Campaign Finance: Key Policy and Constitutional Issues

Campaign Finance: Key Policy and Constitutional Issues

Updated December 3, 2018
Campaign Finance: Key Policy and Constitutional Issues
Campaign Finance Policy: The Basics
Limits on Contributions and Expenditures
For more than a century, Congress has attempted to limit
In its landmark 1976 ruling, Buckley v. Valeo, the Supreme
potential corruption and ensure transparency in campaigns
Court established the framework for evaluating the
through two major approaches: (1) limiting sources and
constitutionality of campaign finance regulation. According
amounts of financial contributions and (2) requiring
to the Court, limits on campaign contributions, which
disclosure about contributions and expenditures. Two major
involve giving money to an entity, and expenditures, which
federal statutes, enacted a generation apart, establish most
involve spending money directly for electoral advocacy,
of modern campaign finance policy. The Federal Election
implicate rights of political expression and association
Campaign Act (FECA), first enacted in 1971 and
under the First Amendment. The Court, however, held that
substantially amended in 1974, 1976, and 1979, is the
contribution limits are subject to a more lenient standard of
nation’s primary campaign finance statute. FECA and its
review than expenditures because they impose only a
1970s amendments established or updated longstanding
marginal restriction on speech, and they will be upheld if
provisions about which entities and practices campaign
the government can demonstrate that they are a “closely
finance law regulates. In 2002, Congress amended FECA
drawn” means of achieving a “sufficiently important”
by enacting the Bipartisan Campaign Reform Act (BCRA)
governmental interest. In contrast, the Court held that
to address money and activities that were widely perceived
because they impose a substantial restraint on speech and
to affect elections, but were not then regulated by campaign
association, expenditure limits are subject to strict scrutiny,
finance law.
requiring that they be narrowly tailored to serve a
compelling governmental interest.
FECA limits the amount of money that individuals, parties,
and political action committees (PACs) can contribute to
Significantly for Congress if it considers legislation, the
campaigns, parties, or PACs. In 2018, individuals could
Court’s recent case law has announced that only quid pro
contribute up to $2,700 per candidate, per election (for a
quo candidate corruption or its appearance constitute a
total of $5,400 for the primary and general elections). PACs
sufficiently important governmental interest to justify limits
can contribute up to $5,000 per candidate, per election.
on contributions and expenditures. (Quid pro quo
Except for super PACs, political committees may not
corruption involves an exchange of money or something of
accept contributions above the limits set in FECA. FECA
value for an official act.) In addition, the Court has rejected
also requires disclosure about certain campaign fundraising
government interests in lessening influence over or access
and spending, and it established the Federal Election
to elected officials, decreasing the costs of campaigns, and
Commission (FEC) to administer the act. BCRA banned
equalizing financial resources among candidates. Therefore,
previously unregulated or soft money in federal elections
with some exceptions, courts have generally upheld limits
and established a new political advertising concept known
on contributions, concluding that they serve the
as electioneering communications to regulate money spent
governmental interest of protecting elections from
on certain communications that refer to clearly identified
corruption, and invalidated limits on independent
federal candidates during pre-election periods.
expenditures, concluding that they do not pose a risk of
corruption.
FECA prohibits corporations and unions from using their
treasury funds to make contributions. The act also bars
Limits on Corporate and Labor Union Spending
contributions from national banks, government contractors,
In a 2010 ruling, Citizens United v. FEC, the Supreme
and foreign nationals. Despite the prohibition on treasury-
Court invalidated two prohibitions on corporations and
fund contributions, corporations and unions may form
unions using their treasury funds for independent electoral
affiliated, but legally, distinct PACs to make contributions.
spending: the longstanding ban on independent
Those contributions must come from voluntary donations;
expenditures and the 2002 ban on electioneering
the corporation cannot simply route its treasury funds
communications. As a result, corporations and labor unions
through a PAC.
are not required to establish a PAC for such spending.
According to the Court, independent electoral spending is
Constitutional Considerations for
protected speech—regardless of whether the speaker is a
Legislation
corporation—and merely permitting a corporation to
Several federal court rulings have had a significant impact
engage in such speech through a PAC does not allow the
on the regulatory scope of FECA and inform the
corporation to speak directly nor does it alleviate the First
constitutional bounds of campaign finance regulation. Such
Amendment burden created by such limits.
pivotal rulings may be instructive should Congress consider
policy options to amend FECA.
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Campaign Finance: Key Policy and Constitutional Issues
Prohibition on Foreign Nationals
are required to do so if they make electioneering
In 2012, the Supreme Court summarily affirmed a three-
communications or independent expenditures. These groups
judge federal district court panel ruling that upheld the
may not contribute to campaigns or parties, as shown in
constitutionality of the FECA prohibition on foreign
Figure 1. Particularly since Citizens United, much of the
nationals making contributions and independent
policy debate in Congress has focused on whether or how to
expenditures. In Bluman v. FEC, the three-judge court held
regulate activities or organizations, like 501(c)s, that can
that under the First Amendment, the United States has a
affect the campaign environment, but are not regulated
compelling interest in limiting foreign citizen participation
under campaign finance law.
in American democratic self-government, thereby
preventing foreign influence in the political process.
Figure 1. Major Entities in the Campaign Environment
However, the court interpreted the ban on independent
expenditures to apply only to foreign nationals engaging in
express advocacy or its functional equivalent, and not issue
advocacy. This case seems to suggest that legislation to
enhance the current ban on foreign nationals donating or
spending money, so long as its scope is limited to the
regulation of express advocacy or its functional equivalent,
might withstand a First Amendment challenge if Congress
could demonstrate that the restriction furthered the
governmental interest in preventing foreign influence over
U.S. elections.
Requirements for Disclosure
In Buckley and more recently, the Supreme Court has
generally upheld the constitutionality of campaign finance
disclosure requirements. According to the Court, disclosure
provides the electorate with information; serves to deter
corruption or its appearance; and is an essential method of
detecting violations for the purposes of law enforcement.
Policy Issues
The constitutional framework described above has shaped
longstanding and recent policy debates facing Congress.
Most issues concern which entities are receiving or
spending money, and how or whether they are regulated by
campaign finance law. Different groups face different
regulation, particularly concerning contributions and

disclosure requirements.
Source: CRS figure.
Note: Political committees are regulated by IRC §527 for tax
FECA primarily regulates political committees, which are
purposes.
candidate campaign committees, party committees, and
PACs, that receive contributions or make expenditures
Recent Policy Debate
aggregating in excess of $1,000 during a calendar year, and
Recent Congresses have generally been divided about how
whose major purpose is to elect federal candidates to office.
or whether to amend campaign finance law in response to
All political committees regularly must file disclosure
emerging policy challenges; developments in campaign
reports with the FEC. These reports summarize total
practice; and amid judicial and agency decisions. Major
receipts and expenditures. Donors who give more than $200
topics of debate include, for example,
are also identified, as is the purpose of disbursements of
more than $200. In some cases, corporations, unions, or
 donor disclosure, particular for 501(c)s and super PACs;
other groups that are not political committees, but which
engage in certain political advertising, must also file
 regulation of foreign money in U.S. elections;
disclosure reports. The FEC is responsible for providing
 regulation of online political advertising;
public access to campaign finance reports.
 public financing of congressional campaigns or updating
In some cases, non-political committees may also attempt to
the presidential public financing program;
influence campaigns, even though they are not primarily

regulated by FECA. Recent attention has focused on groups
personal use of campaign funds;
organized under §501(c)(4) of the Internal Revenue Code as
 contribution limit and disclosure threshold increases;
social welfare groups. Similar provisions apply to
and
§501(c)(5) unions and §501(c)(6) trade associations. To
maintain their tax-exempt status, these groups may not
 oversight of the Federal Election Commission.
primarily engage in electioneering. As non-political
committees, 501(c)s generally do not report to the FEC, but
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Campaign Finance: Key Policy and Constitutional Issues

L. Paige Whitaker, Legislative Attorney
IF11034
R. Sam Garrett, Specialist in American National
Government

Disclaimer
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