Becoming a Political Influencer
A white paper by Ben Palkowski.
TABLE OF CONTENTS
LEGAL FRAMEWORK FOR SUPER PACS
The concept of the Super PAC was created only about a decade ago — in 2010, as a result of two court decisions.
The First Court Decision (Corporations and Unions):
First, there was Citizens United. The case centered around a 2008 video released by a conservative nonprofit corporation that put a major Democratic Party candidate for president in a negative light. The legal issues in the case involved technical aspects of a bipartisan campaign finance law that passed Congress just eight years prior, which, in the opinion of the Supreme Court, had unconstitutional First Amendment free speech implications.
At its core, Citizens United declared that the government cannot limit the amount of corporate or union spending on elections so long as those entities do not contribute directly to, or coordinate with, candidates or political parties. Stated differently, the decision allowed corporations and unions to spend unlimited sums of money on political campaigns so long as their expenditures are not direct contributions to, or coordinated with, the political candidate or party they seek to support. Since 2010, corporate and labor organizations have been using their newfound increased political spending authority directly on supporting and defeating candidates.
The Second Court Decision (Individuals):
But just two months after Citizens United , another dramatic court decision further altered the electoral landscape when, in its SpeechNow.org decision, the US Court of Appeals for DC held that political committees that do not contribute directly to candidates, but make independent expenditures only, may accept unlimited contributions from individual donors.
While Citizens United and SpeechNow.org were separate decisions from two separate courts, taken together, they created a framework for what is now called a Super PAC, the term “super” referring to that type of PAC’s ability to raise unlimited sums of money from individuals, corporations and unions.
Though the decisions had major implications in politics on the national stage, the reality is, it also created a powerful tool for political engagement on every level from supporting federal candidates for Congress to a local candidate for city hall, and ultimately opened the door to a number of mechanisms for such engagement by people and organizations alike.
MYTHS ABOUT SUPER PACS
The two court decisions allowing for the creation of Super PACs were controversial in that they essentially reconfigured the framework by which organizations may participate in the political process. But, of course, controversy tends to create myths, innuendo and hyperbole. Here are some common myths about Super PACs that you may have heard:
Super PACs are “dark money” sources and lack transparency.
In fact, the opposite is true. Super PACs have many of the same public disclosure obligations as candidate committees, party committees, and other types of political committees. This includes routine filings with elections regulators revealing where money is being spent and the source of contributions.
Super PACs can spend and raise money in an unlimited fashion.
This is only partially true. As noted above, the law allows for Super PACs to spend and raise unlimited amounts of money, so long as their activities are independent of the candidates they support. There are strict rules regarding coordination and involve an examination into the particular circumstances surrounding funding sources and content of a particular communication, as well as the conduct of the personnel involved.
Super PACs only benefit one side of the political spectrum.
The reality is Super PACs benefit candidates from both parties, and even candidates who denounce Super PAC support. In fact, as discussed below, Super PACs can serve as somewhat of an alternative to the rigid structure, allegiances and activist-led positions with which political parties must contend. Super PACs can operate in a partisan fashion, a nonpartisan fashion, or in an issue-specific manner.
BENEFITS OF SUPER PACS
A Super PAC can be a powerful tool in not only amplifying your political voice, but can also help to bolster your brand, showcase your professional pedigree and provide a vehicle for community engagement. The menu of benefits are profound:
- As the owner of a Super PAC, you can be in complete control of its message and brand (or delegate those to trusted individuals). And as other organizations encounter difficulty in building consensus and navigating their own internal dysfunction, your Super PAC can be ready to take a position and broadcast its message at your discretion.
- The identity of each individual and entity contributing in excess of $200 to a Super PAC must be revealed in regular financial disclosure filings. This creates a clever opportunity to publicly profile the depth of your business associates, social circles, industry connections, and other networks.
- Most people may associate Super PACs with a tool for high stakes elections on the national stage. But Super PACs have a place in your own community. The reality is that decision-making at the local level has a more immediate impact on citizens’ daily lives. Inserting your Super PAC into local elections for school board, city council or county commissioner, for example, can have a dramatic impact, potentially tipping the outcome in favor of your desired candidate.
- In a time of polarizing politics, political parties are constantly seeking the approval and satisfaction of their base activists and well-connected party insiders. Super PACs can be a political party alternative — an organization for supporters to rally around behind a cause, a candidate, or a block of candidates in the absence of either political party offering, in your view, an acceptable policy platform or slate of candidates.
- If there is one thing politicians give attention to, it is political activity occurring within their wingspan. A new Super PAC that is engaging in an even a moderate level of activity will get noticed — and possibly even met with increased access to a nervous or vulnerable politician, or a politician who is in a position to reap the benefits of Super PAC activity.
- A Super PAC could be a creative component of an investment strategy. In non-election years and other periods of dormancy, a Super PAC’s funds need not sit idle, but can be invested in stocks, bonds, certificates of deposit and other investment vehicles.
PERMISSIBLE ACTIVITIES OF SUPER PACS
Given all of the potential benefits of Super PACs, the question becomes what exactly a Super PAC can do to make your objectives a reality. The answer is that Super PACs have an enormous range of activities in which to engage. Consider the following:
- Television ads. TV ads are probably what come to mind first when thinking about Super PAC activity. Though they can be expensive to produce and to air, they are perhaps the most powerful electioneering tool and get the most attention.
- Radio ads. As a more affordable broadcasting alternative to TV, radio ads can help amplify a message within a station’s transmission frequency.
- Social media campaigns. The reach of social media, as well as the geographic and other targeting mechanisms, have made social media electioneering a mainstream practice in recent years.
- Canvassing. Super PACs can employ and deploy groups of canvassers to help spread its message in an in-person fashion.
- Direct mail. Mail programs can be designed to saturate a legislative district or a community, or they can be designed to tell a story or make a case over a series mailings over a period of time.
- Phone calls. Super PACs can run live phone banks or can outsource phone calls to a firm that can deliver a persuasive message, promote a candidate or simply remind the voters of an upcoming election.
- Visibility. Like candidates and political parties, Super PACs can use long standing electioneering staples like t-shirts, yard signs, bumper stickers and pins to promote their message.
- Polling. In order to inform decision making on executing any of the options above, some Super PACs conduct public opinion polls with carefully crafted questions in order to take the temperature of the electorate and track how and why public opinion moves.
STARTING A SUPER PAC
Super PAC owners should secure proper counsel in connection with (a) the startup phase, (b) financial disclosure reporting and campaign finance regulatory compliance and (c) one-time issues that may surface over the course of a Super PAC’s lifetime.
Serious Super PAC entrepreneurs and owners should consider the big picture — the financial disclosure obligations, organization, staffing and governance, liability concerns, and public image — before launching.
- Registration. Federal PACs must file a Statement of Organization with the Federal Election Commission. Super PACs must also issue a letter to the FEC indicating its intent to operate as an independent expenditure-only committee. Also, depending upon the nature and jurisdiction of state and local election activities, additional registration obligations may be triggered.
- Banking. Super PACs must register an official depository. A Super PAC engaging in both federal and nonfederal election activity may also choose to have two separate accounts — one for federal activity and a separate one for state and local activity.
- Taxpayer identification. In order to secure bank accounts, many financial institutions require that a committee obtain a taxpayer identification number from the IRS.
- Software and accounting systems. Super PACs must have proper accounting systems. The systems need not be overly complex, but need to suit the nature of the size and scope of the Super PAC’s activities. At a minimum, proper accounting or compliance software and personnel are imperative in order to vet contributions, file timely and accurate disclosure reports and conduct internal financial performance analyses.
- Treasurer. Since the name of treasurers are made public, recruiting a treasurer creates another opportunity to bolster a Super PAC’s profile by having a key leader or influencer serve in the role as more of a figurehead. And while the treasurer is ultimately personally liable for legal violations, that risk may be mitigated with the implementation of appropriate accounting and compliance systems.
- Intellectual property. Under election law, Super PACs generally have free reign in naming their entity, except that a Super PAC generally may not contain a candidate’s name. Super PACs should also consider ensuring that their entity name does not sound or appear so similar to another political committee (or other entity) that it violates another’s trademark rights. For those Super PACs interested in participating in state and local elections, research into existing trade names in use in that jurisdiction will be necessary to avoid confusion or otherwise improper use.
- Incorporation. Though not required, Super PACs should consider incorporating their entity. Like in any other business setting, such a maneuver may reduce the liability exposure to the Super PAC owner and treasurer in instances of contractual, employment and other disputes. In addition, incorporation sends a message to potential donors that a Super PAC is serious. There are a number of fly-by-night political entities and Super PACs that exist for only a few months before going dormant. By incorporating, a Super PAC is sending a message that it takes its business seriously.
- Governance. Super PACs should also consider the type of governance they wish to have. Does the owner want to have unilateral control over philosophy, candidate endorsements and messaging? Or does the owner want to have a governing board make those decisions? Some potential contributors will favor donating their money to the latter, seeing that there is some accountability and deliberative process in a Super PAC’s decision-making. The Super PAC entrepreneur should weigh the value of exercising complete control against the value of having a more thorough process which can be spelled out in bylaws and internal policies.
ONGOING REQUIREMENTS FOR SUPER PACS
Political activity is regulated and monitored, but not just by government regulators. With financial disclosure reports open to public inspection, scrutiny can come from all different directions — the media, watchdog groups, adversaries and the general electorate.
A mistake can result in expensive or embarrassing consequences in terms of fines (or imprisonment for more egregious violations), time spent on resolution, and adverse media exposure. Like in any other professional endeavor, retaining an accountant or compliance consultant with industry knowledge is imperative.
Outside of routine financial reporting, Super PACs should ensure that activities are in compliance with the applicable regulations of the day. For example, most public communications are subject to disclosure requirements, which can change rapidly as communications mediums evolve.
Finally, more sophisticated Super PACs — those that employ staff or engage in lobbying activities — have all the more reason to make sure that they have an experienced industry counsel from whom to seek guidance.
Over the course of a Super PAC’s life, issues may arise which require guidance from an experienced professional. This could be a response to a third-party complaint or a media inquiry. It could also be a review of a joint fundraising agreement or a contract with a vendor.
Some of the more unique scenarios are not typically planned for, but Super PAC owners should consider establishing a relationship with an industry advisor so that a resource can be available as the need for counsel surfaces.
ABOUT BEN PALKOWSKI
Ben Palkowski is an attorney, CPA and political consultant who focuses his work primarily on federal and state election compliance; the creation of PACs and 501(c)(4) organizations; and political consulting (including opposition candidate research) related to election compliance. Ben previously worked as an attorney and lobbyist at a large northern New England law firm representing Fortune 500 corporations and trade associations. Previously, Ben worked as legislative director for a state employee union and in numerous positions in political organizations and campaigns. Learn more about Ben and his services at BenPalkowski.com or ElectionLawCPA.com.
SERVICES OF BEN PALKOWSKI
- Preparing and filing Super PAC, PAC or 501(c)(4) start-up documentation
- Election compliance
- Campaign consulting and auditing
- Opposition research
- Tax planning and filing preparation