Being responsible with your PAC

by Justin Allen (JAllen@wlj.com) 238 views 

Editor’s note: Justin Allen is a partner with the Little Rock-based law firm of Wright Lindsey Jennings. He leads the firm’s governmental relations group.

Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.
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There were 288 registered political action committees (PACs) in Arkansas in 2013. In 2015, there were 325. While it is not a significant increase, I think it reflects a trend, albeit gradual, towards a proliferation of PACs in Arkansas.

When I last wrote in this space, I discussed Issue 3, which the voters approved in 2014 resulting in Amendment 94 to the Arkansas Constitution. Specifically, I addressed how Issue 3 modified term limits in Arkansas and how a measure previously approved for canvassing by the Attorney General will modify term limits if it qualifies for the ballot and is approved by the voters. Now, I turn to the provision in Issue 3 that established new rules for campaign contributions in Arkansas, which brings us back to PACs.

Before Issue 3, corporations were allowed to make contributions directly to candidates for office. Corporate contributions, as well as contributions from unions, are now prohibited under Amendment 94 and its enabling legislation. The measure doesn’t specifically state that corporate contributions are prohibited, but it outlines the permissible sources for contributions, those being from individuals, political parties, a legislative caucus and a political action committee (“PAC”). Corporate and union contributions are prohibited by virtue of being excluded from the list of permissible contributions. It should be noted that the prohibition doesn’t only apply to candidates to state office, but also those for local and county offices as well.

Since 1907, federal law has prohibited corporate contributions to candidates running for federal office. Accordingly, such a rule is by no means novel and federal candidates and contributors have been navigating it for a very long time. Moreover, the federal ban on corporate contributions has been unsuccessfully challenged in court, including a holding by the U.S. Supreme Court in FEC v. Beaumont in 2003 affirming the constitutionality of the prohibition.

In 2010, the Supreme Court issued its ruling in the controversial case of Citizens United v. Federal Election Commission. That ruling said corporations and unions had a free-speech right to unlimited spending on elections. While the Court in Citizens United did not address the prohibition on direct corporate contributions to candidates, many believed that it was a precursor to an eventual reversal by the Court that would lead it to strike down the ban. That has not come to be, however, as the Court has declined to hear cases challenging the ban since its ruling in Citizens United. Things could change as the makeup of the Court evolves, but it would seem that a ban on corporate contributions, including the one in Arkansas, will be deemed constitutional for the foreseeable future.

All of this means that, since 2015, things have changed in Arkansas when it comes to contributing to a candidate. Change is tough and people are naturally reluctant to conform, and this situation is no different. The anecdotal evidence is that contributions are more difficult to come by since a corporation cannot write a check to a candidate. But, for those desiring to engage in campaign finance, the PAC has become the primary option.

As noted, people are somewhat reluctant to pivot and adopt the PAC model. But, in recognition of the practical impact of the new rule, individuals and corporations are beginning to come around – as shown in the rise in PAC numbers between 2013 and 2015.

As someone who has created PACs and advised clients with regard to their proper operation, I can attest that it is a straight forward and manageable process. The rules governing a PAC can be found at the Arkansas Ethics Commission website and anyone desiring to establish one should review them in detail. However, here are some of the basics:
• A PAC needs one or more officers, a bank account and must register with the Secretary of State;
• After registering, it must file quarterly reports reflecting contributions it receives, the identity of the contributor and amount;
• The report must also identify the contributions it makes to candidates and the amount;
A PAC, and every other eligible contributor, can contribute up to $2,700 per election to a candidate;
• In terms of receiving, a PAC can accept contributions from individuals, corporations and other PACs; and
• As for giving, a PAC can make contributions to candidates, campaign committees, ballot question committees, legislative question committees, political parties, county political party committees and other PACs.

At the end of the day, we have new rules requiring Arkansans and businesses seeking to engage in campaign finance to adjust. But, for those that are reluctant, I encourage them to give it a look.

While one must take great care in establishing a PAC and adhering to the rules, it is a manageable process.

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