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Accurate PAC Compliance Takes on New Importance for 2022

February 11, 2021

By Peter Sherman, Senior Vice President of PAC Services

To say the 2020 election cycle was tumultuous is putting it mildly. From the pandemic to questions about the legitimacy of our elections to an assault on the Capitol threatening certification of the Electoral College results, our politics were in upheaval in ways we haven’t seen since the mid-19th century. The role of PACs has been at the center of much of the controversy. Unfortunately, corporate and association PACs are being scapegoated alongside super PACs and other methods of campaign financing that are far less transparent and regulated. In this heightened political environment, accurate compliance at both federal and state levels needs to remain a priority.

The debate about PAC participation in the political process has led to an uncertain future for many corporate and association PACs. PAC boards and managers, responding to concerns from leadership, employees, and heightened media attention, are being forced to make difficult decisions about their political giving strategy even though we are only a month into the 2022 election cycle—and make them in much more public ways than ever before. Now is the time to get prepared. As campaigns get underway, it is imperative to reassess what’s best in managing your PAC.

Below we outline several steps you should be taking now to ensure your PAC is positioned to weather the storm hanging over the 2022 election cycle as a result of what we saw in 2020.

PAC Audit

Start the new election cycle with a clean slate and set up your PAC for the future:

  • Conduct a financial review. This should be relatively painless if you have been reconciling the PAC’s finances each month.
  • Make sure all contributions you made during the 2020 cycle were accurately reported.
  • Make sure the PAC is properly registered and reporting at the state/local level if you made state or local contributions.
  • Review your bylaws and contribution criteria and make any necessary updates. Ensure PAC eligibles can readily access your foundational materials for transparency.

Filing Frequency

  • If you are currently filing monthly, consider changing your filing frequency to quarterly. It could significantly reduce your reporting requirements in 2021 as PACs that choose to file quarterly actually need to only file semi-annual reports in 2021. The semi-annual report for January through June is due on July 31, and the report for July through December is due on January 31, 2022.
  • Quarterly filers that make contributions tied to special elections held in 2021 may be required to file additional pre-election reports.
  • PACs that file monthly in 2021 must file a disclosure report covering the previous month’s activity no later than the 20th day of each month, regardless of whether the 20th falls on a weekend or holiday.

Cash on Hand

  • Record the correct cash on hand as of January 1, 2021. Each report filed with the FEC includes this information and failure to update it may cause your reports to inaccurately disclose the PAC’s current and ending cash on hand, prompting a letter from the FEC and the necessity of filing corrective amendments.

State Reporting Schedules

  • Make it a practice to visit state campaign finance sites to remain up-to-date on reporting requirements, as well as any developments in the campaign finance laws and regulations at the state level that might impact your PAC, even if you only have a federal PAC.
  • Review the reporting calendar for 2021 for each state in which you have a PAC or plan to make contributions.
  • Track election activity in any of the states in which you are active. You may incur additional reporting requirements if you make a contribution in a state that is holding regular or special elections in 2021.
  • Put together an annual calendar of state reporting dates to better manage the different schedules and reporting requirements. Most states have their campaign finance reporting calendar online for easy access.

Contribution Limits

  • Be aware of any state changes to contribution limits prior to creating annual or cycle budgets and spending plans for the new election cycle.

Legislative Black-Out Periods

  • About half of the states prohibit or limit making contributions while the state legislature is in session. Review the rules in your target states to determine if there are such prohibitions.

Pay-to-Play

  • Make sure you understand any pay-to-play statutes that may exist if you have contracts with state or local governments. Failure to comply with pay-to-play rules can result in significant penalties, including the voiding of contracts and being prohibited from seeking future public contracts.

Communicating with Your Contributors

Between Democrats who refuse to accept contributions from corporate-sponsored PACs and Republicans who opposed certification of the 2020 presidential election, many of our clients are dealing with inquiries from the press and concerns from their leadership and contributors. DDC encourages our clients to take a measured approach and remember that their PAC eligible classes represent a diverse array of political viewpoints. We also encourage our clients to communicate proactively with leadership, PAC boards and eligibles to ensure concerns are being heard and addressed. Your strategy for making contributions going forward must be both well thought out and clearly communicated, and you should avoid taking any reactive positions that you may need to walk back from later in the election cycle.

The current situation is challenging, but as with most challenges, it also presents opportunity—the opportunity to help your eligibles better understand the important role the PAC plays in supporting the company and helping lawmakers stay informed on what is happening with your industry. It’s also important to remind eligibles why engaging with candidates and legislators across the political spectrum is just as vital now, if not more so, than it was in years past. Make sure eligibles understand that remaining active in the political process is critical to the success of the company long term, and that it makes it possible for good candidates who don’t have the resources to self-finance or the public visibility to raise funds exclusively from individual contributions to run competitive campaigns.

It’s also an opportunity to refresh your eligibles on the basics of the PAC—how the company decides which candidates to support, how the PAC is regulated internally and externally, how and why the PAC maintains transparency, and which issues the company is facing. The more people can be reminded how the PAC works to avoid partisanship, stay focused on core business policy issues, and represent the interests of all employees or members, the better the PAC will weather the current storm and emerge stronger.

DDC is here to help if you need assistance with any of the activities discussed above—or simply need to bounce ideas off an expert. We can help you plan your next steps.

Contact us: info@ddcpublicaffairs.com


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