When does an organization—such as a 527 committee or a 501(c)(4) organization— have to register with the FEC as a political committee and disclose its donors? The Fourth Circuit recently upheld the FEC’s rules that answer that very question.

In the past the answer was very important because a political committee could only accept individual contributions of $5,000 per person per year. Corporations, on the other hand, could not make any contributions to political committees, or spend their funds on independent expenditures or electioneering communications.

In the past two years, all of this has changed. With Citizens United, corporations can make independent expenditures supporting or opposing candidates. In SpeechNow.org v. FEC, the D.C. Circuit decided that even if an entity is a registered and reporting political committee, it can accept unlimited contributions from individuals and corporations as an independent expenditure-only committee (i.e., a super PAC).

But what about a group that doesn’t want to register with the FEC (and more importantly disclose its donors)? What can it do and when does it have to register?

In addition to monetary thresholds—$1,000 in “contributions” or “expenditures”—the FEC applies a “major purpose test” to determine when an organization becomes a political committee. Through a case-by-case analysis the FEC looks at:

  • How extensive the spending on federal election activity is (as compared to other
  • Public statements of the organization that show the major purpose is to support
    federal candidates or parties
  • Fundraising appeals (whether the group raised money by saying it would support candidates
    with that money)

The Fourth Circuit upheld this imprecise facts-and-circumstances test. Organizations making independent expenditures may therefore be subject to registration and reporting as political committees, even if spending the FEC deems election-related is less than 50% of total spending. If the FEC were to do so, then all donors would be disclosed. If an organization wants to be involved in the political process, it is essential for it to determine whether it wants to be a political committee and register with the FEC (and disclose donors) or whether it would be better to organize itself and its activities in a way that avoids political committee status.