How Do I Form a PAC?

Having the power to influence an election, whether for city council, state legislator, or president, is seen as beneficial to individuals, business owners, nonprofits, corporations, and trade associations. Contributing to a candidate is one direct way to influence election outcomes, but federal and state election laws limit contributions.

If an individual or group of people wants to increase their contributions or communicate a message to the public, forming a PAC might be the solution. Consult an experienced attorney for legal help.

What Is a PAC?

A political action committee (PAC) is a general term that describes different types of political committees regulated by the Federal Election Commission (FEC) and campaign finance law.

Traditional Nonconnected Committees

For individuals who want to band together to influence an election, the default PAC is the traditional nonconnected committee.

Under federal election law, a nonconnected committee is any committee that conducts activities in connection with an election and is not one of the other three defined political committees, which are:

• Party committees: represent a political party and are part of the official local, state, or national party structure
• Authorized committees: have been authorized by a candidate to accept contributions or make expenditures on the candidate’s behalf
• Separate segregated fund (SSF): established, administered, or financially supported by a connected organization (either a corporation or labor organization)

A leadership PAC is a nonconnected PAC that is established by a candidate. 

Hybrid and Super PACs

Super PACs and hybrid PACs are also political committees with different benefits and limitations from traditional nonconnected committees.

Super PACs are also called independent expenditure-only committees, because their expenditures are limited to communications that are independent from, and not coordinated with, a candidate. The independence of super PACs stems from recent U.S. Supreme Court decisions and has allowed them to solicit unlimited amounts of donations from individuals and corporations.

A hybrid PAC combines a traditional nonconnected committee and a super PAC, but it must maintain separate bank accounts for each function.

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Little Is Required To Set Up a Nonconnected Committee

A PAC doesn’t need to incorporate or form an LLC, but many do to protect organizers from personal liability for PAC actions.

The FEC allows PACs to incorporate for liability purposes only. These PACs won’t be subject to campaign restrictions placed on other, for-profit corporations if the PAC primarily performs what the FEC labels “exempt activities.”

The PAC must designate a treasurer before it can accept contributions or make disbursements and expenditures. The treasurer will be responsible for ensuring the PAC meets its FEC reporting requirements, including required periodic and election-related reports.

PACs must obtain an Employer Identification Number (EIN) from the IRS. A PAC also must open a bank account in its name, separate from any personal accounts of the PAC’s organizers.

Once all these tasks are complete, the PAC must register with the FEC by filing FEC Form 1, a statement of organization. The PAC must file Form 1 within 10 days after becoming a political committee, generally when it receives contributions or makes expenditures exceeding $1,000 in a calendar year.

Will My PAC Contributions Be Tax-Exempt?

Any organization required to report to the FEC as a political committee is exempt from providing separate notice to the IRS of tax-exempt status under section 527 of the Internal Revenue Code (IRC).

PAC contributions generally are not tax deductible, although PACs are generally political organizations described in section 527 and are often called 527s. However, not all 527s are PACs.

Section 527 organizations are required to be organized and operated primarily for the purpose of directly (or indirectly) accepting contributions or making expenditures, or both, for an exempt function.

The exempt function of a political organization is influencing or attempting to influence the selection, nomination, election, or appointment of an individual to a federal, state, or local public office, or office in a political organization. 

Activities that directly or indirectly relate to or support an exempt function are exempt function activities, and a political organization’s primary activities must be exempt function activities to be within the law.

Find Legal Help

Because election laws are complex, legal advice is critical to forming and maintaining a PAC. Discuss your plans with an experienced attorney when you are ready to form your PAC.