5 Common Issues in PAC Compliance
March 4, 2019
Peter Sherman, Senior Vice President, PAC Services
Managing a PAC is no easy feat. Along with fulfilling your participation objectives and reaching contribution goals, corporate and association PACs require compliance and administrative management resources to ensure your political programs are fully compliant at the federal and state levels.
Despite how critical this management is to an organization’s continued success, many companies and associations struggle to keep track of all the rules regulating the operation of a PAC. And it only gets more complicated if you are also active at the state level. Without proper guidance and a clear understanding of the law, an organization can easily run afoul of the many rules governing the making of political contributions. Below are five areas that organizations must master when managing their political programs.
Soliciting contributions for the PAC.
There are specific rules at the federal level governing the solicitation of contributions for PACs, and these rules are applied differently depending on the type of PAC you are operating. For instance, trade associations and corporations are limited to soliciting certain individuals and entities. An organization must know which individuals can be solicited, and when they can be solicited, to make sure you are compliant.
At the state level, the permissible source of contributions varies. You need to be aware of the different rules before getting involved at the state level.
Campaign finance disclosure reports are not all filed at the same time.
PACs filing disclosure reports with the FEC have the option of filing monthly or quarterly. (A PAC can change its filing frequency once a year.) If your PAC has selected to file monthly, the reports are due by no later than the 20th of each month, regardless of whether the filing date falls on a weekend or holiday. There is nothing in the law permitting extensions of time for filing disclosure reports with the FEC. (In election years, a PAC is also required to file pre- and post-election reports.)
The timeframe for filing quarterly depends on the year. For instance, since 2019 is a non-election year, quarterly filers actually file on a semi-annual basis. Please note that a PAC filing quarterly may have additional reports to file if a contribution is made from the PAC in connection with a special election.
Keep in mind that reporting at the state level is different in each state and the reporting calendar may also be dependent on whether or not it is an election year. One way to avoid missing a deadline is for an organization to maintain an annual state reporting calendar with all the state due dates and reporting periods.
Disclosure requirements vary from the federal to state level and among the different states.
The threshold for itemizing information on an FEC report may be different than the threshold on a state report. Some states have a lower threshold while others have one that is higher. For instance, individuals are itemized on an FEC disclosure report once the aggregate amount of their contributions exceeds $200 during the calendar year. In some states, all contributions made by an individual must be itemized, regardless of the amount of a specific or aggregate contributions. In other states, the threshold may be higher than the federal $200 aggregate amount. To be compliant, an organization needs to be aware of the varying reporting requirements at the federal and state levels.
Rules permitting and prohibiting contributions at the state and local level vary significantly from each other and from federal rules.
The laws and regulations governing the making of contributions at the state and local level do not mirror campaign finance laws at the federal level. Unlike federal law, many states permit direct corporate contributions to state political committees. Additionally, contribution limits vary widely among the states. An organization needs to be informed about permissible sources of contributions and the amount that can be contributed.
Contributions to state committees may be prohibited or limited based on when the contribution is made and/or by the organization making the contribution.
State regulations vary tremendously and it’s vital that you review and understand the campaign finance laws in each state in which you propose to make contributions. For example, some states prohibit the making of contributions while the legislature is in session.
Many states and localities have pay-to-play statutes that may limit or prohibit contributions from certain sources. These pay-to-play statutes may also require additional reporting by an organization. Failure to comply with pay-to-play statutes could result in the loss of business for an organization making an impermissible contribution, so it is critical that an organization be aware of these statutes and the contribution limits/restrictions placed on some entities.
Without a full-time resource designated to managing your PAC compliance, it can be easy to miss one of the many rules governing the making of political contributions. It’s vital that an organization have someone, preferably someone experienced in this area, in place to oversee its political activities, especially for those organizations active at the state and local level.
In addition to our proprietary PAC technology, DDC has been navigating PAC compliance for our clients for more than 20 years. Our campaign finance experts currently work with nearly 150 corporate and association PACs to ensure our clients are compliant at the federal and state levels. If you need help with PAC management, DDC is fully capable and ready to help you avoid any pitfalls regardless of where your PAC is active.