Principles to keep in mind during the coming election season.
All citizens have a fundamental right to participate in the political process, whether it’s expressing your political opinions or making contributions to political candidates or organizations. However, just as with any fundamental right, there are limits. Political contributions are heavily regulated by the government and can impact public perception. If your clients are considering donating to a political candidate or organization, ensure that they carefully consider the following five factors before doing so.
1. It’s better to ask for permission than forgiveness.
Campaign finance laws that regulate and restrict political contributions vary greatly by jurisdiction, and restrictions on political giving can come in many different shapes and sizes.
In particular, donors should always be mindful of whether there are applicable contribution limits, prohibitions or disclosure requirements when making a contribution. Penalties for violating these rules can be very significant, including potentially hefty fines and, in rare instances, incarceration.
Depending on the circumstances, making a political contribution can even result in canceling a government contract or making a contractor ineligible to bid on government contracts in some jurisdictions. Accordingly, it’s critical that donors do their own due diligence or seek counsel to confirm that their political contributions are compliant with the applicable rules before making a contribution.
2. You are the company you keep.
When your client contributes to a candidate or a political organization, he’s expressly endorsing them. He may be supporting them for a very specific reason, but he’s generally associating himself and potentially his business with that candidate or organization when he makes a contribution.
Further, the world of campaign finance is generally very transparent. Despite what you may have heard about “dark money” in politics, there are very few options, if any, to effectively participate in elections confidentially. Your client should assume that any political contribution that they make will either be reported in a public filing or discoverable by the general public and the media.
3. Never reimburse a political contribution.
Although political laws vary from jurisdiction to jurisdiction, one rule is consistent everywhere – it’s illegal for an individual or entity to reimburse another individual or entity for making a contribution to a political candidate. Not only is it a violation of campaign finance laws but also it’s a felony in most jurisdictions. While most campaign finance violations won’t result in jail time, this is one violation that could. Simply put, your client should never pay or reimburse anyone for making a political contribution.
4. Give with no strings attached.
Your client should never make a request of a candidate or officeholder when making a political contribution. Similarly, never mention a political contribution when making a request to a candidate or officeholder. Political giving and lobbying requests shouldn’t be made contemporaneously. It’s frowned upon and makes most candidates and officeholders uncomfortable. In addition, it could be a crime depending on the circumstances. There’s a time for lobbying and making requests, and there’s a time for fundraising. Those times are never the same.
5. Elections have consequences.
Elected officials contribute to the climate in which we do business and pursue happiness. Thus, elections can have consequences that negatively or positively affect us, so participating in the political process can make a difference. Not only is it a fundamental right, but also supporting certain candidates and political organizations can often be in the best interest of both your client as an individual and his business. While there are risks with everything you do in life, the risks involved with making political contributions can be mitigated. Depending on the circumstances, being apolitical or apathetic could be riskier.
The full article, "Five Tips to Ensure Clients’ Political Donations Are Proper," first appeared on wealthmanagement.com on October 10, 2018.