Unpacking PACs for Associations

By Ross E. Weber

Just as the three-letter acronym “ZIP” in ZIP code has essentially replaced its originating phrase (Zone Improvement Plan), whenever “PAC” may be uttered in a certain context, one need not spell it out to understand that political action committees are the topic. And truth be told, in the current climate, any reference to political campaigns and elections may inspire the listener to wish PACs would RIP.

Associations must not fall victim to this point of view. “PACs formed by associations are some of the largest organizations in the country and give a voice to issues that may not otherwise be heard,” according to Aronson LLC, a D.C. consulting firm. PACs are an important element in any advocacy toolkit, providing a mechanism for trade and professional organizations to support candidates and access policy makers. As members look for indirect opportunities to influence public policy from the sidelines, Aronson LLC finds that a dynamic political action committee “is an effective way to show members you are defending their interests and maximizing impact.” Equally important, a PAC shows elected officials that your profession is serious about advocacy.

Legal Definition and Restrictions of PACs

The Federal Election Campaign Act refers to political action committees as “separate segregated funds.” This legal phrase is both instructive and descriptive. Since the IRS generally prohibits tax-exempt organizations from spending money to support candidates, a trade association or professional society can sponsor a PAC whose activities might be outside the scope of the association’s semi-charitable and philanthropic pursuits.

“One reason the IRS and FEC want political money separate and segregated from an association’s general fund is to protect the average member who may not want their tax deductible dues to be spent on politics,” Naylor Government Affairs Executive Director Kevin Daley points out. “That said, once that separation is established, the association can go ahead and pay for the cost of operating and raising money for
the PAC.”

Raising money for a PAC is replete with conditions and restrictions. Although any U.S. citizen may contribute up to $5,000 every year to a PAC, the PAC may actively solicit only a “restricted class” comprised of management-level employees of the association, individual members and, if the trade group is comprised of corporate members, management-level employees and shareholders of member companies.

Rules and regulations abound with the disbursement of PAC funds as well. After a preliminary period, a PAC may give a candidate up to $10,000 in the typical election cycle (2 years for the House and 6 years for the Senate): $5,000 for a primary election and $5,000 for a general election. The PAC may also contribute up to $5,000 to political parties and Leadership PACs sponsored by influential elected officials who in turn support candidates they believe will make a difference. Technically, a national PAC may contribute to state candidates, but the PAC must be registered in that jurisdiction and follow that state’s requirements.

Reconciling PAC Donations with Opposed Members

Making the distribution of PAC funds even more complicated is the fact that many members of an association may be opposed to supporting a candidate with PAC money. Maintaining a fair and nonpartisan approach to “determining who receives funding is important to provide accountability to members who donate and to the lawmakers” with whom the organization works, according to a Kentucky Chamber of Commerce manager quoted on the CQ Connectivity blog.

Barbara Arango, MBA, the executive director of an organization connected to a health professionals’ PAC, reports that several times every year, she hears from members who believe the PAC has bias toward one party or the other.

“Members sometimes pose questions or voice objections when the PAC supports a candidate of the opposing party,” she explains.

“Communication is key,” Arango continued. “We consistently remind members that PAC donations are based on a carefully crafted slate that identifies candidates who may hold sway on a particular issue or may be in a leadership position. It is important to focus on relevant issues rather than a candidate’s party affiliation.”

Strong Organization is Key to Running a Successful PAC

An association must be cautious when undertaking political action committee activity. The accounting and paperwork involved with a PAC are very different from what most associations are used to, and the treasurer is subject to civil penalties if they fail to file reports in a timely manner or if they allow acceptance of illegal contributions. Many laws, both state and local in addition to federal statutes, govern how a PAC may operate. To get the most out of this advanced advocacy tool, a transparent and fair organizational structure is necessary as is a strong connection to the parent association.

Naylor Government Affairs’ Kevin Daley explains, “The mission of the association must also guide PAC activities. The leaders of both entities must demonstrate their commitment to legislative action by contributing funds early and often. Promoting a PAC as an integral element of advocacy will enhance your standing in the profession and in the halls of government.”

Ross E. Weber is a state affairs manager for policy and engagement with Naylor Association Solutions. Learn more at www.naylor.com/management-services/government-affairs.

Photo credit: iStock.com/gremlin