Thursday, December 3, 2015

To PAC or Not to PAC

George Farrell
BlakPac Chair

That is the question.

What is BlakPac?  What s a PAC?  What is a Super PAC? Does your campaign or organization need a PAC? It's complicated.

 The BlakPac Alliance Network, which contains a PAC and a 501(c)4 can receive unlimited funds from donors and make IE to a candidate or make cash contribution to candidates and PAC's, or unlimited cash contribution to a Super PAC. If your campaign  has large donors and want to  concentrate on winning, it is best to use BlakPac and save the organization and compliance cost required by state and federal agencies. The best  time to have this discussion is during the exploratory phase of your campaign.  Both Ben Carson and Jeb Bush used the exploratory phase to raise tons of funds. After your official announcement, your campaign donation are limited by local and federal regulations. Consult BlakPac soon.

The only entity allowed not to disclose donors and do political independent expenditures ( IE ) is a 501(c)non-profit, including a 501(c)4.  The 501(c)4 only disclosures its donors to the IRS but that info is not disclosed to the public.  It is confidential and not available through the Freedom of Information Act.

All other PAC's, including Super PAC's must disclose donors.
The key restriction on the 501(c)4 is that the political IE must not make up or be the primary purpose of the non-profit. The Internal Revenue Service is vague about how they determine “primary purpose” but our legal team recommends spending no more than 40% on IE.  Its an open question if we can average the spending in the two years of an election cycle or if each year is looked at separately by the IRS.

The reason a Super PAC is needed on top of the 501(c)4 for large campaigns is that there are many IE expenditure disclosure reports that need to be filed and it is easier to file those from the Super PAC than the 501(c)4. It also adds another layer of protection of the donors as the IE will be done by your PAC and not by the 501(c)4. Both of them are allowed to receive unlimited contributions and make unlimited IE, and both are required to disclose their IE's.  Usually those disclosures are big lump payments to Public Relations Companies, Pollsters or one stop shops of campaign consultants.  The 501(c)4, if it is a corporation, can make unlimited cash contributions to a Super PAC. Also, besides being able to give unlimited IE's, the PAC can also make cash contributions within the normal PAC limits of $2,700 per election cycle, and can receive unlimited cash contributions from not just the incorporated 501(c)4 but others also  These donors must be disclosed to the Federal Election Commission .

The Cost of your own PAC
 The BlakPac Alliance Network fees are $3,500 for establishment  of each entity , the 501(c)4 and the PAC (both should be corporations), plus the cost of maintenance and compliance for each, There is an annual fee of $3,500, for the 5019(c)4, to file the annual IRS 990 reports and the state corporation  reports; and for the PAC, $1,500 monthly for the filing of the FEC receipts and disclosure reports, this increases to $2,500 in the last six months before the 2016 election.
If your campaign budget is  less than, $50,000, it's  best to use those funds in the campaign and not forming and maintaining  a PAC. Your large donors can work through BlakPac without coordinating with your campaign.  Certain conduct is “deemed” as coordination such as sharing staffs or office space or vendors.

The non IE activities of the 501(c)4 must comprise the main purpose of the 501c4.     Many of the IRS and FEC guidelines on PAC's are not clear.          Alvin Jones and our legal team  are available  to discuss  these and other issues.  Like we said, It's complicated.
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