees as they raise money and contribute to numerous groups. Complying with myriad federal, state, and local laws governing campaign finance can be an uphill challenge.

Federal law prohibits corporations from making political contributions to federal candidates. One solution to this ban is for a corporation to form a federal PAC that allows for candidate contributions from the voluntary contributions to the PAC from its employees.

State laws vary—some permit corporate contributions directly to candidates and others permit state or federal PACs to contribute to state and local candidates.

No matter the model, there is a common thread: All require corporations to follow applicable laws related to permissibility, limitations, and disclosure. Attorneys and those in government affairs who oversee federal PACs should be aware of them.

Required Roles

A federal corporate PAC, also known as a separate segregated fund or connected PAC, must always have an active treasurer. This seems simple, but can present challenges when a treasurer seeks other employment or changes positions within a company that no longer allows that person to fulfill this role.

We recommend an assistant treasurer be appointed to take over the treasurer's duties if the need should arise; otherwise the PAC would need to cease all financial transactions while the position is vacant. The treasurer is ultimately responsible for the PAC's compliance.

A federal PAC's treasurer is listed on the statement of organization filed with the Federal Election Commission and must be updated whenever there is a change in this position. The only other position that the FEC requires always to be filled is the custodian of records. This person should be in actual possession of the committee's financial records.

The treasurer, assistant treasurer, or another person such as an accountant may serve as the custodian of records. Any changes to the custodian also must be made on the statement of organization.

Governance

The FEC doesn't require a PAC to have specific governing documents, such as bylaws, but it's a good practice for a PAC to have bylaws in place.

They should address in part whether a PAC board exists, the makeup of such a board, who can make contribution decisions, the criteria for contribution decisions, and the process for PAC termination.

The bylaws also can address the process for filling a vacancy in the treasurer role. This is particularly important in an election year when a pause in activity can be very disruptive.

Contributions

A federal PAC must ensure it's only soliciting contributions from the restricted class and with all proper disclaimers. A restricted class consists of certain salaried employees with administrative or executive duties.

Generally, class members devote a significant portion of their working hours to running the operations of the business. Certain stockholders and family members of the two groups may also be solicited.

All PAC solicitations must contain certain disclaimers and should conspicuously state:

  • All contributions are strictly voluntary
  • The decision to contribute or not contribute should be made without fear of reprisal
  • Any suggested amount is only a suggestion
  • The contribution is for a political purpose and isn't tax-deductible
  • All contributions over $200 in a calendar year will be publicly available on fec.gov

Recordkeeping

Recordkeeping is the cornerstone to all PAC compliance. Detailed, accurate records must be kept of every financial transaction. This includes all deposits whether from checks, credit cards, or payroll transfers and their source. The name, employer, address, and position of every contributing employee must be kept as well.

Every penny spent must be carefully tracked, including contributions to candidates or other political activities, bank fees, fundraising, or in-kind contributions, or solicitation costs not paid by the connected corporation itself.

Depending on the complexity and size of the PAC, specific PAC management software may be used for recordkeeping and reporting.

Reporting

Reporting must be timely and accurate, but this isn't always easy with the various moving parts of a PAC. All money in and out of the PAC account must be reported to the FEC monthly or quarterly, with extra reports due in an election year.

The FEC assigns an analyst to each PAC. PACs should take advantage of this and call their analyst if they have questions on reporting. They often can provide valuable advice that can prevent the FEC from issuing the PAC a request for additional information in the future.

State-Level Contributions

A federal PAC may make contributions to a state candidate, subject to the rules of that particular state. States generally fall into one of three categories:

  • Those that prohibit federal PAC contributions such as Alaska
  • Those that require federal PACs to register and report as a state PAC to contribute such as Michigan and North Carolina
  • Those that allow a federal PAC to contribute without additional registration requirements such as Wisconsin and Illinois

It's critical to look at the laws on a state-by-state basis, as requirements will vary greatly.

Previously published in Bloomberg Law, April 17, 2024.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
19 April 2024

Federal PAC Treasurers Are A Must To Manage Election Fundraising

United States Finance and Banking

Contributor

In more than 100 years of practice, Steptoe has earned an international reputation for vigorous representation of clients before governmental agencies, successful advocacy in litigation and arbitration, and creative and practical advice in structuring business transactions. Steptoe has more than 500 lawyers and professional staff across the US, Europe and Asia.
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