A Campaign Finance Primer for Corporations

June 29, 1998 Published Work


[Reprinted with permission from The Connecticut Law Tribune v. 24, no. 27 June 29, 1998]

Corporation Law

You are in-house counsel at a major Connecticut corporation. Your neighbor, who is running for state Senate, asks your help in organizing a fund-raiser. Separately, an incumbent U.S. senator asks to speak to your employees. Meanwhile, your secretary asks for a leave of absence for her brother, a state representative. What do you do? You know corporations cannot give political contributions, but what constitutes a "contribution"? What activity is allowed? What should you tell employees!

Contributions

Under federal and Connecticut law, no corporate money or resources may be used to promote the election or defeat of any candidate. A contribution includes any direct or indirect payment, loan, advance or gift of money, services or anything of value. A contribution can be monetary or nonmonetary ("in-kind"). Inkind contributions include goods or services provided to benefit a campaign, such as the use of office space, equipment and materials.

The ban on corporate contributions would, therefore, prohibit you from using corporate funds to contribute to your neighbor's campaign and would prohibit your secretary from using office phones, computers or materials to help her brother get elected.

Certain corporate communications are protected under both federal and state law and are exempt from the definition of contribution. A corporation may freely communicate about campaigns with its restricted class, which includes its stockholders and executive and administrative personnel and their families. Such communications may

  1. expressly advocate the election of a particular candidate;
  2. solicit contributions on behalf of a candidate; and
  3. be coordinated with the candidate's campaign.

For example, a corporation may allow a candidate to address its restricted class at a meeting or other corporate function. At such a function, corporate representatives may express support for the candidate and may urge members of the restricted class to contribute to his or her campaign, but they may not collect contributions. Rather, the candidate or a member of his or her staff may collect the contributions before, during or after the meeting.

Any communication beyond the restricted class that expressly advocates the election or defeat of a particular candidate or solicits contributions on behalf of a candidate is an illegal corporate contribution. Under federal law, however, a corporation may allow a candidate to "meet and greet" employees. The candidate, but not the corporation, may advocate his or her own election and request contributions but may not accept contributions from employees on the premises. Instead, the candidate can leave envelopes for employees to use to return contributions to the campaign. Although Connecticut law does not specifically address candidate appearances, the State Elections Enforcement Commission will generally look to federal law for guidance in this area.

Pursuant to these rules, you could help your neighbor by sending a letter to all members of your company's restricted class urging support for his candidacy and by requesting that members of the restricted class attend his upcoming fund-raiser. You could also allow the U.S. senator to address all of your employees, as long as no corporate representatives engage in express advocacy or solicit contributions.

Employee Activity

Individuals are free to volunteer their time in support of federal and state candidates. Because of the ban on corporate contributions, however, corporate resources may not be used to subsidize these individual activities. Under federal law, employees may make occasional, isolated or incidental use of corporate facilities for campaign purposes. Activity that does not exceed one hour a week or four hours a month is presumed to be "occasional, isolated or incidental." Activity that prevents an employee from completing his or her workload is not considered "occasional, isolated or incidental."

Employees may use regular, earned vacation or personal days to work on a campaign but may not be given paid leaves of absence. The value of an employee's salary would be considered an illegal corporate contribution.

An employee may not use corporate resources (paper, envelopes, copying machines and computers) for campaign related activity unless the corporation is paid for such services by a person or entity legally authorized to make a campaign contribution, such as a political action committee. Corporate meeting rooms can be made available to a campaign only on terms equal to those offered other civic or community organizations.

Based on these principles, your secretary and all employees should be cautioned not to use corporate resources or facilities for campaign-related activity and not to solicit contributions from fellow employees on corporate property.

Political Action Committees

A corporation may form a political action committee, or PAC, to contribute to campaigns. A corporation that intends to contribute to both federal and state elections must form two PACs. The PACs must have separate bank accounts and maintain separate records but may have the same officers. Under federal law, a corporate PAC generally is limited to soliciting contributions to the PAC from members of its restricted class. In Connecticut, a corporate PAC may solicit contributions from any individual, including nonexecutive or, administrative employees and nonemployees. All contributions to the PAC must be voluntary, and the corporation may not reimburse employees for their contributions to the PAC.

If you and your colleagues wish to host a fund-raiser for a particular candidate who has supported your business, certain rules apply. If your company has a PAC, the PAC may pay for the invitations, food, beverages, meeting hall and other items necessary to sponsor the event. These expenses count toward the PAC's contribution limit and must be reported. If your company does not have a PAC, you and your colleagues must pay for the fundraiser. These expenses count toward your individual contribution limits. Both federal and state law have certain exceptions for individually sponsored fund-raisers. For example, under federal law, an individual may host a fund-raiser in his or her home, and the cost of invitations, food and beverages voluntarily provided by the individual up to a value of $1,000 will not count as a "contribution." A husband and wife hosting a fund-raiser in their home could personally pay up to $2,000 in food and other related expenses without counting such expenses against their individual contribution limits. Under Connecticut law, an individual may also host a fund-raiser in his or her home but may spend only $200 on invitations, food and beverages. Anything over that amount would count as an "in-kind" contribution.

Contribution Limits

A "multi-candidate" federal PAC may give up to $5,000 per election to candidates for federal office. To qualify as a multi-candidate PAC, the PAC must have

  1. received contributions from more than 50 people,
  2. been registered with the Federal Election Commission for at least six months and
  3. made contributions to at least five federal candidates. A non-multicandidate PAC may contribute, up to $ 1,000 per election to candidates for federal office. Individuals may also contribute up to $1,000 per election to candidates for federal office. These limits apply separately to each primary, special, run-off and general election.

Under Connecticut law, a business PAC may contribute up to $5,000 to a candidate for governor, $3,000 to candidates for other statewide offices, $1,000 to candidates for state Senate and $500 to candidates for state representative. Individuals may contribute up to $2,500 to candidates for governor, $1,500 to candidates for other statewide offices, $500 to candidates for state Senate and $250 to candidates for state representative. These limits also apply separately to primaries and general elections.

A review of your company's policies and procedures for campaign contributions and employee campaign activity should be included in your overall corporate compliance plan. With the increased scrutiny being given to campaign contributions at both the federal and state level, knowledge of the law and employee education are the best tools to avoid inadvertent violations.