Candidates for political office raise money to fund their campaigns and to demonstrate the breadth of their support. Campaign finance laws—which dictate who can contribute to a campaign, how much they can contribute, and how those contributions must be reported—vary at the state and federal levels. In general, campaigns may raise funds from individuals, political party committees, and political action committees (PACs).
PACs vs. super PACs
Corporations, labor organizations, and membership groups cannot contribute directly to federal campaigns. However, they can influence federal elections by creating political action committees, better known as PACs. These committees solicit donations from members and associates in order to make campaign contributions or fund campaign activities, such as advertising. Funds raised and spent by PACs are subject to federal limits.
Like traditional PACs, super PACs, or independent expenditure-only political committees, raise money to influence federal elections through advertising and other efforts. Unlike traditional, PACs, super PACs cannot directly contribute to or coordinate with campaigns and candidates. However, donations to super PACs are not subject to federal limits.
Politicians can also create political action committees, called leadership PACs. Separate from a candidate's official campaign committee, leadership PACs are often used to contribute funds to political allies.
Some presidential campaigns are funded in part by taxpayers who choose to direct $3 to the Presidential Election Campaign Fund when they file their tax returns. To be eligible for these funds, candidates must agree to spending and fundraising restrictions. Notably, presidential nominees may receive public funds only if they agree not to use private donations. Many major-party candidates decline public funding in favor of private fundraising.
Impact of smaller donations
In the 2019–20 election cycle, U.S. presidential campaigns raised and spent $4.1 billion, according to Federal Election Commission (FEC) records. By contrast, presidential campaigns raised and spent $1.5 billion in the 2015–16 election cycle. A Caltech study published in Election Law Journal in 2020 shows that a sizable fraction of those funds may be grassroots contributions, gifts under $200 that campaigns typically do not need to disclose to the FEC. Campaigns for local and state offices typically involve much smaller total expenditures.
What federal laws govern political donations?
The primary legal guidance for political donations at the federal level is the Federal Election Campaign Act, initially passed by Congress in 1971. The act and its subsequent amendments set limits on campaign fundraising and spending, established disclosure requirements for campaign contributions, and created the FEC, the agency that enforces federal campaign finance law. The act also enabled corporations, labor unions, and membership and trade associations to create PACs.
U.S. Supreme Court rulings and other judicial decisions have also dramatically affected campaign finance regulations. For example, in Citizens United v. FEC (2010), the Supreme Court held that the First Amendment right to free speech prohibits the government from restricting independent expenditures for political communications by corporations, labor unions, and other associations.