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

Updated on February 6, 2017
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Most of us have heard these terms bandied about quite a bit in the last few months. 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 Non-profit Tax Exempt Status

PACs and Super PACs can be organized into Non profit 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 Committee
PACs
Super PAC
501(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 non-profit, Tax exempt organizations.
  • Corporations and Unions can donate to Super PACs and all the non-profit, and all Tax exempt organizations
  • All non-profit 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 means that if a non-profit, 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 dislcose the source of the funds.

How to Create a Super PAC with Tax Exempt Status

  1. Contact a Delaware corporate lawyer.
  2. Have him setup 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 2013.
  6. Not filing until May will allow you to get money for your super PAC and nobody will no about 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 enforcement of campaign and media law.

Conclusion

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.

News Update 7/19/2012, Sheldon Adelson Super PAC connected to foreign Interests

Sheldon Adelson, one of the biggest Super PAC donors to republican candidates is connected to foreign interests in Macau. He is being investigated for using these interests to fund his super PACs. Here is the link: http://www.propublica.org/article/inside-the-investigation-of-leading-republican-money-man-sheldon-adelson

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    • peoplepower73 profile image
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      Mike Russo 4 years ago from Placentia California

      Sooner28: Yes, the make accusations and get the people to believe it then hold investigations to find the evidence to fit the accusations. I'm hoping this backfires on the Tea Party groups. Thanks for your comments.

    • profile image

      Sooner28 4 years ago

      I believe in doing my best to accord my beliefs with the evidence. There isn't any evidence Obama secretly planned to use the IRS to go after conservative groups. Obama is guilty of many other things, but, in my opinion, this is just kind of a sloppy situation that conservatives, thanks to the MSM initially reporting it as a huge scandal, refuse to let go of.

      For those opposed to the IRS in general, I can understand. But if one is a conservative and believes in tax exemptions for special groups, then these Tea Party groups are the ones who are reprehensible, because they are trying/tried to take advantage of a huge loopholes in the law.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      mperrottet: Thank you. It would be nice if the public could really understand this. I think if most people understood this, there could be a movement started to overturn Citizens United. It only benefits the super rich and corporations. Thanks for your votes and sharing.

    • mperrottet profile image

      Margaret Perrottet 4 years ago from Pennsauken, NJ

      Thanks for explaining this so clearly. It seems to me that the IRS was probably just trying to do their job in making sure that organizations that were primarily political didn't get tax exempt status. They were misdirected by targeting these organizations, but I can see how it happened. PACS and SuperPACS should be eliminated, as should all lobbyists as far as I'm concerned. In this day of easily being able to reach our representatives through the internet, why do we need these large organizations to petition Washington? We really need to reverse Citizens United, get rid of all lobbyists, and have complete campaign finance reform in order to straighten this country out. Voting this up, useful, interesting and sharing.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      I've changed the title and summary to be more relevant to the IRS scandal and investigation that is taking place.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      Hey Sooner: That's right, the Supreme Court didn't do us any favors by their ruling on Citizens United and the connection to super PACs. Maybe if this investigation digs deep enough and the people really understand the connection, it may help overturn Citizens United. Thanks for your comments and dropping by. It's nice to reply to sensible people after some of the comments in those forums.

    • profile image

      Sooner28 4 years ago

      You know what's funny? I initially thought the IRS's actions were a real scandal; however, the Supreme Court is the one who opened the door to all of these conservative groups trying to parade around as social welfare organizations when they are anything but (like Karl Rove). So, I think the IRS was justified in giving them extra scrutiny. The only question is if their methods were a little over the top.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      I published this hub almost a year ago. I had no idea the IRS was going to be investigated for these tax exempt entities that were brought about by Super PACs. I just updated this hub to the latest news on the IRS. Read how both side of the isle use these to fund their campaigns and have been doing it for years.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      cjames2783: That's a very notable cause and I wish you luck. But these Super PACs have so much money, they are not going to listen to anybody. Thanks for dropping by.

    • cjames2783 profile image

      Corey James 4 years ago from United States

      I emailed several SuperPACs (Priorities USA, Restore Our Future, American Crossroads, Winning Our Future, and Club for Growth) the following: "What exactly are you hoping to achieve in this election? What are you hoping to gain by getting "your guy" elected? What sorts of political favors are you hoping to buy in this election?"

      I have yet to receive a response. Does anyone else want to join me in asking these simple questions?

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      I have added a procedure as to how you can create your own super PAC with tax exempt status. It is some what tongue and cheek, but yet realistic.

    • peoplepower73 profile image
      Author

      Mike Russo 5 years ago from Placentia California

      junko: I agree with you totally. It was a stretch to go from Hillary Clinton's speech, to the Citizens United video, to Corporations are people and Money is free speech...and yet they don't want the government involved in their business, just the highest court in the land. And now if you are a social welfare organization, you can give unlimited undisclosed funds to support your political interests.

    • junko profile image

      junko 5 years ago

      The highest court in America may be guilty of overreach in the the orignal decision about corporations being people. I think they doubled down on that decision with the recent decision on the state of Montana. It usually takes two or three presidents and quite a few years to reverse the highest court's decisions, it hasn't been done often. If the people really want their country back, it must be soon.

    • cprice75 profile image

      cprice75 5 years ago from USA

      I notice that...my initial response did not mention a side, either. Actually, both sides irritate me--precisely because both sides are bought out.

    • peoplepower73 profile image
      Author

      Mike Russo 5 years ago from Placentia California

      American Romance, cprice75: You notice that what I have written does not take sides. I believe that it applies to both sides. However, the republicans are more connected to big monyed interests and corporations than the democrats. Sheldon Adelson, a LasVegas casino owner has a Super PAC and he says he will give 10 million to his PAC to support Romney and if that is not enough, he will make it 100 million.

    • cprice75 profile image

      cprice75 5 years ago from USA

      That's funny. Basically no one or very few in government would qualify as communists. You might want to read up on the definition of the word. BTW, I didn't vote for Obama. He's no communist, though. Mildly socialist maybe, but barely more so than most 1950s to 1990s "conservatives."

    • American Romance profile image

      American Romance 5 years ago from America

      haha you don't think China and the rest are not helping your communist president?

    • peoplepower73 profile image
      Author

      Mike Russo 5 years ago from Placentia California

      cprice75: I agree with you. Many multi-national corporations have foreign connections and with this law, they don't have to disclose the source or amount of the funds. This is what allows Sheldon Adelson, a Mitt Romney backer to say that he will give 10 million or if necessary 100 million to back Romney's campaign. Of course according to the rules, he can't say "Vote for Mitt Romney."

    • cprice75 profile image

      cprice75 5 years ago from USA

      At least unions are run by Americans. That's not always the case with corporations. The vast majority of money in Wisconsin was spent by out-of-state people.

      Now let's just apply that to the whole US. Now, China or Saudi Arabia could (and probably will) heavily influence the elections. That's not exactly a great scenario for any American, union or right-to-work, and way scarier than American unions influencing elections.

    • peoplepower73 profile image
      Author

      Mike Russo 5 years ago from Placentia California

      yoginijoy: Thanks for your comments. They want you to think it's like what we learned in school, but it's really not once you look behind the scenes. Thanks for dropping by. I hope you share this with everybody.

    • yoginijoy profile image

      yoginijoy 5 years ago from Mid-Atlantic, USA

      Great subject and so timely! Thanks for the explanation. I wish more people knew about this aspect as well as the power that lobbyists have in our government. Our democracy is not at all what most of us learned in school! Voting up and interesting!

    • American Romance profile image

      American Romance 5 years ago from America

      cprice75, Unions have been stealing elections for many years and using money that many in their organizations did not approve of. Republicans needed pacs to be able to compete with unions. As you noiticed in Wisconsin the unions no longer have the upper hand and the voice of the people can now be heard over their roar!

    • cprice75 profile image

      cprice75 5 years ago from USA

      I find super PACs disconcerting. They provide an opportunity for elections merely to go to the highest bidder. Those elected to office are supposed to represent their constituency. With nearly unlimited money, those who pay for these ads become the constituency while the masses have few who actually represent them. Also, since they are not required to disclose who contributes, China, North Korea, or any other nation could influence American elections. Disconcerting, indeed.