Consultants have, until recently, described the post-Citizens United regulatory climate as the “Wild West” of campaign finance. But that hyperbole has died down with the two-year prison sentence given to a GOP operative for illegal Super PAC coordination and the FEC’s lawsuit against a Utah businessman for making what it called $170,000 in illegal campaign contributions.
Now, it appears the feds have a growing appetite for enforcement.
Consultants and candidates should know that even Super PACs have tons of rules and regulations. If you’re not diligent in the execution of compliance, you may quickly find yourself in legal trouble.
Super PACs must be properly firewalled from hard money regulated entities, which include campaign committees, PACs and parties. The expenditures that Super PACs disseminate must be independent, the law states. They cannot be made “in cooperation, consultation, or concert with, or at the request or suggestion of, any candidate, or his or her authorized committees or agents, or a political party committee or its agents.”
It’s important that Super PACs and their compliance firms create and maintain the proper firewalls and speak with an experienced election law attorney. Generally speaking, the firewall must prevent the flow of staff, information, and strategy from the Super PAC to the hard money entity and vice versa. Common vendors of the Super PACs and the hard money entities must create and maintain the proper firewalls within their operations. Moreover, language regarding the proper firewalls should be spelled out in all service agreements with vendors.
Keep in mind that Super PACs cannot contribute to candidate committees, PACs, or parties. The reason is that Super PACs can accept money from sources and amounts that are normally prohibited to those other entities. In particular, Super PACs can accept money in unlimited amounts from corporations and labor unions. Because of these normally prohibited and excessive contributions, Super PACs cannot contribute to hard money entities.
Second, even though federal Super PACs can accept unlimited contributions from a wider pool of contributors, there’s still a level of transparency with Super PACs. The public can get a general sense of the Super PAC’s activity from its FEC report. In fact, Super PACs are subject to file special Independent Expenditure (IE) reports.
During any time during a calendar year, if a Super PAC makes independent expenditures that aggregate $10,000 or more per election/per office for a calendar year, a special report needs to be filed within 48 hours. During the 20 days before an election, the frequency increases and the threshold is lowered to $1,000 or more per election/per office for a calendar year within 24 hours. Both kinds of reports must be reported within 48 or 24 hours of when the IE is disseminated.
Communication between Super PAC staff and its Treasurer becomes crucial, since a communication may be disseminated before or after it is invoiced or paid.
The pace of reporting needs to match the pace of decisions. Missing a 24 or 48 hour report could cause FEC problems for any Super PAC that’s not mindful of its reporting responsibilities.
With that in mind, it’s important for committees to create proper structures and process from the outset. Always be sure to check with an attorney and a compliance expert before creating a Super-PAC – and happy hunting in the new not so Wild West of campaign finance law.
Brad Crate is the founder and president of Red Curve Solutions.