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The basic rules for U.S. political campaign spending are drawn primarily from the Federal Election Campaign Act (FECA). FECA dates back to the early 1970s. It was amended in 2002 with the passage of the Bipartisan Campaign Reform Act (BCRA), also known as the McCain-Feingold Act after its sponsors. Per these statutes, the general rules for U.S. campaign spending are divided into three categories: contributions, expenditures and disclosures.
The most commonly acknowledged rule addresses campaign contribution limits. FECA provides caps on what a person or group can contribute to a political candidate, political action committee (PAC) or party committee. These contribution caps are adjusted each election cycle to keep pace with inflation. As an example, in the 2009-2010 election cycle, a person could legally give up to $2,400 U.S. Dollars (USD) to a candidate or his candidate committee. This person could also contribute up to $30,400 USD to his national party committee each calendar year.
National, state and certain local party committees are granted permission to contribute funds to their chosen federal candidate as long as they comply with FECA contribution limits. A national party committee can contribute up to $5,000 USD to each candidate or candidate’s committee during an election. This particular contribution limit is not adjusted for inflation. No person or organization can make a contribution in another person's name. Moreover, they cannot make a single cash contribution of $100 USD or more.
In certain circumstances, FECA completely prohibits contributions. The law bars any federal campaign contributions or expenditures by labor organizations, corporations, U.S. government contractors, and foreign nationals. Additionally, FECA prohibits national banks, foreign nationals and federally chartered corporations from making contributions or expenditures to state or local election campaigns. With the passage of the BCRA, soft money contributions to national political parties were prohibited. Soft money contributions are unregulated contributions from independent organizations that are not associated with any candidate’s campaign.
Different rules apply to independent expenditures. Federal election law permits a person or a group such as a PAC to make as many independent expenditures as desired. Independent expenditures exist when organizations or people provide funding for campaign communications, such as television advertising, that calls for the election or defeat of a specific candidate and which is made independent of that candidate’s campaign. While there is no limit on this spending, there is a disclosure requirement. The organization or person must report the existence of the independent expenditure and the source of the money.
In early 2010, the U.S. Supreme Court heard the case of Citizens United v. Federal Election Commission. In this case, the court held that, because of free speech considerations, campaign spending laws as they existed at the time cannot bar a corporation or labor union from funding an independent political broadcast associated with a federal election. Moreover, as an example of another form of independent expenditure, state and local committees can pour unlimited amounts of money into grassroots activities such as voter drives in support of their candidate.
While corporations and labor unions are prohibited from making contributions or expenditures in a federal political campaign, they may establish their own PACs. These PACs may raise funds from a limited group of people, then use the funds raised to support specific political campaigns or committees. Beyond supporting these PACs, corporations and labor unions are permitted other activities relating to federal elections, subject to certain restrictions.
Finally, pursuant to FECA, groups including PACs; national, state and certain local political parties; and candidate committees are required to disclose the results of their federal campaign fundraising and campaign spending efforts. These organizations must disclose the names of any person who gives them more than $200 USD in any given election period. They must also disclose any expenditure to any person or vendor that exceeds $200 USD.