Campaign finance in the United States is the financing of electoral campaigns at the federal, state, and local levels.

At the federal level, the primary source of campaign funds is individuals; political action committees are a distant second. Contributions from both are limited, and direct contributions from corporations and labor unions are prohibited. According to Mark Hertsgaard, the richest 4 percent of the population provide nearly 100 percent of all individual contributions.^[1] On January 21, 2010, the Supreme Court overturned a 20-year-old ruling that had previously permitted state laws that prohibit corporations and unions from using money from their general treasuries to produce and run their own campaign ads.^[2]

The Federal Election Commission (FEC) is an independent federal agency created in 1974 by amendments to the Federal Election Campaign Act (FECA) to enforce FECA.

Public financing is available for qualifying candidates for President during both the primaries and the general election. Eligibility requirements must be fulfilled to qualify for a government subsidy and those that do accept government funding are usually subject to spending limits. The system is designed so that the Democratic or Republican candidates for President of the United States routinely qualify for funds, while excluding most other party candidates.

Races for non-federal offices are governed by state and local law. Over half the states allow some level of corporate and union contributions. Some states have limits on contributions from individuals that are lower than the national limits, while four states (Missouri, Oregon, Utah and Virginia) have no limits at all.^[3]

Campaign finance is a controversial issue, pitting concerns about free speech against concerns about corruption and inequality on the part of those who favor existing or further restrictions.

For most of the history of the United States, federal election campaigns were relatively unregulated. The first federal legislation dealing with campaign finance was the 1867 Naval Appropriations Bill which aimed to stop the practice of shaking down naval yard workers for political donations.^[4] In 1883, the Civil Service Reform Act aka Pendleton Act applied the Naval Appropriation Act to all government workers. The Hatch Act prohibited contributions to federal candidates from federal workers and contractors and limited individual contributions to $5,000 per year.^[4] The Tillman Act and Federal Corrupt Practices Act sought to limit more broadly the influence of money on the campaigns, but these were largely ignored.^[4] In 1971, Congress consolidated its earlier reform efforts in the FECA, instituting more stringent disclosure requirements for federal candidates, political parties, and political action committees (PACs). Federal candidates include those running for the House, the Senate, the President and the Vice President.

After the Watergate affair, Congress took action to specifically regulate federal campaigns. Amendments to the FECA in 1974 created an independent agency, the FEC, to monitor donations and spending on federal campaigns. It also created a commission to enforce the Federal Election Campaign Act provisions. The limits included $1,000 individual contribution limit and a $5,000 PAC limit. FECA also placed limits on expenditures by candidates, but these were invalidated on First Amendment grounds in the Supreme Court decision of Buckley v Valeo. In 1979, the FECA amendments package allowed the use of donations to political parties rather than candidates, the first time Congress enacted such reform.^[4]

In 1986, several bills were killed in the U.S. Senate by bipartisan maneuvering which did not allow the bills to come up for a vote. The bills would impose strict controls for campaign fund raising. Later in 1988, legislative and legal setbacks on proposals designed to limiting overall campaign spending by candidates were shelved after a Republican filibuster. In addition, a constitutional amendment to override the Supreme Court decision failed to get off the ground.

In 1994, Senate Democrats had more bills blocked by Republicans including a bill setting spending limits and authorizing partial public financing of congressional elections. In 1996, bipartisan legislation for voluntary spending limits which rewarded those who comply, and which banned soft money, was killed by a Republican filibuster.^[4]

In 1997, the McCain-Feingold bipartisan bill sought to close soft money and TV advertising expenditures but the legislation was defeated by a Republican filibuster. Several different proposals were made in 1999 by both parties. The Campaign Integrity Act (H.R. 1867) proposed by Asa Hutchinson (R - Arkansas) put a ban on soft money and raised hard money limits. The Citizen Legislature & Political ACT (H.R. 1922) sponsored by Rep. John Doolittle (R - CA) would repeal all federal freedom ACT election contribution limits and expedite and expand disclosure. H.R. 417 Campaign Reform Act Shays-Meehan Bill, sponsored by Christopher Shays (R - CT) and Martin Meehan (D - MA), banned soft money and limited types of campaign advertising.^[4]

In 2002, Congress further attempted to reform federal campaign financing with the Bipartisan Campaign Reform Act. This law was also challenged in the Supreme Court, but its core provisions, including restrictions on "soft money" donations to political parties and restrictions on "electioneering communications" (broadcast ads mentioning a candidate within 30 days of a primary or 60 days of a general election) were upheld by the Supreme Court in McConnell v. Federal Election Commission.

The DISCLOSE Act (S. 3628) was proposed in July 2010. The bill would have amended the Federal Election Campaign Act of 1971 to prohibit foreign influence in Federal elections, prohibit government contractors from making expenditures with respect to such elections, and establish additional disclosure requirements with respect to spending in such elections. The bill would also impose new donor and contribution disclosure requirements on nearly all organizations that air political ads independently of candidates or the political parties. The legislation would require the sponsor of the ad to appear in it and take responsibility for it. Obama argued that the bill would also reduce foreign influence over American elections. Democrats needed at least one Republican to support the measure in order to get the 60 votes to overcome GOP procedural delays, but were unsuccessful.^[5][6]

The Supreme Court’s 2010 decision in Citizens United v. FEC and a lower court’s decision in SpeechNow.org v. FEC constitute “the most fundamental changes to campaign finance law in decades,” according to a 2011 Congressional Research Service report. The report notes the following changes, and the rules that remain in place, that are shaping the 2012 election landscape:

1) “As a consequence of Citizens United, corporations and unions are now free to use their treasury funds to air political advertisements explicitly calling for election or defeat of federal or state candidates (independent expenditures) or advertisements that refer to those candidates during pre-election periods, but do not necessarily explicitly call for their election or defeat (electioneering communications). Previously, such advertising would generally have had to be financed through voluntary contributions raised by PACs affiliated with unions or corporations";

2) The 2010 U.S. Court of Appeals decision in SpeechNow.org means that “contributions to PACs that make only independent expenditures—but not contributions—could not be constitutionally limited. As a result, these entities, commonly called super PACs, may accept previously prohibited amounts and sources of funds, including large corporate, union, or individual contributions used to advocate for election or defeat of federal candidates";

3) Despite these changes, it should be noted that despite very common reports in the media that these decisions constituted overturning limits on contributions to candidates, parties or PACs, “pre-existing limits on contributions to campaigns, parties, and PACs generally remain in effect. Despite Citizens United’s implications for independent expenditures and electioneering communications, the ruling did not affect the prohibition on corporate and union treasury contributions in federal campaigns";

4) “Corporations and unions are still banned from making contributions in federal elections. PACs affiliated with, but legally separate from, those corporations and unions may continue to contribute to candidates, parties, and other PACs";

and 5), “[U]nless meeting [certain] criteria for disclosure, corporate or union funds given to an intermediary (such as a trade association) do not have to be publicly reported. Accordingly, the total sources or amounts of corporate or union funds in federal elections remains unknown.”^[7]

Political money in the United States is often divided into two categories, "hard" money and "soft" money.

"Hard" money is contributed directly to a candidate of a political party. It is regulated by law in both source and amount, and monitored by the Federal Election Commission (maximum $2500).

"Soft" money is contributed to the political party as a whole. Historically, "soft money" referred to contributions made to political parties for purposes of party building and other activities not directly related to the election of specific candidates. Because these contributions were not used for specific candidate advocacy, they were not regulated by the Federal Election Campaign Act, as interpreted by the Supreme Court in Buckley v. Valeo. The Bipartisan Campaign Reform Act of 2002 (also known as McCain-Feingold) prohibited unregulated contributions to national party committees. "Soft money" also refers to unlimited contributions to organizations and committees other than candidate campaigns and political parties (except, where legal, to state and local parties for use solely in state and local races). Organizations which receive "Soft money" contributions are often called "527s", for the section of the tax code under which they operate. The term is generally used to refer to independent, nonprofit political organizations that are not regulated by the FEC or by a state elections commission, and are not subject to the same contribution limits as PACs. Such organizations can legally engage in political activity, but funds from "soft money" contributions may not be spent on ads promoting the election or defeat of a specific candidate.

The U.S. Supreme Court decision Buckley v. Valeo (1976) held that limitations on donations to candidates were constitutional (because of the compelling state interest in preventing corruption or the appearance of corruption), but limitations on the amount campaigns could spend (spending limits or caps) were an unconstitutional abridgment of free speech under the First Amendment. Buckley v. Valeo also held that only speech that expressly advocated the election or defeat of a candidate could be regulated. Thus organizations could spend unregulated "soft money" for a variety of activities, including "issue advertising," a broad term that included any advertising that stopped short of expressly advocating the election or defeat of a candidate through words and phrases such as "vote for," "vote against," "support," "defeat," or "elect".

Beginning in the late 1970s, parties successfully petitioned the FEC to be allowed to spend soft money on non-federal party building and administrative costs. Soon, this use of soft money expanded to voter registration, get out the vote, and issue advertising. For example, a wealthy individual could give a large contribution in soft money to a political party. The party could then spend this money on political ads. These ads could not explicitly or expressly advocate the election or defeat of a candidate (such as "Vote for Smith," "Elect Smith," "Send Smith to Congress," "Vote Against Doe," or "Defeat Doe"), but they could use the names of candidates ("Bill Smith is an honest man who stands up for the people; John Doe is a chronic liar who's taken money from special interests and advocated cutting Social Security. Call John Doe and tell him how you feel about this."^{[citation needed]})

The Reform Party, founded by Ross Perot, made campaign finance reform a central issue in its platform, and when Perot ran for president in 1992 and 1996 he strongly argued for it. Oddly enough, most political scientists believe that campaign finance laws hindered Perot's efforts to establish the Reform Party on a permanent basis.^{[citation needed]} It again became a major issue in the 2000 presidential election, especially with candidates John McCain and Ralph Nader. Organizations in favor of campaign finance reform included many public interest groups, such as Common Cause, Democracy 21, the Campaign Legal Center, and Democracy Matters. Opposition came from a coalition of organizations such as the American Civil Liberties Union and the Center for Competitive Politics (both of which argue that campaign finance reform would harm free speech) and the National Rifle Association, National Right to Life Committee, and other organizations.

The Bipartisan Campaign Reform Act of 2002, sometimes called McCain-Feingold, amended the FECA (1971) to ban national political party committees (most prominently the Democratic National Committee and Republican National Committee) from accepting or spending soft money contributions. It also included a "stand by your ad" provision requiring candidates to appear in campaign advertisements and claim responsibility for the ad (most commonly with a phrase similar to "I'm John Smith and I approve this message.")

The legislation was challenged in McConnell v. Federal Election Commission (2003), but most of the act was upheld by the Supreme Court. However, a further challenge in Federal Election Commission v. Wisconsin Right to Life, Inc. (2007), with new justices on the Supreme Court, resulted in parts of McConnell being effectively, though not formally, reversed.

After the passage of the Bipartisan Campaign Reform Act, many of the soft money-funded activities previously undertaken by political parties were taken over by various 527 groups, which funded many issue ads in the 2004 presidential election. The heavy spending of key 527 groups to attack presidential candidates brought complaints to the Federal Elections Commission of illegal coordination between the groups and rival political campaigns. In 2006 and 2007 the FEC fined a number of organizations, including MoveOn.org and Swift Boat Veterans for Truth, for violations arising from the 2004 campaign. The FEC's rationale was that these groups had specifically advocated the election or defeat of candidates, thus making them subject to federal regulation and its limits on contributions to the organizations.^[9] In 2006 the Campaign Finance Institute issued a study on 527 groups. The study shows that many advocacy groups deploy three different types of organization— PACs, 527 groups, and 501(c) advocacy entities—in their efforts to influence federal elections and public policy. These cumulative, coordinated efforts increase the groups' financial influence in elections. The CFI analysis presents much new information about the major role played by 501(c)(4) social welfare, (c)(5) labor union and (c)(6) trade association organizations in elections, and the different ways in which they and related 527 organizations are used by Republican and Democratic-oriented groups.^[10]

Another consequence of the limitation upon personal contributions from any one individual ($2400 for each election, with a total of $4800 for a primary and general election as of 2009^{[citation needed]}) is that campaigns seek out "bundlers," people who can gather contributions from many individuals in an organization or community, and present the sum to the campaign. Campaigns often recognize these bundlers with honorary titles and, in some cases, exclusive events featuring the candidate.

Bundling has always existed in various forms, but has become more important with the enactment of limits on contributions at the federal level and in most states in the 1970s.^[11] EMILY's List, for example, was involved in early bundling-like activities. Bundlers grew in importance again after the Bipartisan Campaign Reform Act of 2002 prohibited soft money contributions to political parties.^[12]

Bundling became organized in a more structured way in the 2000s, spearheaded by the "Bush Pioneers" for George W. Bush's 2000 and 2004 presidential campaigns. One infamous former "bundler" was Democratic Party supporter and apparel manufacturer Norman Hsu, who achieved a prominent role as one of Hillary Rodham Clinton's "HillRaisers" for her 2008 presidential campaign.^[12] Hsu was then found to be a fugitive from an early 1990s fraud charge; in such cases, campaigns usually return or donate to charity the contributions that the person in question gave, but are left with the thorny question of whether to return all the other contributions that bundler gave. In some cases, including Hsu's, bundlers are suspected of having donated their own money under others' names (to circumvent the individual contribution limit) or of having coerced employees or others to make contributions with their own money, both of which are illegal. But most bundlers operate legally and help to reduce the time and cost of fundraising for the candidates and their campaigns.

During the 2008 campaign the six leading primary candidates (three Democratic, three Republican) had listed a total of nearly two thousand bundlers.^[12]

Current campaign finance law at the federal level requires candidate committees, party committees and PACs to file periodic reports disclosing the money they raise and spend. Federal candidate committees must identify, for example, all PACs and party committees that give them contributions, and they must provide the names, occupations, employers and addresses of all individuals who give them more than $200 in an election cycle. Additionally, they must disclose expenditures to any individual or vendor. The Federal Election Commission maintains this database and publishes the information about campaigns and donors on its web site.

Similar reporting requirements exist in many states for state and local candidates and for PACs and party committees.

Increasingly, political committees on all levels are required to electronically file campaign finance statements.

Most political advertising, including all advertising that specifically advocates the election or defeat of a candidate for federal office, is required to identify the source of its funding. In elections for national office (Congress and president/vice-president), television ads from a candidate must feature a shot of the candidate's face and have the candidate personally identify himself/herself, saying, "I approved this message." The Bipartisan Campaign Reform Act added this rule in the belief that candidates would not engage in negative campaign advertising if they had to personally claim responsibility for the ad's content. As of 2007, little empirical research has been done on its effects, but no one has reported a noticeable effect on the tone of campaigning.^{[citation needed]}

The Supreme Court's ruling in Buckley v. Valeo (1976) held that expenditures made independently of a candidate's campaign could not be limited under the Constitution. If expenditures are made in "coordination" with a campaign, however, they may be regulated as contributions.

Corporate and labor PACs raise voluntary contributions from a restricted class of individuals. In the case of unions, this consists of union members and their families. For corporations, the restricted class consists of managerial employees and stockholders and their families. For wealthy individuals funds may come directly from their personal bank account or via foundations they have set up. Funds may be used to support federal candidates and political committees, either through independent expenditures or through contributions to candidates. A PAC used to be limited to receiving a maximum contribution of $5,000 to a candidate committee per election. However, this has largely been skirted by claiming the PAC isn't directly associated with a particular candidate and funding into these types of PACs or Super PACs as they have come to be know is unlimited.

Because of the Supreme Court's decision in the case Citizens United v. Federal Election Commission, corporations and labor unions can now use the funds from their general treasuries to run advertisements for candidates in national elections. The Supreme Court decided that any laws prohibiting corporations and labor unions from using these funds were prohibiting first amendment rights. ^[13]

Additionally, over half the states allow some level of direct corporate contributions or spending in state and local races.

Political parties are active in federal elections at the local, state and national levels. Most party committees organized at the state and national levels as well as some committees organized at the local level are required to register with the FEC and file reports disclosing their federal campaign activities.

Party committees may contribute funds directly to candidates, subject to the contribution limits. National and state party committees may make additional "coordinated expenditures," subject to limits, to help their nominees in general elections. National party committees may also make unlimited "independent expenditures" to support or oppose federal candidates. However, since 2002, national parties have been prohibited from accepting any funds outside the limits established for elections in the FECA. State party and local committees are also subject to restrictions on the funds they may spend in connection with an election in which a federal candidate is on the ballot.

Party committees must report with the FEC once their federal election activities exceed certain dollar thresholds specified in the law.

It is a federal crime to evade the following donation limits through a straw donor scheme.

Table footnotes

(Table taken from the FEC website on 2 April 2011.)

At the federal level, public funding is limited to subsidies for presidential candidates. To receive subsidies in the primary, candidates must qualify by privately raising $5000 each in at least 20 states. For qualified candidates, the government provides a dollar for dollar "match" for each contribution to the campaign, up to a limit of $250 per contribution. In return, the candidate agrees to limit his or her spending according to a statutory formula.

From the inception of this program in 1976 through 1992, almost all candidates who could qualify accepted matching funds in the primary. However, in 1996 Republican Steve Forbes opted out of the program. In 2000, Forbes and George W. Bush opted out. In 2004 Bush and Democrats John Kerry and Howard Dean chose not to take matching funds in the primary.

In 2008, Democrats Hillary Clinton and Barack Obama, and Republicans John McCain, Rudy Giuliani, Mitt Romney and Ron Paul decided not to take primary matching funds. Republican Tom Tancredo^[14] and Democrats Chris Dodd,^[15] Joe Biden^[16] and John Edwards elected to take public financing.

By refusing matching funds, candidates are free to spend as much money as they can raise privately. In 2008, Barack Obama pledged to seek public financing for the general election, but later reversed himself in order to avoid fundraising limits.^[17]

In addition to primary matching funds, the federal government subsidizes the presidential nominating conventions of the major parties (the Democratic National Convention and Republican National Convention). Based on the performance of their party in past elections, candidates may be offered the opportunity to accept government funds for the general election. If they accept the government funds, they agree not to raise or spend private funds or to spend more than $50,000 of their personal resources. No major party nominee turned down government funds for the general election from 1976, when the program was launched, until Barack Obama did so in 2008,^[18] or for General Election Legal and Accounting Compliance Funds (GELACs), which pay for attorneys and closeout costs but are not supposed to pay for campaigning or advertising.^[19] The only party other than the Republicans and Democrats to receive government funding in a general election was the Reform Party, which qualified for government subsidies in 1996 and 2000 on the basis of Ross Perot's strong showing in the 1992 and 1996 elections.

The presidential public financing system is funded by a $3 tax check-off on individual tax returns (the check off does not increase the filer's taxes, but merely directs $3 of the government's general fund to the presidential fund). The number of taxpayers who use the check off has fallen steadily since the early 1980s, until by 2006 fewer than 8 percent of taxpayers were directing money to the fund, leaving the fund chronically short of cash.^[20]

A small number of states and cities have started to use broader programs for public financing of campaigns. One method, which its supporters call Clean Money, Clean Elections, gives each candidate who chooses to participate a fixed amount of money. To qualify for this subsidy, the candidates must collect a specified number of signatures and small (usually $5) contributions. The candidates are not allowed to accept outside donations or to use their own personal money if they receive this public funding. Candidates who choose to raise money privately rather than accept the government subsidy are subject to significant administrative burdens and legal restrictions, with the result that most candidates accept the subsidy. This procedure has been in place in races for all statewide and legislative offices in Arizona and Maine since 2000, where a majority of officials were elected without spending any private contributions on their campaigns. Connecticut passed a Clean Elections law in 2005, along with the cities of Portland, Oregon and Albuquerque, New Mexico.

A 2003 study by the GAO found that "It is too soon to determine the extent to which the goals of Maine’s and Arizona’s public financing programs are being met."^[21]

In recent years, the movement for "Clean Elections" appears to have stalled. Proposition 89, a California ballot proposition in November 2006, sponsored by the California Nurses Union, that would have provided for public financing of political campaigns and strict contribution limits on corporations, was defeated. In 2008, the non-partisan California Fair Elections Act passed the legislature and Governor Schwarzenegger signed it, but the law does not take effect unless approved by voters in a referendum in 2010. A proposal to implement Clean Elections in Alaska was voted down by a two-to-one margin in 2008.,^[22] and a pilot program in New Jersey was terminated in 2008 amid concern about its constitutionality and that the law was ineffective in accomplishing its goals. In 2006, in Randall v. Sorrell, the Supreme Court held that large parts of Vermont's Clean Elections law were unconstitutional. In 2008, the Supreme Court's decision in Davis v. Federal Election Commission suggested that a key part of most Clean Election laws—a provision granting extra money (or "rescue funds") to participating candidates who are being outspent by non-participating candidates—is unconstitutional. On the basis of Davis v. Federal Election Commission, in late 2008 a federal court in Arizona found the "rescue funds" prosivions of Arizona's Clean Elections law unconstitutional in McCommish v. Brewer.^[23] In a suit brought by the Green Party of Connecticut, a federal court ruled Connecticut's law was unconstitutional in August 2009.^[24] An appeal is pending as of October 2009.

• Campaign finance
• Campaign finance reform in the United States
• Political finance
• DISCLOSE Act

• Green, Mark (2002). Selling Out, How Big Corporate Money Buys Elections, Rams Through Legislation, and Betrays Our Democracy. Regan Books (Harper Collins). ISBN 0-06-052392-1.
• Samples, John (2006). The Fallacy of Campaign Finance Reform. University of Chicago Press. ISBN 978-0226734507.
• Smith, Bradley (2001). Unfree Speech: The Folly of Campaign Finance Reform. Princeton University Press. ISBN 978-0691113692.
• Gill, David & Lipsmeyer, Christine (2005). Soft Money and Hard Choices: Why Political Parties Might Legislate Against Soft Money Donations. Public Choice.((cite book)): CS1 maint: multiple names: authors list (link)
• Smith, Rodney (2006). Money, Power & Election: How Campaign Finance Reform Subverts American Democracy. Louisiana State University Press. ISBN 978-0807131282.
• "Public Funding of Presidential Elections". Federal Election Commission. Retrieved August 3, 2005.
• "The Federal Election Campaign Laws:A Short History". Federal Election Commission. Retrieved August 3, 2005.
• "Bipartisan Campaign Reform Act". The Campaign Finance Institute. Archived from the original on March 17, 2005. Retrieved August 3, 2005.
• Ciara Torres-Spelliscy, ed., Writing Reform: A Guide to Drafting State & Local Campaign Finance Laws (2010 Revised Edition), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1729827

• Federal Election Commission
• National Institute on Money in State Politics
• OpenSecrets.org
• CQ PoliticalMoneyLine
• Campaign Legal Center
• Campaign Finance Institute
• Public Campaign
• Common Cause
• Public Citizen
• Campaign Finance Amendment - proposed constitutional amendment
• Moneyed Politicians
• Center for Competitive Politics
• Campaign Cash Since Citizens United Ruling - video report by Democracy Now!
• Cash Attack 2010 at FactCheck.org