Weird Loophole Allows Corporations to Incentivize Employee Contributions to Corporate PACs

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December 23, 2013; Bloomberg

U.S. corporations cannot give money directly to political action committees, but individuals can. Can corporations find a way around the prohibition?

Of course they can! That’s what loopholes are for.

Bloomberg News reports that corporations are getting their employees to donate to PACs in return for the corporations making matching contributions to the employees’ choices of charities. Among the corporations doing this according to Bloomberg are Wal-Mart, Coca-Cola, Boeing, and Hewlett-Packard.

The loophole isn’t just a recent discovery. The practice was specifically approved by the Federal Election Commission in the late 1980s and has been reviewed and approved by the FEC seven times between 1994 and 2009. It is also a practice that is reprehensible, clearly intended to skirt the intention of the law.

Election law prohibits corporations from reimbursing employees for their PAC donations, either directly or indirectly, but the corporations are making the case that making donations to charities is different than offering employees reimbursement, bonuses, or other compensation. The employees participating in this political contribution scam don’t get charitable deductions for the charitable donations— again, to avoid having the employees specifically compensated in the transaction.

Coke and HP give employees a one-for-one match, with the charitable donations going to charities selected by the employees. Wal-Mart, however, offers a two-for-one match, but the contributions must go to the Associates in Critical Need Trust, a charity started by Wal-Mart in 2001 to help Wal-Mart employees who are facing financial hardships.

The combined PAC/charitable donation scheme is “a great way for people who contribute to the PAC to also do good for fellow associates,” according to David Tovar, a Wal-Mart spokesman. “This provides them an opportunity to support the company and the things we’re advocating for on behalf of our shareholders, our associates, our customers in places like D.C. and state capitals.” Walmart switched to the two-for-one match in 2004.

There’s no question that this works. Now the nation’s ninth-largest corporate PAC, the Wal-Mart PAC (officially, Wal-Mart Stores Inc. PAC for Responsible Government) grew rapidly in the years following the introduction of the double-match. In a United Way-type approach, Wal-Mart deducted the PAC and charitable contributions from the employees’ pay, according to Bloomberg. Like many corporations nowadays, the Wal-Mart political contributions were divided just about evenly between Republican and Democratic House and Senate candidates.

The employees who support the corporate PACs, even with the charitable incentives, know that they are contributing to a political entity pushing the corporate line. “As our company has grown, WAL-PAC has become an increasingly important tool in Washington, D.C., to help us support pro-business candidates representing both political parties,” Bob Hart, the chairman of Wal-Mart’s ACNT wrote in 2002. “This in turn helps protect our associates and customers from unnecessary or potentially harmful laws and regulation.”

None of this in any way limits what corporations can do in contributions to 501(c)(4) social welfare organizations and 501(c)(6) business leagues that take active partisan roles in elections. Since the Citizens United case, corporate contributions to (c)(4)s and (c)(6)s can be unlimited.

Bah humbug, and welcome to yet another corporate loophole! Maybe we can arrange for a lump of coal for Wal-Mart, Coca-Cola, Boeing, and HP with a FEC reversal of this practice in 2014.—Rick Cohen