Accepting Contributions from Candidates Post-Election
Any fundraiser knows that donations for your nonprofit can be found in unexpected places, especially at this time of year. But did you know that you can receive donations from former political candidates and their campaigns? In the post-election landscape, nonprofits can accept gifts from former candidates who have lost their races and have determined not to run for office again. While we wouldn’t suggest a nonprofit rely on this avenue for their end-of-year campaign, these gifts (likely in the ballpark of a few hundred or a thousand dollars) can still help your bottom line.
It is no surprise that there is a lot of money in politics. Candidates at the federal and state level must raise and spend an inordinate amount of funds in order to compete. During the 2018 midterm election, the average candidate for U.S. House of Representatives raised and spent over $2 million on their campaign.
So what happens when the election is over? It will take time, even for an unsuccessful politician, to bring their account to zero and close its campaign. Candidates need to make final payments to staff, taxes, rent, and other overhead costs – but there are strict regulations on the use of excess funds. In no case may candidates use funds for their own personal use or make personal gifts to family members. But, laws often allow candidates to share their left-over campaign dollars with nonprofits. Bolder Advocacy often gets questions after the election from nonprofits who are wondering whether they can accept such donations. Organizations will want to consider many factors including public perception and the nonprofit’s overall relationship with the candidate to determine whether to accept a donation of excess campaign funds.
Laws that Permit Candidates to Donate to Nonprofits
What can a candidate who is no longer running for office do with any remaining funds? Candidates who ran for federal office may use the excess funds to make contributions to nonprofit organizations. The Federal Elections Commission outlines acceptable uses for excess campaign funds, including:
- Donations to charitable organizations defined in 26 U.S.C. § 170(c), unless the candidate receives compensation from the organization before the organization has expended the entire amount donated for purposes unrelated to the candidate’s personal benefit.
- Unlimited transfers to any national, state, or local political party committee;
- Donations to state and local candidates, pursuant to state law; and
- Any other lawful purpose, (which excludes personal use).
Many states have similar regulations on using excess funds. However, the nonprofit and non-federal candidates should consult state law to determine to what extent a state or local candidate can use their excess funds. For example, the state of Washington allows candidates to only donate to a charity registered with the Washington Secretary of State. On the other hand, Ohio and Indiana’s law permits candidates to donate to a variety of nonprofits, including 501(c)(4) organizations. And some states’ laws imitate federal law and include a provision that prohibits candidate donations to a nonprofit by which the candidate is employed or otherwise compensated (e.g., Michigan).
Reporting Candidate Donations
Contributions could come in the form of monetary or in-kind gifts from campaign assets. Candidates may have more than unspent money, they may have acquired tangible property that might be donated to a nonprofit (ex. Cell phones, laptops, office furniture, supporter lists, etc). However, nonprofits and candidates alike must be mindful that they follow the rules when making and accepting donations.
Candidates will need to report their donations in their final campaign finance reports. These reports will be publicly available. So, both candidates and nonprofits should consider this practical aspect when making and accepting donations.
For nonprofits, they must properly report donations as required by law. 501(c)(3) public charities MUST report their larger donors ($5,000 or more) on Schedule B of their annual 990 to the IRS. While (c)(3) organizations are permitted to redact their donor identity information for public distribution, they must still report their large donors to the IRS. A new ruling in 2020 provides that 501(c)(4) organizations and other non-501(c)(3) tax-exempt organizations need only report the dollar value of large donations ($5,000 or more) without identifying donor information. For non-cash contributions, nonprofits may need to report non-cash contributions in excess of $25,000 on a Schedule M of the Form 990.
Nonprofits have many things to consider when determining whether they should accept any given donation. Gift acceptance policies are a great idea to help navigate considerations such as whether any particular donation is in line with a nonprofit’s mission or values or how to properly value in-kind contributions. Nonprofits should also take steps to provide any necessary acknowledgments or disclaimers.
In addition, when considering a possible donation, a 501(c)(3) nonprofit should think about any relationship with the former candidate that might create a perception of support for their campaign. Consider whether additional facts and circumstances create a perception of political intervention (See Appendix A, Rules of the Game). Accepting a donation from a candidate who is shutting down their campaign and not running again is lower risk.
If candidates offer to donate lists, electronic data, or similar in-kind donations, 501(c)(3) organizations should not accept assets that include partisan information. It may be a best practice to ensure that any electronic devices such as laptops, phones, or the like, are scrubbed of any partisan or candidate information prior to the donation. Examples of partisan information could include candidate polling, campaign plans, or any information that indicates how someone was likely to vote.
When accepting in-kind donations, especially data assets, consult your legal counsel and accountants to assist in determination of fair market value. Nonprofits will want to review any potential contribution to ensure that they proceed in a prudent and compliant manner.
Quick Do’s and Don’ts:
- Create a Gift Acceptance and Review Policy.
- Consider acceptance of the gift in light of public perception and overall relationship past or future with the candidate or elected official.
- Consider your facts and circumstances test to assess the risk level of accepting the donation being seen as political intervention. (See “Can We Say That” podcast for a discussion of facts and circumstances).
- Consider whether you will be lobbying this candidate in the future. Does this create a conflict of interest?
- Consider and abide by state campaign finance and ethics regulations.
- Don’t accept in-kind contributions without calculating fair market value.
- Don’t overly thank a candidate or republish the candidate’s notice of donation.
- Don’t consider the donation a quid pro quo.
- Don’t accept a donation of electronic assets without ensuring partisan information is deleted.
- Do call Bolder Advocacy with questions about accepting donations.
Our team at Bolder Advocacy is available to help if you have questions about accepting excess contributions from candidates who are winding down their campaign. You can access our hotline at no charge by emailing us email@example.com or calling 866-NP-LOBBY.