Corporate Campaign Contributions

Fund raising for the 2000 presidential race not only is already in full swing, it is certain to break all records, making it the most expensive race ever. Despite the scandals that plagued the 1996 presidential campaign, candidates and parties are raising money for 2000 at an unprecedented pace, highlighted by Gov. George W. Bush's revelation of a record-smashing war chest. The fund- raising frenzy promises to continue into the millennium as candidates try to keep up with Bush, and as party committees, recently freed by the courts from limits on independent expenditures, vie to outspend each other-not only in pursuit of the presidential spot, but also to influence the congressional map.
 
Why should corporate general counsel take note? Corporations and their employees may wish to have their voices heard during the upcoming electoral season, and in any event, they surely have been and will be prime fund-raising targets of presidential campaigns. Moreover, this fund raising will take place in essentially the same, often murky, legal context as the 1996 campaign, thereby raising similar potential pitfalls for the unwary. This is because neither the Federal Election Commission (FEC) nor Congress has yet acted to change or clarify the rules to any significant degree.
 
With this backdrop, and bearing in mind the general prohibition on most forms of corporate giving in federal elections, we urge companies and their executives to proceed carefully. Here are some of our tips for staying clear of even the appearance of impropriety when treading in the thornier areas of presidential campaign-related activities.

Be aware of who may and may not lawfully contribute directly to candidates (or committees) ("hard money" contributions) and what contribution limits apply. For example, corporate treasury funds may not be used to make contributions in connection with any federal election, including the presidential race. Contributions may be made only from monies raised by the corporation's political action committee (PAC) within applicable limits, discussed below. Of course, individual corporate executives and other employees may contribute from their own personal funds within applicable limits. But there are complex rules regarding when the individual activity of executives and employees from one company becomes so coordinated that it rises to the level of corporate "facilitation," which makes the individual activity a prohibited corporate contribution.
 
Recognize the distinction between the rules governing presidential candidates receiving public funding vs. those who have chosen to forgo public funding as George W. Bush did in the primary).

Candidates who are eligible for federal funds must meet certain eligibility requirements, including, most significantly, agreeing to specified spending limits. In the primaries, these candidates receive partial public funding in the form of matching payments: The government matches up to $250 of an individual's (but not a PAC's) total contributions to an eligible candidate. As a practical matter, what does this distinction mean for private contributors? Not much, because permissible private contributors may give to all primary candidates, regardless of their eligibility for matching payments. Individuals may give up to $1,000-multicandidate PACs up to $5,000-per primary candidate. Note that these limits apply to the entire primary process, rather than a single primary held in a particular state.
 
The distinction between federally funded candidates and others does matter in the general election, where federal funding takes the form of direct government grants. Contributions may be made only to-and accepted only by-the campaigns of candidates who have declined public financing. However, permissible contributors may still help federally funded candidates during the general election by making contributions of up to $1,000 for individuals, $5,000 for PACs, to the candidate's "compliance fund" (an account set up for paying legal and accounting expenses incurred to comply with campaign finance laws).

Keep careful track of "in kind" contributions. Contributions of goods and services also count toward applicable contribution limits. The contribution is valued at the "fair market value" to the candidate, not the cost to the contributor. The donor should notify the benefiting candidate of this amount, so it can be reported.
 
Carefully scrutinize requests for "soft money" donations and keep detailed records thereof. Much confusion arises out of the fact that corporations, which are supposed to be banned from making contributions in connection with federal elections, are permitted to contribute unlimited, but sometimes reportable, amounts in soft money contributions. Indeed, soft money was at the center of the 1996 fund-raising scandals and is the prime target of campaign finance reformers.

What is soft money? It is a term not defined anywhere in federal election laws or regulations. Essentially, soft money is defined by omission-it is a donation or disbursement that falls outside the purview of the federal election law's restrictions and requirements. As a practical matter, most often it refers to a corporate donation to a nonfederal account of a national party committee or its state or local counterpart. (Keep in mind that contributions to party committees to support federal candidates are considered hard money, but are subject to different limits than contributions made directly to candidates.)
 
Nonfederal accounts are used to support general activities such as get-out- the-vote and voter registration drives, as well as state candidates subject to relevant state laws. More recently, soft money has been increasingly used for issue advocacy ads, sparking a political firestorm.
 
The challenge for corporate counsel is to ensure that a soft money donation is just that-not an impermissible hard money contribution. One way to minimize the risk is to address contribution checks to the nonfederal account of the relevant party committee and to accompany each check with a memo notation or cover memo that states: "not to be used for federal election purposes." In addition, you should always inquire into the facts of any purported soft money event.

Note that another layer of requirements and restrictions will apply if you have overseas operations or your company is a U.S. subsidiary of a foreign company. This is because of the general ban on contributions from foreign nationals (i.e., foreign persons and entities other than green-card holders), which applies to state and local, as well as federal, electoral activity.
 
Issue and monitor a corporate policy on permissible volunteer campaign activity during work hours and on using corporate resources. Individuals may help presidential candidates and party committees by volunteering their personal services without running afoul of campaign finance laws. Therefore, you generally need not be concerned about the campaign activity your executives and employees undertake at home or during their free time. However, while FEC regulations allow a minimal amount of volunteer work to be performed on the job or using corporate resources, this is an area that has to be monitored closely because it is ripe for inadvertent violations of the law. A clear policy on this type of activity should be issued, and compliance officers (see below) should be assigned to make sure that employee conduct adheres to the policy.
 
Heed the right rules. The rules that apply to election-related communications with, and candidate appearances before, all employees and/or the general public are different from those that apply to a corporation's "restricted class" of employees. A company may wish to participate in the presidential campaign, for example, by sponsoring a candidate "meet and greet" or issuing a voter guide. The audience of that communication will determine the rules governing it. Most significantly, the restricted class-executive and administrative personnel, shareholders, and the families of both, may be the recipient of "express advocacy"-expressly advocating the defeat or election of a federal candidate- whereas such a communication may not be directed at others.
 
Carefully analyze any requests to sponsor or host convention-related activity. There are lawful opportunities for companies to become involved in convention-related activities, such as hosting receptions and hospitality suites and contributing to "host committees." But the applicable rules are narrowly circumscribed and may rely heavily on the existence of certain factual criteria, such as, in the case of host committee contributions, meeting the definition of a "local business" in the convention area.
 
Make independent expenditures only with PAC funds and make sure they are truly "independent" of any candidate or campaign. An independent expenditure is money spent for a communication that expressly advocates the election or defeat of a candidate. An expenditure is independent only if the one making it does not coordinate or consult in any way with the candidate's campaign. Corporations may not make independent expenditures, but PACs and individuals may. These are unlimited, although reporting requirements apply.
 
Set up internal controls to ensure compliance with the rules and make sure such standards and procedures are communicated to all employees. Ironically, many candidates look to the contributors themselves to ensure that the rules of the road are followed. So never assume that if a candidate's campaign requests a contribution, it's per se lawful. Don't be caught unprepared! It bears emphasis that we have only touched on some of the relevant federal rules in this area; the application of these rules is exceedingly fact- intensive. In addition, we have focused here only on the rules governing the presidential race, not those for congressional races, which, while similar, include some important distinctions, such as the lack of a public funding mechanism. It is therefore essential that corporate general counsel consult election law practitioners about specific contribution or expenditure requests. Note also that these tips have been geared toward corporations. The rules for partnerships, trade associations, and other organizations overlap somewhat with the rules described here, but they differ significantly enough to warrant separate discussion and treatment.

Sonia P. Fois is a partner and Leslie A. Nickel is an associate at D.C.'s Arnold & Porter, specializing in legislative advocacy, as well as election, lobbying, and government ethics compliance at both the federal and state levels. The authors would like to thank Michael Ruggiero for his assistance in preparing this article.