Business Guide to Political Lobbying and Campaign Donations
The United States has a long history of small, medium, and large businesses investing in political campaigns and political groups. In the 2016 election cycle, AT&T, Microsoft, and Bloomberg all contributed millions of dollars to influence the election. In non-election years, businesses contribute to lobbying firms and lobbyists. Between 2007 and 2010, the top lobbying firms in the US contributed around $5.8 billion to attempt to influence legislation for their business and industry.
Why such a large investment to election campaigns and political causes?
The return on investment can make political contributions lucrative. The $5.8 billion that various businesses contributed to lobbying firms had an estimated ROI (return on investment) of $4.5 trillion.
Here are a few real cases of successful lobbying efforts by private industries in the United States:
- 1,455 lobbyists working on behalf of 400 healthcare companies led to tweaks to the 21st Century Cures Act which decreased the regulatory burden on pharmaceutical companies to rigorously test drugs before they can be brought to market.
- The gun and firearm industry through lobbying have successfully influenced legislation to prevent legislation that would allow the Centers for Disease Control and Prevention to study the causes of gun violence.
- Health insurance lobbyists influenced legislation to raise private Medicare prices in 2013.
It cannot be denied that the tradition of small, medium, and large businesses lobbying to influence state and federal legislation in their favor has a long history of success.
Should Businesses Contribute to Political Causes?
The question of should business owners contribute funds to influence local, state, and federal legislation is a complicated one. On the one hand, it could significantly increase the chances that pro-business legislation becomes a reality. That legislation could increase the business profits. On that front, why wouldn’t you invest in a future that would lead to your business flourishing?
On the other hand, political contributions by owners of private businesses can be an ethical gray area in some cases. A business supporting political lobbying efforts is legal, but whether or not you’re conducting it in an ethically right manner is a tad more complicated. Is it right to throw your money to support causes as a private organization that could have a negative fallout for others? All business owners must take stock of that potential and come to terms with that decision.
At the end of the day, you must decide: to lobby or not to lobby.
Contributing to Political Causes Legally
If you decide to invest in contributing to political causes, lobbying firms, or lobbyist, you need to navigate carefully. The United States doesn’t allow companies to contribute an unlimited amount of money to any lobbyist, campaign, or lobbying firm they desire.
Earlier this year, for example, it was discovered that Donald Trump’s charity, The Donald J. Trump Foundation, was fined $2,500 by the IRS for making an illegal political contribution.
As you embark on politically driven donations, you will need to carefully to ensure that you follow the state and federal laws to avoid legal fallout and potential financial fines.
Campaign Contribution Law
Here’s what you need to know about political contributions as a business owner:
Business owners must make donations to political campaigns personally. This means that you cannot utilize your business funds. You will report the donations on your own personal tax returns rather than on the businesses tax returns. Here are minor aspects of campaign finance law (as of 2016) that you will need to know:
- – Can contribute up to $2,700 to a candidate’s campaign per election. (You can contribute the full $2,700 during both the primary and general elections.)
- – Can contribute up to $5,000 each year to a Political Action Committee (PAC).
- – Can contribute up to $10,000 combined each year to state, district, and local party committees.
- – Can contribute up to $33,400 each year to a national party committee.
- – Can contribute an unlimited amount of money to Super PACs.
If your business is a corporation, the business can make, in some cases, political contributions..
- Form a PAC to make contributions and conduct various types of activities to promote the candidate (more information here).
- Can contribute an unlimited amount of money to Super PACs.
Charities founded by business owners:
- Non-profit, tax qualified charities, cannot make campaign donations, hand out materials, or raise money to support or oppose a particular political candidate.
Contributions and Taxes
Individual and corporate donations will need to report to the IRS. You will need to be ready to provide the following information:
- The amount donated.
- The organization that received the donation.
As a business owner, you can either:
- Take on lobbying efforts yourself.
- Hire a lobbyist.
- Hire a lobbying firm.
Businesses and business owners must adhere to the Lobbying Disclosure Act of 1995 as they venture into lobbying. The federal law focuses less on setting a financial limit and more on trying to ensure public disclosure of contributions.
Here are a few key details that the act requires:
- Lobbyists (individuals who dedicate 20% of their time toward lobbying) to register with the Secretary of the Senate and the Clerk of the House.
- Lobbyists must file semi-annual reports on amount spent lobbying.
- The company or individual must be registered as an organization or individual that is engaging in lobbying if it exceeds the amount set every quarter by the law.
- Gifts cannot be given to politicians by lobbyists or their clients.
- Lobbyists who raise more than $15,000 in support of a bill must be disclosed.
Due to the complications of adhering to the federal and (potentially) state lobbying laws, it is recommended you hire a lobbyists, a lobbying firm, or a lawyer to ensure that you are meeting all legal guidelines during the initial stages of your lobbying venture to avoid legal fines.
Is the lobbying or campaign contribution tax-deductible like other donations?
In around 99.8% of cases, politically geared donations (either lobbying or to campaigns) are not tax deductible. Individuals who live in Arkansas, Ohio, Oregon, or Virginia should look into the tax credits that are offered to individuals that make political donations to candidates in state elections.
In all other cases, you can attempt (if you want) to deduct the amount given and argue why the donation should be deductible. That though would most likely trigger an audit by the IRS that could not only a waste of time, but also costly due to the possibility of fines, lawyer fees, and court fees.
In most other cases, you or your corporation will be funding the ventures out of your own pocket. This means that there is a bit of a gamble. The contributions could lead to changes that cause the business to flourish financially. Or the endeavor might fail and you’ll lose money.
It’s a gamble that can be fairly lucrative. Individuals and businesses should just ensure as they embark on this new gamble that they adhere to all federal and state laws.
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