Skip to main content

What Are PACs and Super PACs and Their Connection to the IRS?

Mike has a keen interest in the effects of politics in our culture. He has a unique way of simplifying complex concepts.

A PAC is an organization formed to raise money and fund a candidate.

A PAC is an organization formed to raise money and fund a candidate.

PACs and Super PACs

Most of us have heard these terms bandied about quite a bit in the past. So I decided to do the research, and I would like to share with you what I found.

PAC (Political Action Committee)

A PAC is an organization formed to raise money and fund a candidate. The money can be used to promote a candidate or defeat an opposing candidate. How much can they give?

  • $5,000 to a candidate committee per election (primary, general, or special election).
  • $15,000 annually to any national party committee.
  • $5,000 annually to any other PAC. PACs may receive up to $5,000 from any one individual, PAC or party committee per calendar year.

They have to disclose their donors semi-annually in non-election years and quarterly in election years.

Super PACs

Super PACS are an offshoot of PACs and were created in July 2010, following the outcome of a federal court case known as SpeechNow.org v. Federal Election Commission. Here are the particulars for a Super PAC:

  • They can raise unlimited amounts of money to advocate for or against political candidates. However, they cannot donate directly to a specific candidate.
  • Their donors can be corporations, unions, associations, and individuals.
  • They must report who their donors are to the Federal Election Commission on a monthly or quarterly basis, the same as a PAC.

You can identify ads created by Super PACs because they do not have the by line that states. "I'm (Name of Candidate) and I approve of this ad."

PACs and Nonprofit Tax-Exempt Status

PACs and Super PACs can be organized into nonprofit tax-exempt status under IRS code 501(c). They can engage in varying amounts of political activity depending on their type of group. However, they are not legally required to disclose any information about their donors. They can also give unlimited funds. The following table shows the interaction among these various groups.

 Candidate CommitteePACsSuper PAC501(c)(3)501(c)(4)501(C5,6)

Donor

 

 

 

 

 

 

Individuals

X

X

X

 

 

 

PACs

X

X

X

X

X

X

Corporations

 

 

X

X

X

X

Unions

 

 

X

X

X

X

501(c)(3)

 

 

 

X

 

 

501(c)(4)

 

 

X

X

X

X

501(c)(5)

 

 

X

X

X

X

501(c)(6)

 

 

X

X

X

X

  • 501(c)(3) - Includes religious, charities, scientific and educational groups. They cannot engage in political activities, except for some voter registration activities.
  • 501(c)(4) - These are social welfare organizations. *
  • 501(c)(5) -These include labor and agricultural groups *
  • 501(c)(6) - These include business leagues, chamber of commerce, real estate boards, and boards of trade.*

*501(c) (4,5,6) groups can engage in political activities as long as these activities do not become their primary purpose.

What Does All This Mean?

It means the following:

  • Individuals can donate money to a candidate, a PAC, or a Super PAC.
  • PACs can donate to other PACs and to all the nonprofit, tax-exempt organizations.
  • Corporations and unions can donate to Super PACs and all the nonprofit groups and all tax-exempt organizations
  • All nonprofit tax-exempt organizations can donate to each other except a 501(c)(3). They can only donate and receive from each other.

The implications of this mean that if a nonprofit, tax-exempt organization is formed and they engage in political activities, but it is not their primary function, they can give unlimited amounts of money to create ads as long as the ad does not say to vote for or against a specific candidate. Further, they are not required by law to disclose the source of the funds.

How to Create a Super PAC With Tax-Exempt Status

  1. Contact a Delaware corporate lawyer.
  2. Have him set up a shell corporation in your name.
  3. Meet with your board of directors, which is just you.
  4. Elect yourself as president, secretary, and treasurer.
  5. Authorize your corporation to file documents with the IRS as a (c)(4) corporation operating as a "General Welfare Organization."...but don't file until May.
  6. Not filing until May will allow you to get money for your super PAC and nobody will know about it until after the election.

What I have just outlined is what Stephen Colbert did on his show with Trevor Potter, the former Chairman of the Federal Election Commission. He is currently the president of the Campaign Legal Center, a non-partisan group committed to representing the public interest in the enforcement of campaign and media law.

Why Is It So Complex?

I hope this has clarified the mystery and mystique of PACs and Super PACs. It has been quite a learning curve for me and I'm happy to share it with you. It is overly complex, but I think this is by design to keep the average person from really understanding how these organizations are interrelated. Now when you hear about these organizations, you will have a better understanding of what they are about.

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

© 2012 Mike Russo