Political Law With The Simpsons - A Four Part Series By Avi Kelin
October 17, 2023 | By: Avi D. Kelin, Esq.
Part I - In-Kind Contributions and Government-Ethics Rules
As far back as 1995, The Simpsons established that you don't win friends with salad.
Even though you may not make any friends with salad, it still has a monetary value.
This dichotomy can actually teach us something about political-law compliance.
Under campaign-finance law, providing anything of value to a political candidate needs to be treated as a political contribution. This can take the form of monetary contributions (writing a check to a candidate) or it can also be in-kind contributions (providing goods or services to a candidate)--either one is a political contribution. Both monetary contributions and in-kind contributions can be subject to contribution limits, and certain individuals and entities may be prohibited entirely from making a contribution to political recipients.
Therefore, if Corporation A buys a salad for a political fundraiser, Corporation A has made an in-kind contribution to the candidate (whether or not any friends were made in the process).
In contrast, once in office, political officeholders and government employees are subject to government-ethics laws, which generally include gift restrictions.
While some jurisdictions impose a complete prohibition on all gifts, the gift rules in many places allow private individuals to provide items of value so long as the gift would not would reasonably impair the objectivity of the elected official or government employee.
In this case, if Corporation A buys a salad lunch for an elected official, this may actually be permitted in some jurisdictions because no one expects a salad to impair the recipient's objectivity (though there may be disclosure obligations).
Part II - Pre-Election Reporting
Part and parcel of the political process is reporting. Half the job of election watchdogs like the FEC or the New Jersey Election Law Enforcement Commission is ensuring compliance with contribution limits and other laws regarding the financing of elections. The other half is simply ensuring that the public understands the money received and spent by a political organization.
Candidates, PACs, and political parties all have to report their contributions received and expenditures made. Understanding those rules is of critical importance--omitting an address or a contributor's occupation can lead to the imposition of monetary penalties.
Generally, these reports are filed on a quarterly basis or some other regular schedule of reports. But, because transparency is a core value of campaign-finance laws across the US, if there is significant activity in close proximity to election day, special pre-election reporting will generally follow.
For example, a New Jersey PAC files reports on a quarterly basis. The third quarter report, covering July - August - September will be due in October. But activity during October and November will not be reported on the regular reporting schedule until January, more than two months after election day. New Jersey law therefore requires the PAC to report its significant activity on an ongoing basis between October 1 and election day, including within 72 or even 24 hours as we get closer to the day of the election. Because the entire purpose of these reports is transparency before the election, there is generally no cure for a late report.
(Keep in mind that businesses that hold government contracts have their own independent disclosure obligations in certain jurisdictions--including New Jersey, Maryland, and Illinois.)
Part III - Super PACs
Following some well publicized Supreme Court cases more than a decade ago, the term Super PAC became part of the public lexicon. Every call we received from a new client started with them asking for our help to start a Super PAC.
After I explained what a Super PAC is and what it can do, some clients decided that this was an appropriate vehicle for their political ambitions. But many others decided that a traditional PAC or 501(c)(4) or other entity would be better suited for them.
So what is a Super PAC? The name is an informal term to differentiate a Super PAC from a traditional PAC. In most jurisdictions, the law refers not to a Super PAC but to an Independent Expenditure Only Committee.
As this formal name suggests, the committee can make only independent expenditures, and not direct contributions to candidates or parties.
This means that the Super PAC can place social-media or newspaper or radio ads supporting or opposing candidates, but it can't coordinate those activities with the candidates and it can't give money directly to the candidates.
The benefit of conducting this independent-only activity is that there are no limits on the contributions that the Super PAC can accept. So if Individual A wants to contribute $100,000 or $10,000,000 to the Super PAC, that will generally be permitted.
In contrast, a traditional PAC is generally subject to contribution limits on what it can receive (in New Jersey, $14,400 per calendar year) and what it can contribute directly to candidate (in New Jersey, $16,400 per election). But the traditional PAC has the flexibility to contribute directly to candidates.
The type of entity that is appropriate depends on the specific goals and operations of the organizers.
Part IV - Non-Profit Political Activity
There is a common understanding that non-profits can't do politics. This conclusion is an oversimplification of the truth.
First, there are many types of non-profit organizations. For example, 501(c)(4) social-welfare organizations and 501(c)(6) trade associations are permitted to engage in even partisan political activity provided that this doesn't become the primary purpose of the organization. As a shorthand, many practitioners therefore say that partisan political activity can be no more than 49% (or 40% to be safe) of an organization's overall activity. But beyond these limits, a 501(c)(4) or a 501(c)(6) can engage in lobbying without limits, and can do unlimited non-partisan voter-registration or Get Out The Vote work.
It is true that a 501(c)(3) charitable organization is not permitted to engage in any partisan political activity, which means that a 501(c)(3) can't support candidates or parties. But even a 501(c)(3) can engage in non-partisan voter-registration or Get Out The Vote activities, host non-partisan candidate town halls, and engage in lobbying within certain limits.
Depending on the type of organization and its IRS classification, a non-profit is subject to important limitations on its political activity. But don't overlook the crucial work that these organizations are permitted to do under legal limits.