Report No. 255

(iii) United States of America

2.25.12. Campaign finance laws in the US are different at the federal, state, and local levels. At the federal level, the Federal Election Commission (hereinafter "FEC"), an independent federal agency, enforces these laws.

Expenses

2.25.13. There are no limits on election expenses by candidates or political parties. In Buckley v. Valeo, 424 US 1 (1976) the Supreme Court struck down the Federal Election Campaign Act's (hereinafter "FECA") individual expenditure limit on the grounds that it curtailed the quantum of free speech, and hence violated the First Amendment rights of the candidates. As the Court noted:

"A restriction on the amount of money a person or group can spend on political communication during a campaign necessarily reduces the quantity of expression by restricting the number of issues discussed, the depth of their exploration, and the size of the audience reached. This is because virtually every means of communicating ideas in today's mass society requires the expenditure of money".

It must be noted, however, that when Presidential candidates are publicly funded, an upper limit to that expenditure is constitutional.

2.25.14. Independent third party expenditures in the US are not subject to any limi.- corporations and unions may incur such expenditure. These refer to any communications that expressly advocate the winning or defeat of any party, without being requested or suggested to do so by any party or agents or political committee to do so.62

62. FECA, How General Election Funding Works,
<http://www.fec.gov/info/chtwo.htm>

Contribution

2.25.15. In 2010, in Citizens United v. FEC, 553 US 310 (2010). As per the ruling, corporations and unions can now spend money, for instance via advertisements, supporting or denouncing individual candidates, even though the ban on direct corporate contributions remained, the Court continued the line of reasoning followed in Buckley and proceeded to strike down any limit on independent expenditures by corporations, associations, and labour unions in federal elections citing the free speech clause.

However, the ban on direct corporate contributions remained unaffected. Justice Stevens who delivered the dissenting opinion in this case made the observation that the bench in Buckley had recognised the possibility of its judgement being misused and had left open a window to impose regulations on the grounds of curbing corruption. This ruling has been criticised for allowing special interest groups to influence the election campaigns through unbridled spending, while undermining the efforts of ordinary citizens making modest contributions to support the candidates of their choice.

2.25.16. After Buckley, a distinction was drawn between election contribution and election spending. In other words, the different limits that are imposed in each state on the amount of contribution that an individual, company, union etc. can make, stood intact after this decision. However, with the 2014 decision in McCutcheon v. FEC, 134 S. Ct. 1434 (2014) this distinction between contribution and spending was blurred, and the Supreme Court struck down the biennial upper limit to the total amount any individual could contribute to federal candidates and national parties.

According to the Court, these aggregate limits restricting how much money a donor may contribute to candidates for federal office, political parties, and PACs do not further the government's interest in preventing quid pro quo corruption, although they seriously restrict participation in the democratic process. Hence, the First Amendment was said to have been violated, with the Court noting that, "Any regulation must instead target what we have called 'quid pro quo' corruption or its appearance."

65. The Supreme Court's rationale in McCutcheon v. FEC, 134 S. Ct. 1434 (2014) was that aggregate limits restricting how much money a donor may contribute to candidates for federal office, political parties, and PACs do not further the government's interest in preventing quid pro quo corruption, although they seriously restrict participation in the democratic process. Hence, the First Amendment was said to have been violated, with the Court noting that, "Any regulation must instead target what we have called 'quid pro quo' corruption or its appearance."

2.25.17. Thus, after McCutcheon, there are no overall limits on aggregate contributions by an individual to candidates and political parties. Apart from this, the ban on direct corporate contribution stands and there are limits on individual contributions to a single candidate or a Political Action Committee ("PACs").

Disclosure

2.25.18. The FECA mandates the disclosure of all sources and spending of funding for candidate, party committees and PACs.66 Under Section 432 of the Act, a treasurer is mandatorily appointed for every party, and all contributions must be forwarded to this person within a specific time (10 days for contributions over $50 and 30 days for contributions less than $50). The treasurer is obliged to maintain records of all contributions and transactions and file a report with the FEC.

66. FEC, Citizens' Guide, April 2014,
<http://www.fec.gov/pages/brochures/citizens.shtml>.

2.25.19. There are also disclosure norms in place even for independent expenditure.- a disclaimer is required to identify who paid for communication and financing must be disclosed to the public. The reports must be quarterly when aggregate is greater than $250 per election, 48-hour reports between the beginning of the year and twenty days prior to the election when the aggregate is greater than or equal to $10,000. Within 20 days before the election, 24 hours reports must be given when the aggregate is greater than or equal to $1000. Electioneering communications are also subject to disclosure norms if the costs of disbursement exceed $10,000.67

67. IDEA, Campaign Finance for United States,
<http://www.idea.int/politicalfinance/country.cfm?id=231>

2.25.20. Disclosure norms are different for different categories of 'political committees', which play a supremely important role in US elections. The terms refers to any committee or association of people who receive total contributions or makes net expenditure in excess of $10,000 during a calendar year or any local committee of a political party which makes certain kinds of expenditure and receives contributions in aggregate excess of $5,000 in a year.

Section 434 of the FECA lays down the reporting requirements for various such committees, such as the authorized political party committees, unauthorized committees, personal contributions of the candidate etc., each being required to be filed under different norms.

2.25.21. When reports are filed with the FEC, however, they must contain the following details:

(a) The amount of cash on hand at the beginning of the reporting period.

(b) The total amount of all receipts in the reporting period.

(c) The identification of each person who makes a contribution or provides any dividend, interest or other receipt exceeding $200 in the calendar year or cycle, or any lesser amount if the reporting committee should so select, as well as the date and amount of their contribution.

(d) The identification of political committees and other affiliated committees making contributions or loans.

(e) Numerous other heads such as rebates, refunds, dividends, interests, other forms of receipts etc.

(f) The total amount of all disbursements and all disbursements in specified categories like expenditures made to meet committee or candidate expenses, transfers, repayment or loans, etc.68

68. Section 304, FECA (2 USC 434)

2.25.22. All candidates and party committees and PACs are required to file regular reports with the FEC, which maintains a public database.69 Campaign finance reports are placed in the public record within 48 hours of receipt at the FEC.70 Further, any amount of contribution more than $1000 received on behalf of a candidate by an authorized party within the last 20 days of an election will be notified to the Commission within 48 hours of receipt of the same.71

69. FEC, Campaign Finance Reports and Data,
<http://www.fec.gov/disclosure.shtml>

70. 2 USC § 438(a)(4); FEC, Freedom of Information Act,
<http://www.fec.gov/press/foia.shtml>

71. FEC, Candidate Committee,
<http://www.fec.gov/rad/candidates/FECReportsAnalysisDivision-CandidateCommittees.shtml>

Penalties

2.25.23. The FECA has the power to conduct audits and field investigations of any political committee filing a report under Section 434 and its powers (including enforcement) are delineated in greater detail in Section 437d and g.

2.25.24. Instances of noncompliance with the provisions of the FECA may lead to an FEC enforcement case, or Matter Under Review ("MUR"). The Office of Complaints Examination and Legal Administration and the Enforcement Division of the Office of General Counsel usually deal with these MURs through the FEC's traditional enforcement program, based on procedures detailed in the Act.

In some less complex cases, the candidates or political committees may also be permitted to participate in the FEC's ADR program for a swift resolution through settlements. Further, failure to or late submissions of FEC reports or any other violations of such nature are subject to the FECA's Administrative Fine Program.72

72. FEC, FY 2014-2019 Strategic Plan,
<http://www.fec.gov/pages/strategic_plan/FECStrategicPlan2014-2019.pdf>