The Pros to Forming a Political Action Committee

With state legislators ensconced in their home districts and the laws they wrote or changed going into effect, it is a good time to assess what the government is doing for us — or to us — as the case may be.

Courtesy Holland & Knight Josh Aubuchon is an attorney with Holland & Knight in Tallahassee and a member of the government affairs practice.

This is also a good opportunity to ask yourself how much government regulations and rules impact your business. Chances are it is a lot. The next question is: What are you going to do about it?

Not long ago, when the Gallup pollsters asked small businesses what their biggest challenge was, the largest number of respondents (22 percent) said it was complying with government regulations. That number probably isn’t surprising given that the actual financial burden of federal regulations on small business is 36 percent greater than it is on larger firms, according to the U.S. Chamber of Commerce.

Government action can make the difference between profit and loss for your business. On top of that, you may even have competitors who are actively attempting to tilt the regulatory playing field to their advantage and against yours. Given this situation, it is a good time to start thinking about raising your company’s political involvement by forming a political action committee (PAC). 

The primary reason for a business to form a PAC is to help support and elect those candidates who are like-minded with your business in their views on government policy. You probably saw some situations during the past legislative session in which legislators took strong stands supporting those who help keep them in office. This is a fundamental American right, upheld by the highest court. 

Obviously, it is against the law and destructive to democracy to attempt to buy or sell specific votes with campaign contributions. A bright legal line separates support for a candidacy from paying for specific votes. As a result, there are some fairly complex — and continually evolving — regulations that govern political donations.

The Federal Election Campaign Act regulates participation in federal politics and prohibits corporations from contributing directly to candidates in federal elections. Therefore, if you want to make business-focused political contributions, it will need to be through a political action committee. You will need to decide whether you want to engage in federal races, such as congressional campaigns, state races or both. This decision will determine what kind of PAC to form.

Creating your own PAC is a very effective way for an organization to show its strong support for a candidate and make a combined contribution for a larger amount than can be made individually.

Of course, in order for a PAC to give, it must have contributions itself. There are several ways to raise funds for a PAC, but the simplest way is for members to contribute directly to a PAC or to contribute voluntary amounts along with their membership dues to a parent organization.

This sounds easy enough, but organizations should be careful when setting up and engaging in political campaign activities as there are myriad other rules and restrictions, including limits on campaign contributions both to and from the PAC, how contributions may be solicited, what types of contributions may be accepted, and reporting and disclosure requirements. These pitfalls could result in fines or increased tax liabilities for organizations.

It should be noted that forming a PAC to give directly to candidates for office is not a company’s only option. In the Citizens United v. Federal Election Commission case, the U.S. Supreme Court ruled that the government cannot prohibit companies, organizations and labor unions from making independent political expenditures. These are expenditures that are not coordinated with a candidate’s campaign but can express an opinion about candidates, government policies or pending legislation.

Whether or not you like the laws regarding political campaign activities by businesses and other organizations, they remain the rules of the game. Each year, more businesses decide to consult with an experienced election law attorney and increase their political profile. The risks of non-involvement, or limited involvement through a trade group, are getting too high to ignore.