Associations, corporations, and labor unions have Political Action Committees (PACs) because by law, they are prohibited from contributing directly to candidates. PACs are managed by an organization’s employees or members as a beneficial, collective voice for achieving its policy initiatives. Here’s everything you need to know about starting a PAC in 2021.
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What is a PAC?
PACs are groups of like-minded individuals who pool their resources to achieve a common goal. PACs support candidates for elected office who share aligned philosophy and values on policy interests and issues affecting an organization.
Federal PACs are required to report their contributions and disbursements to the Federal Election Commission (FEC). State PACs report to state election agencies. Aristotle’s expert staff can help navigate the complexities of political compliance and PAC management at the federal level and in all 50 states, Washington, D.C., and Puerto Rico.
Intimidated by PAC compliance requirements? Aristotle can help with expert PAC Compliance Outsourcing Services.
Types of PACs
There are several types of PACs. Here’s what you need to know:
Separate Segregated Funds (SSF)
This type of PAC exists to represent the interests of corporations, associations, and trade associations. The Federal Election Campaign Act generally prohibits corporations (including incorporated trade associations and membership organizations) and labor organizations from using their general treasury funds to make contributions to federal candidates, federal accounts of political party committees, and other political committees (PACs). They can, however,establish a Separate Segregated Fund (SSF), known as a PAC to contribute directly to federal candidates.
Non-Connected Committees
When a PAC isn’t a political party committee, a committee that has been authorized by a candidate, or an SSF, it may be considered a non-connected committee. This is a wide category including traditional PACs, hybrid PACs, and super PACs, among others.
What are Super PACs?
Super PACs were established in 2010 as a result of two landmark Supreme Court cases:
- Citizens United v. Federal Election Commission, which was ruled on by the U.S. Supreme Court in 2010.
- org v. Federal Election Commission, which was decided by the D.C. circuit, also in 2010.
A Super PAC can accept unlimited donations, but they cannot coordinate their spending with a specific political campaign, and they cannot donate directly to candidates.
Unlike an SSF PAC, Super PACs can collect money from a variety of groups without a limit on the donation size. They can take money from unions, corporations, and individuals. Super PACs typically form around specific issues.
How to Start a PAC
In this post, we will discuss the details of starting an SSF PAC, which is a type of PAC that can be used contribute directly to federal candidates. A Federal SSF may also contribute to state and local candidates in 45 of the 50 states with varying state and local reporting requirements.
Step 1 – Appoint a Treasurer
Your organization will need to appoint a PAC Treasurer. This is required by the FEC. You need a Treasurer to accept contributions or spend money. It is the treasurer who will be found liable for any actions they take, typically officially but sometimes personally. The Treasurer is the one who will sign committee statements and report and deposit receipts. They’re also the individual in charge of authorizing expenditures or appointing someone else to authorize expenditures, and they are responsible for monitoring contributions and make sure they are legal.
Here are the FEC’s guidelines for appointing or changing treasurers.
Step 2 – Incorporation
While not required, you may consider incorporating your PAC to protect it from liability. Incorporating to avoid liability does not mean that your PAC will be considered a corporate entity, and it does not violate the ban on corporate contributions. Nor does it affect the Treasurer’s liability with compliance for campaign finance law.
Step 3 – Register with the FEC
You also need to file a statement of organization with the Federal Election Commission (FEC). No matter the size of your PAC or the amount of funds you have raised, you must register your SSF within 10 days of establishment. This can be done by submitting the Statement of Organization (From 1) with the FEC, which includes information like your PAC’s name, address, and treasurer.
Step 4 – Get Tax ID & Bank Account
The first step to creating an SSF PAC is to establish a bank account. You’ll need this account to make deposits and disbursements. To open an account, you’ll need a taxpayer identification number. You can get an employer identification number by completing IRS Form SS-4.
You should not open a bank account using an individual social security number or under a corporate EIN. The bank account for your new SSF should be at a National Bank, State Bank, or a FDIC- or NCUA-insured institution.
If your PAC will be performing both federal and non-federal election activities, you may consider establishing a separate bank account for each. For instance, you may set up one bank account for federal elections and a separate account for state and local elections. This strategy can help to make FEC reporting for your federal activities easier and more organized.
Step 5 – Fundraising
There are many ways for your organization to generate money for its PAC.
Before you begin, it’s important to understand the retractions on solicitations placed on SSF PACs. According to the FEC:
- All Contributions to the SSF must be voluntary
- Special notices must be included
- Only a limited class of individuals may be solicited
- Solicitation of the general public is prohibited
- All contributions and records must be forwarded by collecting agents and others in a timely manner
Possible solicitation methods for SSF PACs include:
- Payroll deduction
- Written solicitations
- Online solicitations
- Solicitations at conventions or meetings
- Matching charitable contributions
- Events and promotions
- Combined dues and solicitation statements
Note that the FEC places unique restrictions on each of these SSF solicitation methods. For more information, see here.
The Aristotle Virtual Fundraiser Tool can help to streamline and track your fundraising activities. Learn More
Start A Successful PAC Today
Starting a PAC affords organizations the unique ability to support candidates for elected office while establishing a political footprint and expanding the focus on the issues of importance.
To help ensure the success of your PAC, consider taking advantage of the PAC technology solutions, consulting, and compliance services available through Aristotle. We look forward to helping you stay compliant and establish and grow your PAC.
