Campaign Contributions and the Basics of Campaign Finance Law

October 24, 2013
Harter Secrest & Emery LLP

Each fall, elected officials run for once, and their election campaigns can be expensive. Many candidates seek campaign contributions to help pay for their campaigns. However, numerous campaign ­finance rules govern how individuals and corporate entities can contribute to political campaigns. These rules can be complex, and the law sets forth harsh penalties for violating them. Moreover, political contributions can implicate areas of law other than standard election law. For instance, many not-for-profi­t entities would endanger their status under the tax code by making direct political contributions.

Recent events in New York underscore the importance of compliance. Governor Cuomo created a Moreland Act Commission to investigate corruption in New York politics, and the Commission immediately targeted campaign ­finance records. Moreover, the state Board of Elections has stepped up enforcement of all manner of campaign ­finance regulations. Just recently, it took the drastic step of freezing the bank account of a political committee that failed to correct erroneous reports.

Some businesses respond to these strict rules by refusing to contribute to political campaigns. However, many businesses that are well integrated in their local communities may see some bene­fit to supporting popular local candidates and participating in widely attended political events. These businesses must understand the basics of campaign ­finance law.


The law places limitations on the amounts that businesses or individuals can give and on the amounts that campaigns can receive. You must keep track of both amounts. For example, the law may permit your company to make $5,000 in campaign contributions during the course of the year. However, a candidate for State Assembly can only accept $4,100 from any single individual or entity during a two-year election cycle.

The campaign may technically be responsible for turning away contributions that exceed the applicable limits. However, your business should not rely upon campaign volunteers to recognize and address inappropriate contributions. The Board of Elections will likely contact your company and require it to correct the violation by requesting a refund of the contribution from the campaign. Even if the Board of Elections does not address the problem, contribution information is available to the public, and it can be embarrassing to your company if it is discovered that contribution limits have not been heeded.


The contribution rules differ at various levels of government. At the federal level, only individuals, partnerships, and Political Action Committees can make campaign contributions. The law forbids corporate entities (including PCs and LLCs) from contributing. Moreover, a campaign cannot receive more than $2,600 from any one source during an election cycle (although certain kinds of Political Action Committees can give more). In addition, the Federal Election Commission requires disclosure regarding intermediaries: individuals who do not contribute, but who gather contributions from other people.

At the state level, LLCs and PCs can contribute to campaigns as individuals, while corporations can contribute a total of $5,000 per year to all state and local campaigns cumulatively. The contribution limits on what a candidate for State of­fice can accept in an election cycle vary significantly by offi­ce. For example, the Governor can accept up to $41,100 from a single contributor; a candidate for State Senate can accept up to $10,300 from a single contributor; and a candidate for State Assembly can accept up to $4,100 from a single contributor.


Contributions do not simply include checks written to a political campaign. The law broadly de­fines contributions to include so called “in-kind” contributions: things of value given to a campaign for any reason. For example, a candidate might ask your business to donate a product that it sells to be auctioned off at a dinner. The full value of that product must be accounted for as a contribution to that candidate’s campaign. A candidate might ask to use an empty portion of your warehouse to store campaign signs or other materials. The value of that storage space must be accounted for as a contribution to that candidate’s campaign.

Potentially severe consequences can arise when businesses treat political contributions as marketing expenses. For instance, a sales representative could attend a fundraising event for a popular congressional candidate. The sales representative wants to attend the event to meet with other business representatives that he knows will also attend. The sales representative writes a personal check at the event and then seeks reimbursement from your company for a marketing expense. It would be a crime for your company to cut that check, as you would be circumventing the prohibition on corporate contributions in federal races. It would also be a crime because there is a direct prohibition on reimbursing anyone for a political contribution whether at the federal, state or local level.


This LEGALcurrents® provides a framework to understand some of the basic principles of campaign finance law, and by no means should be relied upon to provide guidance regarding the entire scope of regulations applicable to campaign ­finance. If your company regularly contributes to political campaigns, we recommend that you implement a robust policy regarding contributions. Moreover, your company may wish to exercise more control by forming a Political Action Committee to handle all such matters. If you have any concerns about any of the issues raised in this LEGALcurrents®, please contact any member of our Government Affairs or Government and Internal Investigations practice groups at (585) 232-6500.

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