The big story for the 2012 elections has been the rise of super PACs, or, independent expenditure committees. How did we get super PACs, what do they do, what can they do and what are the legal restrictions on them?

The legal underpinnings

There are two underlying issues involved in super PACs:

1. The use of corporate funds for independent expenditures
2. The fundraising restrictions imposed on political committees

Corporate independent expenditure:Since Buckley v. Valeo in 1976, the Supreme Court has recognized that there is a difference between a contribution given to a candidate and a person's own expenditures supporting a candidate. The former receives less protection under the First Amendment and may be limited; the latter may not be limited because it is direct speech by an individual. Even with these First Amendment protections, the Federal Election Campaign Act (FECA) prohibits corporations from making independent expenditures.

Under the Supreme Court's jurisprudence, the only justification for campaign finance regulation is preventing corruption or the appearance of corruption. In Citizens United, the Supreme Court categorically held that independent expenditures cannot corrupt a candidate because they are made independently of the candidate. Therefore, the court struck down the ban on corporate independent expenditures.

Political committees:The Federal Election Commission (FEC) has taken a broad view of the definition of “political committee.” Therefore, even when making independent expenditures, individuals could not band together to pay for them because they would be considered a political committee. A political committee is subject to contribution limits of $5,000 per year. Thus, one person could spend an unlimited amount on independent expenditures, and so could a second person. If, however, they pooled their resources and worked together, they would be considered a political committee and the amount they could each contribute to the effort would be limited.

Following Citizens United, in SpeechNow.org v. FEC, the D. C. Circuit held that a political committee that just makes independent expenditures (and not contributions) may not be subject to the $5,000 contribution limit. In Advisory Opinion 2010-11, the FEC recognized that with Citizens United and SpeechNow.org, it could not limit the contributions given to independent expenditure committees and the super PAC was born.

What is a super PAC and how does it work?

A super PAC is a political committee registered with the FEC. As such, it must file periodic reports disclosing its donors and its expenditures. It may accept unlimited contributions from individuals, labor unions and corporations.

Disclosure:Because a super PAC may accept corporate contributions, it may accept those contributions from non-profit organizations, such as a 501(c)(6) trade association or a 501(c)(4) social welfare organization. The non-profit is disclosed as the contributor to the super PAC. Therefore, there is some concern that donors that do not wish to be disclosed—whether they are corporations or individuals—may give to non-profits, which then give to the super PAC. There are limits on how much of a non-profit's resources may be used for campaign activity, such as contributing to a super PAC.

Independent expenditures:A super PAC may spend its funds on independent expenditures. This is any kind of communication that expressly advocates the election or defeat of a clearly identified candidate for federal office (there are also state super PACs, which register with state elections agencies and support state or local candidates). Such communications may include television and radio advertisements, email, websites, social media, direct mail and telephone calls. Depending on the mode of communication, the message will require a disclaimer stating the name and website (or address) of the organization and a statement that it is not authorized by any candidate.

When a super PAC makes independent expenditures to support or oppose a candidate, it must file reports with the FEC disclosing the expenditures. Depending on how far before the election the communications are made, the reports are filed either 24 or 48 hours after the communications are publicly disseminated.

No coordination: The key to a super PAC is that it must conduct its activities independently from the candidates it supports. Thus, it may not make “coordinated communications.” The FEC has struggled with this definition over the years. In general, a communication is considered to be coordinated if:

• The communication is made at the request or suggestion of the candidate or his agent
• The candidate or her agent assents to a suggestion by the super PAC for a communication
• The candidate or his agent is materially involved with decisions concerning the content, audience, means, frequency, media outlet or similar information
• There is substantial discussion about the candidate's plans, projects, activities or needs

In addition, communications are considered to be coordinated if vendors or employees of the campaign use material, non-public information about the campaign to produce a communication within 120 days. That is, there is generally a four-month cooling off period when employees or vendors move from the campaign to a super PAC (although it is certainly possible that a vendor or employee has no material non-public information, particularly if the campaign releases information to the media).

Thus, there are many different types of activities—particularly when information is publicly available—that are permitted without running afoul of the coordination regulations.

Fundraising: Candidates are allowed to raise money for super PACs. However, they may not ask for more than $2,500 per election. Thus, if a candidate is involved in fundraising, he or she will usually ask for contributions without an amount and representatives of the super PAC will ask for amounts over $2,500.

Conclusion

To date, there have not been many contributions to super PACs from publicly traded companies and some have adopted policies against giving to super PACs. There have been contributions from 501(c)(4)s and 501(c)(6)s, so some of the money may have gone through those organizations. There have been direct contributions by privately held companies, but most of the contributions have been from individuals.

The big story for the 2012 elections has been the rise of super PACs, or, independent expenditure committees. How did we get super PACs, what do they do, what can they do and what are the legal restrictions on them?

The legal underpinnings

There are two underlying issues involved in super PACs:

1. The use of corporate funds for independent expenditures
2. The fundraising restrictions imposed on political committees

Corporate independent expenditure:Since Buckley v. Valeo in 1976, the Supreme Court has recognized that there is a difference between a contribution given to a candidate and a person's own expenditures supporting a candidate. The former receives less protection under the First Amendment and may be limited; the latter may not be limited because it is direct speech by an individual. Even with these First Amendment protections, the Federal Election Campaign Act (FECA) prohibits corporations from making independent expenditures.

Under the Supreme Court's jurisprudence, the only justification for campaign finance regulation is preventing corruption or the appearance of corruption. In Citizens United, the Supreme Court categorically held that independent expenditures cannot corrupt a candidate because they are made independently of the candidate. Therefore, the court struck down the ban on corporate independent expenditures.

Political committees:The Federal Election Commission (FEC) has taken a broad view of the definition of “political committee.” Therefore, even when making independent expenditures, individuals could not band together to pay for them because they would be considered a political committee. A political committee is subject to contribution limits of $5,000 per year. Thus, one person could spend an unlimited amount on independent expenditures, and so could a second person. If, however, they pooled their resources and worked together, they would be considered a political committee and the amount they could each contribute to the effort would be limited.

Following Citizens United, in SpeechNow.org v. FEC, the D. C. Circuit held that a political committee that just makes independent expenditures (and not contributions) may not be subject to the $5,000 contribution limit. In Advisory Opinion 2010-11, the FEC recognized that with Citizens United and SpeechNow.org, it could not limit the contributions given to independent expenditure committees and the super PAC was born.

What is a super PAC and how does it work?

A super PAC is a political committee registered with the FEC. As such, it must file periodic reports disclosing its donors and its expenditures. It may accept unlimited contributions from individuals, labor unions and corporations.

Disclosure:Because a super PAC may accept corporate contributions, it may accept those contributions from non-profit organizations, such as a 501(c)(6) trade association or a 501(c)(4) social welfare organization. The non-profit is disclosed as the contributor to the super PAC. Therefore, there is some concern that donors that do not wish to be disclosed—whether they are corporations or individuals—may give to non-profits, which then give to the super PAC. There are limits on how much of a non-profit's resources may be used for campaign activity, such as contributing to a super PAC.

Independent expenditures:A super PAC may spend its funds on independent expenditures. This is any kind of communication that expressly advocates the election or defeat of a clearly identified candidate for federal office (there are also state super PACs, which register with state elections agencies and support state or local candidates). Such communications may include television and radio advertisements, email, websites, social media, direct mail and telephone calls. Depending on the mode of communication, the message will require a disclaimer stating the name and website (or address) of the organization and a statement that it is not authorized by any candidate.

When a super PAC makes independent expenditures to support or oppose a candidate, it must file reports with the FEC disclosing the expenditures. Depending on how far before the election the communications are made, the reports are filed either 24 or 48 hours after the communications are publicly disseminated.

No coordination: The key to a super PAC is that it must conduct its activities independently from the candidates it supports. Thus, it may not make “coordinated communications.” The FEC has struggled with this definition over the years. In general, a communication is considered to be coordinated if:

• The communication is made at the request or suggestion of the candidate or his agent
• The candidate or her agent assents to a suggestion by the super PAC for a communication
• The candidate or his agent is materially involved with decisions concerning the content, audience, means, frequency, media outlet or similar information
• There is substantial discussion about the candidate's plans, projects, activities or needs

In addition, communications are considered to be coordinated if vendors or employees of the campaign use material, non-public information about the campaign to produce a communication within 120 days. That is, there is generally a four-month cooling off period when employees or vendors move from the campaign to a super PAC (although it is certainly possible that a vendor or employee has no material non-public information, particularly if the campaign releases information to the media).

Thus, there are many different types of activities—particularly when information is publicly available—that are permitted without running afoul of the coordination regulations.

Fundraising: Candidates are allowed to raise money for super PACs. However, they may not ask for more than $2,500 per election. Thus, if a candidate is involved in fundraising, he or she will usually ask for contributions without an amount and representatives of the super PAC will ask for amounts over $2,500.

Conclusion

To date, there have not been many contributions to super PACs from publicly traded companies and some have adopted policies against giving to super PACs. There have been contributions from 501(c)(4)s and 501(c)(6)s, so some of the money may have gone through those organizations. There have been direct contributions by privately held companies, but most of the contributions have been from individuals.