Running for election to federal office in the United States requires candidates to raise enormous sums of money to finance their campaigns, and the raising and spending of that money is highly regulated by the U.S. government. Election law expert Jan Witold Baran explains the legal restrictions on campaign contributions from individuals and organizations, describes how campaigns determine expenditures, and discusses private and public funding of presidential elections. The author is a partner in the law firm Wiley Rein LLP in Washington, D.C., and is a commentator and legal analyst for Fox News, National Public Radio, and ABC News.

By the summer of 2007, almost two dozen candidates had launched election campaigns to become the next president of the United States. The election itself will not occur until November 4, 2008, yet these candidates had already started campaigns for the nomination of their respective political party, Republican or Democratic. The parties formally choose their presidential nominees at conventions in the summer of 2008, but the candidates must start their quest for delegates in the primary elections that begin in January 2008. This lengthy and arduous process demands candidates who are skilled, resilient, and tireless. It also requires large sums of money.

The offices of president, senator, and representative are federal offices. They constitute the elective members of the White House, the U.S. Senate, and the U.S. House of Representatives in Washington, D.C. The campaigns for election to these offices are regulated by federal law, which also dictates how campaigns may raise funds, from whom, and how much. Federal campaign finance laws are separate from state laws that regulate elections for state and local offices, such as governor, mayor, or member of the state legislature. Accordingly, a candidate for federal office must abide by the federal laws, which are somewhat complex and restrictive. Presidential candidates find it necessary to raise hundreds of millions of dollars for campaigns directed at a nation of more than 100 million voters, but the way in which these candidates raise and spend this money is highly regulated.

Organizing a Campaign

A candidate for president must designate a campaign organization, called a political committee. The political committee must have a treasurer and must register with the Federal Election Commission (FEC). Notwithstanding its name, the FEC only supervises and enforces campaign finance laws; it does not actually conduct the elections. In the United States, the process of registering voters, conducting the balloting, and counting the votes is the responsibility of state and local election officials.

Various types of political committees are registered with the FEC. In addition to the candidates, political parties must register their own committees with the agency. In addition, any group of private citizens may form a political committee, including individuals from corporations, labor unions, or trade associations. These political committees are often referred to as PACs, or political action committees, and must also register with the FEC.

Once registered, political committees may start raising campaign funds. All such funds, as well as expenses, must be disclosed on reports that are filed with the FEC on either a quarterly or monthly basis. The reports are filed electronically and are available to the public on the FEC's Web site [http://www.fec.gov]. Numerous private organizations also maintain Web sites to monitor the contributions and expenses of the candidates, political parties, and PACs.

Lawful Sources of Contributions

All donations to federal candidates or political committees must be either from individuals or committees registered with the FEC. Direct contributions from corporations or labor unions are prohibited, although these entities may sponsor PACs that raise money from individuals. Contributions in cash of more than $100 to PACs are illegal, as are contributions from individuals who are deemed "foreign nationals," i.e., noncitizens who have not been admitted permanently to the United States. However, foreign citizens who are admitted for permanent residence may contribute, even though they cannot vote in an election.

Limits on the Size of Contributions

The amount that an individual or political committee may contribute is subject to various limits. For example, an individual may not contribute more than $2,300 to any one candidate's campaign. This limit is calculated as "per election." Accordingly, an individual may contribute a maximum of $2,300 to a candidate's primary election campaign and another maximum of $2,300 to the same candidate's general election campaign. A husband and wife are treated as separate individuals and, therefore, collectively may donate twice the limit, or $4,600 per election.

In addition to limits on how much may be contributed to candidates (and other types of committees), individuals also are subject to an "aggregate" contribution limit. An individual may not donate more than $108,200 to all federal candidates and political committees during a two-year election cycle. (The limits are adjusted every two years according to the rise in inflation, which explains the unusual dollar amounts.)

PACs are subject to a limit of $5,000 per election for a candidate's campaign. The amount that can be contributed to political parties is also limited but is higher than the limit on PAC contributions to an individual candidate.

Accordingly, a candidate for president who aspires to raise, for example, $23 million — a relatively modest amount for a presidential campaign — must do so by attracting individual donors, who may not donate more than $2,300, and perhaps also PACs, which are limited to $5,000. In order to raise $23 million, such a candidate, at a minimum, would need 1,000 people to donate the maximum amount. More likely, the candidate will attempt to find several thousand contributors, most of whom will donate less than the legal maximum.

Campaign Expenditures

In order to campaign for office, a candidate needs to hire staff; arrange for office space and travel; conduct research; issue position papers; advertise on radio and television, in publications, and on the Internet; and conduct numerous public appearances and fundraising events. Candidates for the House of Representatives will undertake these activities in their specific congressional district, while Senate candidates will do likewise in their constituency, which is their entire state.

Candidates for president have the daunting task of organizing their campaigns state by state and then, if nominated, throughout the nation. The initial planning of a presidential campaign — winning the party's nomination — will focus on the earliest primary states. Thus, the candidates will attempt to organize in Iowa, New Hampshire, South Carolina, Nevada, and Florida, all of which will hold caucuses or primary elections in January 2008. In the past, other states held their primary elections in a cycle running through June. In 2008, however, a majority of states, including such large states as California, New York, and Texas, will hold their primary elections on February 5. This greatly shortened election schedule imposes enormous demands on presidential campaigns to raise substantial amounts of money — by some estimates at least $100 million — in order to finance activities in these primaries. How much is raised and where the money is spent will be a matter of public record since the campaign committees will have to disclose their finances to the FEC. These reports, particularly throughout 2007 and for January 2008, are known as "the money primary" because they are widely viewed as a barometer of the amount of support each candidate is attracting before the start of actual voting.

Public Financing of Campaigns

Since 1976, candidates for president have been eligible to participate in a public financing system whereby the U.S. government provides funding to qualified campaigns. Until the 2000 elections, all candidates nominated for president participated in this system by accepting government funds in exchange for a promise not to spend more than a specified amount. However, this system has become increasingly unappealing to candidates because the imposed spending limit is considered too low — and less than the amount that major candidates can often easily raise from private sources. Consequently, in 2000 then-Governor George W. Bush became the first major candidate to forego public financing in the primary elections. Four years later, President Bush, a Republican, and Democratic candidates Senator John Kerry and Governor Howard Dean opted out of public funding for the primary races. In 2008 it is widely expected that for the first time all major Democratic and Republican candidates, with the exception of Democrat John Edwards, will opt out of public funding for the primaries. It also seems likely that the eventual Democratic and Republican presidential nominees will bypass the public financing system during the general election campaign.

How Much Will Be Spent?

It is difficult to predict the amount that campaigns will spend in the 2008 election, but it is quite safe to make one prediction: More money will be spent in this election than ever before. In 2004 President Bush raised $270 million for the primaries and received $75 million in public funds for the general election. Senator Kerry, his eventual opponent, was close behind, raising $235 million for the primaries and receiving the same $75 million for the general election. In 2008 the number of candidates has increased, but so has the contribution limit ($2,300, up from $2,000 in 2004). There also is an increase in the number of Americans contributing to campaigns; doing so is facilitated by the ease of contributing electronically through campaign Web sites on the Internet.

In addition to candidate spending, the political parties, PACs, and other interest groups will spend money. In 2004 the Center for Responsive Politics estimated that $3.9 billion was spent by all federal candidates, political parties, and others for that year's election campaigns. This constituted a 30 percent increase over the 2000 campaign. The odds are that 2008 will see another increase.

The opinions expressed in this article do not necessarily reflect the views or policies of the U.S. government.