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03/22/17

Understanding Corporate Contributions

The general rule in Texas is that corporations cannot make contributions to candidates and political committees. So, you may ask why a corporation like Walmart, or an organization like the Texas Association of Realtors, can show up on a campaign finance report. The answer is a bit complicated.

The Texas Election Code prohibits incorporated entities – that includes businesses as well as non-profits – from donating to candidates or to political committees that may, in turn, donate to candidates. But other types of businesses, such as partnerships and LLC’s, are generally not subject to that prohibition. So, for example, a review of a judicial candidate’s campaign finances will often show donations from law firms which are organized as limited partnerships. This is allowed under Texas law.

Corporations are authorized, however, to form and maintain separate general-purpose political committees and pay for their overhead and certain fundraising expenses. Dr. Pepper Snapple Group maintains a PAC, for example, and the corporation can donate to that PAC to fund its offices and to raise funds from Dr. Pepper’s employees. The soda company, however, cannot give money directly to their PAC and have the PAC pass those funds on to candidates. So the next time you buy a can of Dr. Pepper, some of that money may go to pay for overhead in their PAC, but it won’t go directly toward paying a political consultant or funding a campaign ad.

Likewise, corporations are also specifically allowed to give money to political committees that are organized for the sole purpose of supporting measure elections. Measures are things like local bond elections, liquor option elections, and recall elections. For example, if a local community is considering allowing liquor sales, the local Baptist church is allowed to set-up and donate to a PAC to oppose the election.

There are also “Direct Expenditure Only Committees,” AKA “Super-PACs.” Corporations can donate to Super-PACs because those entities can only make independent expenditures (known in Texas as “direct expenditures”). These are expenditures to support a candidate in a campaign, but they cannot be coordinated with the candidate they are intended to help. Since the Super-PAC is prohibited from donating directly to candidates, the courts have said the Super-PAC can accept money from corporations. For example, Walmart could donate to a Super-PAC which could then pay for TV and newspaper ads to support a particular candidate.

Finally, since the Citizens United decision, corporations can make independent expenditures to support candidates without having to go through the trouble of setting up a separate entity. Just as a media conglomerate can distribute copies of a newspaper containing endorsements, likewise a retail store can buy television ads or send out mail expressing their views on a candidate in an election. These expenditures are sometimes required to be reported on so-called “as-if” reports, because the corporation is reporting “as-if” it was a political committee. But these types of expenditures can’t be coordinated with the candidate they are intended to benefit.

 

Summary:

The general rule is corporations may not donate to candidates or to political committees that may, in-turn, donate to candidates. However…

  • Certain LLCs and LLPs are allowed to give money  to PACs and Super-PACs that is, in turn, given to candidates.
  • Corporations may set up their own political committees, but the corporation may only fund the committees’ administrative expenses.
  • Corporations are allowed to give money to support measure elections — elections about issues rather than candidates.
  • Super-PACs cannot coordinate with the candidates they are supporting.
  • Corporations can make independent expenditures to support a candidate, such as spending money on TV ads, without setting up a separate entity (e.g. PAC or Super-PAC) but cannot coordinate with or donate directly to the candidate.

 

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