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Running for office costs a lot of money. That’s why candidates collect millions of dollars in contributions, as do the political action committees (PACs) established in their name. Candidates in recent presidential cycles have drawn billions of dollars in donations.
But once the political campaign is over, the volunteers leave, the printers are turned off, and the buttons are put away, where does all that leftover money go? There are rules in place that dictate how money can be spent after a campaign concludes. Permitted uses include charitable donations, donations to other candidates, and saving it for a future campaign; personal use is prohibited.
Key Takeaways
- Presidential candidates raise millions and even billions of dollars from donors and through political action committees during campaigns.
- There are rules in place for how money can be used after a campaign ends.
- Permissible uses include charitable donations and donations to other candidates while personal use is prohibited.
- Campaign funds given for a general election during a primary, must be refunded if the candidate will not be in the general election, and can only be applied to other acceptable uses with permission from the donors.
- Super PACs have less restrictions on what can be done with left over funds, though they often return them after winding down costs.
Understanding Candidate Campaign Committees
Candidate campaign committees are the official committees run by the candidate and their campaign team. The Federal Election Commission has rules in place to control how money raised by such committees is spent after a candidate bows out, or after an election is officially over.
Approved Uses for Campaign Funds After Elections
The contributions can be used in the following ways:
- Donations to charities as long as the candidate does not receive any compensation from the organizations before it is spent and the donation is not used by the charity to benefit the candidate.
- A donation of a maximum of $2,000 to another federal candidate, and donations to state or local candidates subject to state law.
- Gift or donations of nominal value on special occasions to anyone besides the candidate’s family.
- Unlimited transfers to a local, state, or national political party committee like the Democratic or Republican National Committees.
- Transfer to a future election campaign committee of the same candidate.
- Creation of a leadership PAC to back other candidates and a political agenda. Critics say these can be used as slush funds since there are few restrictions on this kind of spending.
Prohibited Uses of Campaign Contributions
Candidates are not allowed to use any remaining funds for personal use after all campaign-related debts are settled. Personal use is defined as “a commitment, obligation or expense of any person that would exist irrespective of the candidate’s campaign or responsibilities as a federal officeholder.”
In other words, campaign funds may not be used for an expense that exists independent of the campaign. Expenses that are automatically considered personal use include:
- Household items
- Mortgage or rent for a personal residence
- Salary payments to the candidate’s family unless they provide a bona fide service to the campaign and the payment reflects the value of the service in the free market
Important
Candidates who are unopposed are allowed to have a separate contribution limit.
Rules for Refunding General Election Contributions
The amount of money any individual can donate to a single candidate is capped. The Federal Election Campaign Act places caps on the amount of contributions per election, which can be subject to adjustment.
One important point to note is that the primary election and general election count as two separate elections. This means that it is possible for someone to contribute twice to a federal candidate—once during the primary and once during the general election.
If a candidate receives contributions for a general election, but drops out of the race or loses the primary race beforehand, contributions must be refunded to individual donors within 60 days. Alternatively, the candidate can redesignate or redistribute their general election funds with the contributor’s permission.
Navigating Super PAC Regulations Post-Election
Ideally, contributions should not be lying around and should be spent as quickly as they come in to maximize the chances of the candidate winning. However, a super PAC can have money left if those at the helm were reluctant or inept.
“Where you see a lot of money left over in the super PAC after the candidate drops out, that will probably tell you something about how seriously the super PAC took the race, to begin with,” according to Robert Kelner, partner of the law firm Covington & Burling, specializing in election and political law.
Super PACs cannot coordinate with a federal candidate or donate to a national political party committee. There are no regulations on how a super PAC uses funds after the candidate drops out or the election is over. They can continue to use the money to support the same candidate in future elections, or another federal candidate in future elections. They can also donate the money to other organizations aligned with their political cause. Although a super PAC’s treasurer isn’t legally obligated to refund any of the money to donors, they often do. There have been instances where super PACs have opted to refund large sums to donors after elections.
Can Politicians Keep Campaign Funds?
Politicians cannot keep any campaign funds for themselves. Contributions must be used during the campaign to pay for related expenses. They are not intended for personal use. Any money that is left over after a candidate drops out or once the election is over must be used to pay off debts. Funds can also be used for other purposes. For instance, a candidate may donate an unlimited amount to a federal, state, or local political committee, or they may be refunded to donors.
Can Campaign Contributions Be Refunded?
If a candidate receives contributions for the general election, but does not make it past the primary they must refund general election contributions to donors. This must be done within 60 days. They may also redirect the funds elsewhere with the donor’s permission. Some candidates may also choose to refund contributions to donors for moral or ethical reasons, or for legal purposes if a donor has exceeded the maximum allowable contribution.
Are Campaign Contributions Subject to Taxes?
All political organizations are subject to taxation under section 527 of the Internal Revenue Code. As such, they may have filing requirements with the IRS. Donors who wish to make contributions to political campaigns should note that they do not count as charitable donations and, therefore, cannot be used to claim a tax deduction.
Can You Deduct Campaign Expenses?
You cannot claim any campaign expenses for a political candidate as a deduction on your annual tax return. This means that anything you’ve spent out-of-pocket is not deductible—even your time.
The Bottom Line
Campaign contributions, whether from individuals or PACs, play a crucial role in financing electoral campaigns, covering a myriad of expenses such as travel, administration, and salaries. However, once an election concludes, strict regulations guide the allocation of remaining funds.
Permissible uses include donations to charities, other candidates, or party committees, and saving for future campaigns. Crucially, personal use of leftover campaign funds is strictly prohibited, ensuring that finances are allocated appropriately and transparently post-campaign. Candidates must maintain precise records of contributions and expenditures, underscoring the importance of financial transparency and compliance in political financing.
