Consider these federal laws when contributing to candidates

So you thought the next presidential election was being held in November 2008? Think again. The horses are already out of the gate and jockeying for position around the first turn. Handicapping the field involves many factors (party affiliation, voting record, beliefs and charisma to name a few), but one factor may be the best indicator of the true thoroughbreds, those built for the long haul – money. 

Through the first two quarters of 2007, three candidates were required to file their first campaign reports for the 2007-2008 election cycle. Clinton, Obama and Romney have initially broken from the pack, raising in excess of $44 million each in political contributions, with Clinton in the lead, raising a staggering $63 million. If the other candidates hope to stay within striking distance down the backstretch this fall and winter, then they must keep up with the current contribution pace.

By now, many of you have likely been solicited for contributions to at least one of the presidential candidates, with those requests coming from many sources – friends, colleagues, employers and local campaign figureheads. The underlying political model is not new. Candidates who can establish a sizable war chest early on may dissuade latecomers from entering the race and may, by attrition, outlast the other competitors through campaign expenditures. However, this model has never been applied so aggressively this early in an presidential election cycle.

With that in mind, hereÂ’s a snapshot of the federal election laws that you should consider before making your presidential contribution(s):

• Individual Contribution Limits. An individual may contribute up to $2,300 per candidate per election, with primaries being viewed as separate elections and spouses being considered separate contributors. Therefore, a married couple could potentially contribute a maximum of $9,200 to the victorious presidential nominee of each political party (each spouse contributing $2,300 to such nominee’s primary and general election campaigns). Also, the maximum contribution can be made before the primary election takes place (if the recipient loses the primary, then he/she must return all contributions otherwise allocated to the general election). Finally, individuals are subject to a $108,200 biennial limit for contributions to all federal sources during the 2007-2008 federal election cycle (broken down as $42,700 to candidates, $22,800 to national party committee, and $42,700 to other committees and PACs).

• PAC Contribution Limits. As a general rule, federal political action committees (PACs), including those sponsored by corporations, are subject to the same per campaign contribution limits as individuals. However, if a PAC has qualified for “multicandidate” status, then it may instead contribute up to $5,000 per candidate per election.

• Timing. With the federal contribution limits applying per election rather than per calendar year, once those limits have been met, the contributor must step to the sidelines. This creates an interesting dilemma for contributors who are being pressured to make sizable contributions from their various suitors. Should they impress the candidate with a single, maxed-out contribution now (knowing that the campaign trail will not return to their doorstep) or do they make a smaller contribution, wait and see how the field settles out and then later max out their contribution to one of the frontrunners? Many clients, particularly corporate-sponsored PACs, prefer to hedge their bets by making smaller contributions to several candidates this year, and then double down on one of the favorites next year.

• Disclosures. For each individual that has contributed over $200 to his/her campaign, a presidential candidate must report such individual’s name, address, employer and occupation. These itemized reports are available to the public on the Federal Election Commission’s Web site. However, the individual contributor lists contained in those reports cannot be sold or used for commercial purposes or generally utilized to solicit additional contributions.

Returning to the horse track, the 2008 presidential election is off to a blistering start. Unless the current contribution pace decelerates, no more than a handful of the candidates will survive the sprint to the finish line at next yearÂ’s primaries. Hopefully, their views on the key issues of the day will determine ultimate access to the winnerÂ’s circle, but political contributions will likely provide the endurance they need to get there.

Justin A. Hoover is an attorney in the Fort Worth office of Winstead PC, practicing law in the

corporate securities and mergers and

acquisitions practice group.