A Guide to Campaign Finance
Why Is Campaign Finance Important in Winning Elections?
According to a Pew Research Center survey conducted this April, “the presidential race is virtually tied: 49% of registered voters favor Donald Trump or lean toward voting for him, while 48% support or lean toward Joe Biden.” The biggest source of this “enthusiasm gap” in Biden’s base? Young voters and voters of color. Broadcasting the key differences between a Biden presidency and a Trump presidency to a young, diverse electorate is critical to encouraging a higher number of pro-Biden votes, but doing so is impossible without proper campaign funding.
Campaign finance is, of course, instrumental in securing qualified staffers, offices, and materials. But it is, perhaps, most crucial in funding a candidate’s “outreach and messaging to voters” and “demonstrat[ing] the breadth of their support.” According to Shanna Ports, senior legal counsel for campaign finance at Campaign Legal Center, "There are new methods of technology, especially around the internet and digital platforms that campaigns want to be able to spend a lot of money on to reach voters and to micro-target people with their messages."(3) Targeted advertising and media outreach have proven to be simultaneously necessary in securing wins and quite expensive and, therefore, account for a large percentage of campaign spending. There are, however, legal parameters around campaign finance of which candidates and donors alike must be mindful when ensuring campaigns have the capital to foot the political advertisement bill.
Laws and Limitations
The laws and limitations around funding for political campaigns differ at the federal and state levels, as noted in Figures 1 and 2 included in this document’s Addendum. Generally, campaign finance laws “dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported.”(4)
Federal: At the federal level, individuals, candidate committees, party committees, and political action committees can make direct contributions to political campaigns (candidates, parties, and PACs) per specific federally approved guidelines (Fig. 1). However, corporations, labor organizations, and membership groups (like super PACs) are prohibited from direct donation.(4)
State: At the state level, individuals, party committees, and political action committees may contribute to candidates according to specific state-by-state guidelines. Corporations and unions can contribute to candidates in a number of states, but are specifically prohibited from doing so in others (Fig. 2).
For the most part, regulations regarding approved donors and contribution caps are simple enough to understand. Where these requirements become complex is in contribution reporting and the ways in which entities raising political money may operate in partnership.
Donor Entities and How They Fund Campaigns
In adherence with campaign finance laws, below is a brief rundown of how entities raising political money contribute to campaign success.
Candidates: Donating directly to candidates allows political campaigns to make campaign-related disbursements for advertising and disclaimers, campaign fundraisers, day-to-day operations, recounts, transfers between a candidate's committees, and travel. It also allows funds to be used for non-campaign disbursements related to candidate salary; fundraising for other candidates, committees and organizations; making contributions to other federal and nonfederal candidates; non-campaign expenses for travel; transfers and donations; personal use; and supporting tax-exempt organizations.
Federal: Individuals, candidate committees, PACs, and party committees can contribute directly to candidates running for federal office per the limits listed in Figure 1, Column 1.
State: Individuals, party committees, and political action committees may contribute directly to candidates running for state office, the amounts varying state-by-state. Corporations and unions may also contribute to candidates in some but not all states, the amounts varying state-by-state (Fig. 2).
Parties: Political parties and candidate committees may use funds to make direct contributions to candidates, to make coordinated party expenditures on behalf of a candidate (polls, campaign ads, opposition research, and compiling lists of targeted voters), and to make “unlimited independent expenditures to help their candidates, as long as they do not coordinate with candidates and the expenditure is made from disclosed and limited contributions raised from permissible sources in limited amounts (i.e., ‘hard’ money).” Parties also act as “‘orchestrators’ of non-party contributors and spenders” encouraging them to donate using “very public signals…via press releases, blog posts, and filings with the FEC.”(7)
Federal: Individuals, candidate committees, PACs, and party committees can contribute to national political party committees per the limits listed in Figure 1, Columns 4 and 5.
State: Individuals, candidate committees, PACs, and party committees can contribute to state political party committees per the limits listed in Figure 1, Column 3.
PACs: Political action committees are political committees which are not outright authorized by a candidate. Because corporations, labor organizations, and membership groups cannot directly fund federal campaigns5, PACs “tend to represent specific interests such as business, unions or ideologies.”4 PACs solicit donations for the purpose of making campaign contributions and funding campaign-related disbursements like advertising. These expenditures are subject to contribution limits. PACs can operate at both the federal and state levels.
Federal: Individuals, candidate committees, PACs, and party committees can contribute to PACs per the limits listed in Figure 1, Column 2. PACs may contribute to federal campaigns per the limits listed in Figure 1, Rows 3 and 4.
State: “Seven states allow PACs to contribute unlimited amounts of money to state campaigns. The remaining 43 states either impose the same limitations as those for individuals or provide a separate contribution limit.”
Super PACs: Super PACs are independent expenditure-only political committees that, unlike traditional PACs, cannot directly contribute to or coordinate expenditures with candidates and party committees, and are not subject to federal contribution limits. Super PACs can solicit and spend unlimited donations on “independent expenditures in federal races, which are [most often] ads communicating a message that ‘expressly advocates’ in support or opposition to a specific federal candidate’s election.”(8)
Federal/State: Super PACs are independent entities that may contribute to campaign success at both the state and federal levels. The only limitation is that they are not to contribute funds directly to candidates or party committees.
Non-profits: Non-profit organizations that “claim tax exempt status under Sections 501(c)(4) or 501(c)(6) of the Internal Revenue Code” may contribute to political campaigns and are exempt from both contribution limits and public disclosure of donors.(8) Federal tax law allows these groups to spend a portion of donations on elections, but “election spending cannot be their ‘primary purpose.’”(8) These groups typically make independent political expenditures and contributions to super PACs. Some super PACs receive a majority of their funding from these groups, which allows them to keep the knowledge of independent donors from the public.8 501(c)(3) organizations, however, may not make contributions to political organizations such as candidate committees, political party committees, or political action committees.
Federal/State: 501(c)(4)s and 501(c)(6)s may contribute at both federal and state levels. 501(c)(3)s are prohibited from contributing to political organizations altogether.
Key Takeaways
Candidate quality is, of course, key to a political campaign’s success, but fundraising plays a major role.(4) In the case of big money federal elections, Northwestern law professor Michael Kang states, "Usually if you're spending a lot of money, often the opponent is also spending a lot of money and they kind of cancel out. That's not to say that having money is not important or doesn't help you win, because if the opponent is spending a lot of money, you're better off spending a lot of money too."(4) Where this money tends to be most beneficial to campaign success is in advertising and messaging. After all, “While Trump raised less money than his Democratic rival, Hillary Clinton, he received free media attention valued at about $5 billion.” When assessing a potential donation to a political money-raising entity, it is important to consider how this money might be used. Is contributing to day-to-day operations more aligned with your donor goals, or is funding targeted media outreach? And will a donation to a federal campaign go further than a donation to a smaller, state-level campaign, many of which prove unsuccessful when under-funded?
Recommended Political Fundraising Organizations
Federal:
Democratic National Committee - The DNC works to build a strong Democratic Party capable of securing victories from the state house, to the Senate, to the White House.
SwingLeft - In 2024 their primary focuses are:
Reelecting Biden/Harris by harnessing volunteer and donor resources in eight key presidential swing states (Arizona, Georgia, Michigan, Nevada, New Hampshire, North Carolina, Pennsylvania, and Wisconsin),
Protecting the Democratic Senate majority by supporting Democratic candidates in seven target Senate races, and
Winning back the Democratic House majority by investing in a slate of Swing Districts where our efforts can make the biggest impact.
Mind the Gap - Mind the Gap (MTG) is a left-wing super PAC dedicated to helping Democratic political candidates win elections.
State:
Sister District Project - Sister District Project works to get Democrats elected to strategic state legislative seats by supporting campaigns with grassroots action. They “sister” volunteers from deep blue districts with carefully targeted races in swing districts, where flipping control of the state legislature will advance progressive policy.
Run For Something - Run For Something recruits and supports young, diverse progressives to run for down-ballot races in order to build sustainable power for Democrats in all 50 states.
State Party Advancement Network - SPAN connects progressive donors with Democratic State Parties building invaluable infrastructure to help elect more Democrats.
Footnotes
1 - https://www.pewresearch.org/politics/2024/04/24/in-tight-presidential-race-voters-are-broadly-critical-of-both-biden-and-trump/
2 - https://www.pbs.org/newshour/show/biden-campaign-working-to-regain-support-of-disillusioned-democratic-voters
3 - https://www.npr.org/2023/11/01/1205728664/campaign-finance-donations-election-fec-fundraising-ad-spending
4 - https://scienceexchange.caltech.edu/topics/voting-elections/campaign-funding-finance-explained
5 - https://www.fec.gov/help-candidates-and-committees/making-disbursements/
6 - https://bipartisanpolicy.org/wp-content/uploads/2019/05/Political-Parties-and-Campaign-Finance-What-Role-Do-the-National-Parties-Play.-Diana-Dwyre.-Diana-Dwyre.pdf
7- https://campaignlegal.org/update/pacs-super-pacs-and-more-your-guide-key-election-spending-vehicles
8 - https://www.ncsl.org/elections-and-campaigns/campaign-contribution-limits-overview
9 - https://www.opensecrets.org/pres16/candidate?id=n00023864
Addendum
Figure 1
