Penalties for Campaign Finance Non-Compliance

Campaign finance laws exist to provide transparency and accountability to candidates and groups wishing to influence U.S. elections. How jurisdictions work to ensure this transparency varies but all have one commonality, each enforce their rules through the application of penalties for non-compliance. Did your committee fail to register as a political committee in a state despite meeting the registration thresholds? You could be looking at a fine for each contribution made over the threshold while not registered. Did your committee fail to disclose certain receipts or accept contributions over the jurisdiction’s contribution limits? These could lead to more fines.

This was a record year for campaign finance penalties; Washington led this record year handing down a whopping $24.7 million fine for violations of the state’s statutes surrounding digital ad disclosure. This was a penalty against a single company. It’s clear that one wrong move (or in this case, multiple wrong moves) could spell the end of your political action committee or small corporation (it’s a safe bet that even a larger corporation would not be happy to pay such a large fine).

While violations and their resulting penalties vary among the many jurisdictions that regulate campaign finance activity, there are some common violations that could result in penalties:

• Accepting contributions or making expenditures prior to appointing a treasurer;

• Failing to register as a committee when meeting the threshold;

• Failing to file reports;

• Failing to file accurate reports;

• Failing to disclose independent expenditures;

• Accepting contributions in excess of the statutory contribution limits;

• Accepting contributions from prohibited donors (e.g., corporations, foreign nationals, anonymous donors);

• Making candidate contributions in excess of the statutory contribution limits;

• Failing to use required disclaimer text on campaign advertisements/independent expenditures;

• Using committee money for the personal benefit of someone;

• Failing to maintain adequate records.

Political committees are not the only ones facing civil and criminal penalties for violating campaign finance laws. Corporations contributing to political candidates can also be held liable for improper activity. Many states penalize corporate violations of campaign finance activities just as they penalize political committees:

• Contributing to a candidate or political committee in a jurisdiction where corporate contributions are impermissible;

• Forcing an employee to make a political contribution with their own funds;

• Reimbursing an employee for a contribution made with their own funds;

• Failing to report independent expenditures;

• Failing to register as a political committee if required in the jurisdiction;

• Giving excess contributions to a candidate;

• Failing to use required disclaimer text on campaign advertisements/independent expenditures;

• Forcing an employee to give to a corporate political action committee or retaliating against employees who do not give to the PAC;

• Mingling corporate and PAC funds (if in a jurisdiction prohibiting corporate contributions).

Even if your corporation is not actively giving to political candidates, if you are a vendor of campaign services (think digital advertising, event space, print/radio/TV advertising, etc.) there may be requirements that your company could be liable for adhering to or face penalties. That mobile app your company helped develop for a candidate to maximize fundraising that you did not charge the campaign for, this would most likely be considered an in-kind contribution to the campaign and may need to be reported. The conference room you allowed a candidate to use for a fundraiser and gave the campaign a discount off the fair-market value of a rental, this would also be an in-kind contribution.

In some jurisdictions, fines may be imposed on the political committee itself. In others, fines may be imposed on the political committee, its treasurer and/or chair person, and other committee leadership. Additionally, if the violations are found to be intentional or a longstanding pattern of abuse, the committee leaders may face criminal penalties for the failure to adhere to the laws. Most violations are discovered, not at the time of filing the report (or lack of filing a report, if that’s the violation), but as the result of a random audit or citizen or whistleblower complaint against the committee or corporation in question.

Fortunately, MultiState is here to help you navigate the often complex world of campaign finance compliance. Don’t fall victim to the most common mistakes made by political committees — reach out to our team with questions.