NHEH Publications

Campaign Contributions: Know the Rules to Avoid Violating Campaign Finance Laws

by Anne Secker, ESQ

Election season is here again.  Although the Citizens United case decided several years ago opened the floodgates for corporations and labor unions to make political contributions, it did not change the law regarding individual political contributions.  There remain limitations on how much individuals can contribute to both state and federal campaigns.  It is vital to know the individual campaign contribution rules to avoid inadvertently violating them.

California limits for Individual Campaign Contributions

How much an individual or business can contribute to a candidate in a California state election depends which office the candidate is seeking.  The chart below shows the maximum contributions per office:

Contributions to State Candidates Per Election:





 Lt. Governor, Secretary of State, Attorney General,    Treasurer, Controller, Supt. of Public Instruction,        Insurance Commissioner, Board of Equalization






The primary, general, special, and special run-off elections are all considered separate elections.  Thus, an individual who contributed $4,200 to a candidate for the primary, can also contribute another $4,200 to the same candidate for the general election.

In addition to contributions made to an individual candidate, individuals can contribute to committees that support state candidates (PACs).  An individual can contribute a maximum of $7,000 per calendar year to each PAC, and $35,200 per calendar year to a political party account for state candidates.

Federal limits for Individual Campaign Contributions

Campaign contribution limits in federal elections do not change based on the office the candidate seeks.  Individuals are limited to the following annual limits:

  Candidate’s election committee

     $2,700 per election


     $5,000 per year

  District/Local/State Party Committee

     $10,000 per year

  National Party Committee

     $33,400 per year

Aggregation discussion

Here are three key things to understand about how the aggregations rules work:

1.  Employers Cannot Reimburse Employees for Political Contributions

Scenario:  Your employee writes a personal check or uses his/her own credit card to attend a fundraising event for a local elected official.  The employee then includes that cost as part of his/her monthly expense report.  The company’s controller reimburses the employee for the contribution.

This violates the campaign finance laws.  The company, not the employee, is the true source of the contribution because of the reimbursement.  Absent company action to ensure that the contribution is properly reported as a contribution by the company, the company could actually be charged with “laundering” campaign money to avoid disclosing the true source of the funds.  Even though inadvertent, campaign laundering violations have historically resulted in the highest fines under California’s campaign finance laws.  Such “laundering” can also lead to criminal charges.

Steps to Take to Avoid Problems:  Companies should carefully review employee expense reports and credit card statements for company-issued cards.  If the company determines that any political contributions were made by the employee and reimbursed by the company, the company should immediately inform the recipient of the contribution that the company is the source of the funds so the recipient can prepare accurate reports.  In addition, companies should set up a basic compliance program to avoid future missteps.

2.  Know the Aggregation Rules to Correctly Report Contributions

Scenario 1:   Smith and Jones are partners in SJ Ranches.  Smith and Jones are also members in JS Agriculture, LLC.  They are both actively involved in managing both the partnership and the LLC.  The Partnership donates $5,000 to Candidate A.  The LLC donates $5,000 to Candidate A. 

Scenario 2:  Brown is an officer of XYZ Corporation.  XYZ has a subsidiary named ABC.  Brown directs that XYZ contribute $5,000 to Candidate B and also directs ABC to contribute $5,000 to Candidate B.

The contributions in each scenario must be aggregated so that the true amount contributed is $10,000.  Under the law a single person or group of persons who "direct and control" contributions must report those contributions as if coming from a single source, even if the funds come from different legal entities.  Separate ownership of the entities involved or separate funding sources for the contributions will not avoid aggregation as long as there is individual or group control.  The rule even applies if the contributions come from the personal funds of the persons who “direct and control” the contributions.

Steps to Take to Avoid Problems:  Understand how your companies make political contributions and who controls the decision to make such contributions.  Be aware of these aggregation rules.  If in doubt, consult your legal advisor before making the contributions so you can correctly report these contributions.

3.  Misunderstanding California’s “Major Donor” Rules

Scenario:  You contribute $5,000 to Candidate X in June.  In September you contribute another $5,000.  Two weeks before the election you contribute another $5,000 to help with the last blitz of pre-election campaign costs. 

When the total of the contributions you make to any one candidate hit the $10,000 mark, you have become a “major donor” and must comply with the disclosure requirements under California’s Political Reform Act.  You must file a Major Donor Committee Campaign Statement (Form 461available at http://www.sos.ca.gov/prd/forms/461.pdf).  Any campaign receiving more than $5,000 in a calendar year from a single donor must inform the donor of the donor’s obligation to file this report.  If any contributions to a single candidate exceed $50,000, Form 461 must be filed electronically with the Secretary of State. 

Additionally, once the $10,000 threshold is achieved, any additional donations over $1,000 made in the 16 days before the election must be specially reported within 24 hours.  These required reports are called “late contribution” reports.  Failure to file these reports or filing them late exposes the donor to fines up to $5,000 and late filing penalties of $10 per day.  Note that the campaigns are also required to file these “late contribution” reports within the 24-hour period.  Therefore the donor’s failure to file timely will often be glaringly obvious to the Fair Political Practices Commission reviewing the candidate’s reports.

Steps to Take to Avoid Problems:  Pay close attention to the amounts contributed to a single candidate.  Once the amount contributed exceeds $10,000, be aware of and comply with the filing requirements, particularly the “late contribution” 24-hour filing requirements relating to contributions made during the 16-day contribution period immediately preceding the election.

Monetary penalties for violating the campaign finance laws can be stiff.  The negative publicity from charges against donors for violation of these rules can be as bad, or worse, than the fines involved.

This article is intended to address topics of general interest and should not be construed as legal advice.
© 2012 Noland, Hamerly, Etienne & Hoss