Campaign Finance Laws: Definition and Examples

Campaign finance laws are laws that regulate the use and influence of money in U.S. federal elections. According to a 2018 Congressional Research Service report, federal campaign finance laws regulate how much money individuals or organizations may give to candidates or political parties and committees, as well as how donated money can be used. Campaign finance laws also require candidates, committees, party committees, and political action committees (PACs) to file periodic public reports to the Federal Election Committee (FEC) disclosing the amounts of money they raise and spend.

Campaign contributions are now recognized as a form of speech partly protected by the First Amendment.

History of Campaign Finance Laws

The undue influence of money in federal elections has been a controversial issue since the early days of the union. After the Civil War, political parties and candidates depended on wealthy individuals such as the Vanderbilts for financial support. In the absence of a regulated civil service system parties also depended on financial support from government employees, sometimes through mandatory deductions from their pay.

The first federal law dealing with campaign financing was part of an 1867 Navy appropriations bill which, in part, prohibited naval officers and federal employees from soliciting contributions from Navy shipyard workers. In 1883, the Pendleton Civil Service Reform Act of 1883 formalized the civil service and extended the protections of the 1867 bill to all federal civil service employees. However, this law merely increased the parties’ reliance on corporations and wealthy individuals for contributions.

The first federal law specifically regulating campaign financing, the Tillman Act of 1907, prohibited monetary contributions or expenditures to federal candidates by corporations and nationally chartered banks.

Emphasis for the Tillman Act grew from the 1904 presidential election when Democrats alleged that incumbent Republican president Theodore Roosevelt had received large sums of money from corporations in exchange for influence on his administration’s policies. Although Roosevelt denied the charge, a post-election investigation found that corporations had made huge contributions to the Republican campaign. In response, Roosevelt called on Congress to enact campaign finance reform. By 1906, Congress considered a bill introduced by Sen. Benjamin R. Tillman, a South Carolina Democrat, who declared that Americans viewed their elected representatives as “instrumentalities and agents of corporations.” President Roosevelt signed the Tillman Act into law in 1907.

Though the Tillman Act remains in effect today, its broad definition of “contribution or expenditure,” along with its weak enforcement provisions, allowed businesses and corporations to take advantage of loopholes in the law. In the years since the enactment of the Tillman Act, campaign finance has remained a source of contention in American politics.

During the 1980s and 1990s, several campaign finance bills were killed in the U.S. Senate after bipartisan maneuvers prevented the bills from coming up for a vote. Today, the Federal Election Campaign Act (FECA) of 1971, the McCain–Feingold Bipartisan Campaign Reform Act (BCRA) of 2002 form the foundation of federal campaign finance law.

Federal Election Commission

Created in 1974 through an amendment to the Federal Election Campaign Act of 1971, the Federal Election Commission (FEC) is an independent federal regulatory agency responsible for enforcing campaign finance laws in United States federal elections.

The FEC is headed by six Commissioners who are appointed to staggered six-year terms by the President of the United States and confirmed by the Senate. By law, no more than three Commissioners can represent the same political party, and at least four votes are required for any official Commission action. This structure was created to encourage nonpartisan decisions.

The FEC’s primary duties include:

• Enforcing prohibitions and limitations on campaign contributions and expenditures.
• Investigating and prosecuting violations of campaign finance laws—typically reported by other candidates, political parties, watchdog groups, and the public.
• Maintaining the campaign finance disclosure reporting system.
• Auditing some campaigns and their organizing committees for compliance.
• Administering the presidential public funding program for presidential candidates.

The FEC also publishes reports—filed in Congress—showing much money each campaign raised and spent in each federal election, as well as a list of all donors of over $200, along with each donor’s home address, employer, and job title. While this data is publicly available, party and candidate organizations are legally prohibited from using the information to solicit new individual donors.

To help prevent campaign finance violations, the FEC conducts an ongoing public education program, primarily directed at explaining the laws to the public, candidates and their campaign committees, political parties, and other political committees, such as PACs, that it regulates.

However, there are limitations to the FEC’s effectiveness. Even though the FEC commissioners’ enforcement rulings rarely divide evenly along party lines, critics have argued that its congressionally mandated bipartisan structure often tends to render it “toothless.” Critics of the FEC have accused the agency of serving the political concerns of those it is intended to regulate instead of acting in the public interest—a phenomenon known as “regulatory capture.”

Finally, most FEC penalties for violations of campaign finance laws come long after the election in which they were committed. The time required to resolve a complaint, including time to investigate and engage in legal analysis, time for defendants to respond to the complaint, and finally, when necessary, prosecute, simply takes far longer than the comparatively brief period of even presidential political campaigns.

Court Cases

Since the 1970s, a series of U.S. Supreme Court decisions have significantly impacted the effectiveness of federal campaign finance laws.

Buckley

In its 1976 decision in the case of Buckley v. Valeo, the Supreme Court ruled that several key provisions of the Federal Election Campaign Act placing limits on campaign contributions and spending were unconstitutional violations of free speech. Perhaps the most impactful aspect of the Buckley ruling was how it establishes a connection between campaign donations and expenditures to Freedom of Speech under the First Amendment of the U.S. Constitution.

Buckley v. Valeo laid the groundwork for future Supreme Court cases regarding campaign finances. Several decades later, the Court cited Buckley in another landmark campaign finance decision, Citizens United v. Federal Election Commission.

Citizens United

In its landmark 2010 decision in the case of Citizens United v. Federal Election Commission, the U.S. Supreme Court ruled that a provision of the law prohibiting corporations from contributing to campaigns using money from their general treasuries violating the First Amendment’s freedom of speech. In granting corporations the same free speech rights as private individuals, the Citizens United ruling blocks the federal government from limiting the efforts of corporations, unions, or associations in spending money to influence the outcome of elections. In doing so, the ruling led to the creation of super PACs and, according to critics, ushered in an era in which vast sums of money could potentially decide the outcome of elections.

In writing the Supreme Court’s narrow 5-4 majority opinion, Justice Anthony M. Kennedy wrote that “Governments are often hostile to speech, but under our law and our tradition it seems stranger than fiction for our Government to make this political speech a crime.”

Criticizing the ruling, the four dissenting justices described the majority opinion as a “rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self-government since the founding, and who have fought against the distinctive corrupting potential of corporate electioneering since the days of Theodore Roosevelt.”

McCutcheon

On April 2, 2014, the Supreme Court issued a ruling in McCutcheon v. FEC that struck down a provision of the Bipartisan Campaign Reform Act (BCRA), which imposed aggregate limits on the amount of money an individual may contribute during a two-year election cycle period to all federal candidates, parties and PACs combined. By a vote of 5-4, the Court ruled that the biennial aggregate limits are unconstitutional under the First Amendment.

While the McCutcheon ruling overturned limits on aggregate federal campaign contributions, it did not affect limits on how much individuals can give to an individual politician’s campaign.

The majority held that the aggregate contribution limit did little to address the concerns that the Bipartisan Campaign Reform Act was meant to address and at the same time limited participation in the democratic process.

In the Court’s majority opinion, Chief Justice John Roberts wrote that “The government may no more restrict how many candidates or causes a donor may support than it may tell a newspaper how many candidates it may endorse.”

The four dissenting justices wrote that the decision “… creates a loophole that will allow a single individual to contribute millions of dollars to a political party or a candidate's campaign. Taken together with Citizens United v. FEC, today’s decision eviscerates our nation's campaign finance laws, leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve.”

Significant Issues

Federal campaign finance law is composed of a complex set of limits, restrictions, and requirements on money and other things of value that are spent or contributed in federal elections. As with any set of such complex laws, loopholes and unintended exceptions abound. Despite the best efforts of lawmakers and federal regulators, issues with campaign finance law remain.

PACs and Satellite Spending

Groups or individuals that are not directly affiliated with or controlled by a candidate or a candidate’s campaign, including political party committees, super PACs, interest groups, trade associations, and nonprofit groups, are free to engage in a practice known as “satellite spending” or “independent spending.” Under current federal campaign finance law, such apparently non-affiliated groups can spend unlimited sums of money on political activities.

Satellite campaign spending exploded after the Supreme Court ruled that for-profit and nonprofit corporations and unions cannot be prohibited from making independent expenditures in elections. According to the Center for Responsive Politics, satellite campaign spending increased by roughly 125% between 2008 and 2012.

Nondisclosure Dark Money

Because certain nonprofit organizations, such as social welfare groups, unions, and trade associations, are not required to disclose information about their donors, their campaign spending is sometimes referred to as “dark money.” Especially since the Supreme Court’s Citizen United v. FEC in 2010, dark money has become a controversial issue.

Critics of dark money that it lacks transparency and serves special interest groups, thus further contributing to corruption in politics. Proponents of dark money campaign spending contend, that as the Supreme Court has affirmed, it is a protected form of free political expression and that additional donor disclosure requirements might discourage political participation.

According to the Center for Responsive Politics, political spending by organizations that are not required to disclose their donors amounted to approximately $5.8 million in 2004. However, after the Supreme Court's 2010 ruling in Citizens United v. FEC, dark money contributions increased substantially. In 2012, for example, organizations that were not required to disclose their donors spent approximately $308.7 million on political activities.

Sources

• Garrett, Sam R. “Campaign Finance: Key Policy and Constitutional Issues. Congressional Research Service,  December 3, 2018, https://www.everycrsreport.com/files/2018-12-03_IF11034_1441e0cf56bffb59ace1329863576aac13516723.pdf.
• “The Money Behind the Elections.” Center for Responsive Politics, https://web.archive.org/web/20160307122029/http://www.opensecrets.org/bigpicture/index.php.
• Levine, Carrie. “Soft Money Is Back—And Both Parties Are Cashing In.” Politico, August 04, 2017, https://www.politico.com/magazine/story/2017/08/04/soft-money-is-backand-both-parties-are-cashing-in-215456/.
• Wihbey, John. “State of campaign finance policy: Recent developments and issues for Congress.” The Journalist's Resource, October 3, 2011, https://journalistsresource.org/politics-and-government/campaign-finance-policy-recent-developments/.
• Maguire, Robert. “How 2014 Is Shaping Up to be the Darkest Money Election to Date.” Center for Responsive Politics, April 30, 2014, https://www.opensecrets.org/news/2014/04/how-2014-is-shaping-up-to-be-the-darkest-money-election-to-date/.
• Briffault, Richard. “Updating Disclosure for the New Era of Independent Spending.” Columbia Law School, 2012, https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=2741&context=faculty_scholarship.