Are PACs Allowed To Accept Limited Bitcoin Contributions?
The FEC was asked to consider whether Bitcoins should be allowed in political contributions. Because the PAC requesting to use Bitcoins wasn’t able to explain how they would know who made the contributions, the FEC ultimately deadlocked on their advisory opinion request (AOR). In the meantime, other political committees are already accepting Bitcoin, without any guidelines for how to do so properly.
We strongly believe that campaign finance needs to be done in a transparent, auditable, and responsible manner. We also want to give our users the ability to make political contributions using Bitcoin.
In order to set an example for how this can be done responsibly, on February 10th 2014, Make Your Laws PAC (MYL PAC) submitted a new request, proposing how we intend to accept Bitcoins.
Because of the legal context of this request, we can only ask the FEC to approve our own activity; we can’t ask them to impose requirements on other political committees. However, if we are successful in getting the FEC’s approval for our method, it’s likely that other political committees will adopt the same policy.
- Receiving Bitcoin
- We will only receive Bitcoins online (i.e. no “physical” Bitcoins), after the contributor provides their information, and only through a “one-time linked address” system that makes it harder to contribute in someone else’s name.
- We will keep records of all Bitcoin-specific transaction details (much like the records kept for check or credit card contributions).
- We won’t accept any Bitcoins or Bitcoin-derived contributions from any “issue advocacy” (501(c)4) organization.
- Both the “traditional” and “SuperPAC” sides of MYL PAC (which is a “hybrid” SuperPAC) will follow the same rules. Bitcoin contributions will be separated the same as any other assets (e.g. with separate “contribution” vs “independent expenditure” wallets).
- We will refund Bitcoins in USD only, for contributors who have identified themselves to us. (Our request doesn’t address anonymous contributions.)
- We won’t accept more than $100 worth of Bitcoin (per contributor, per election), because even with our proposed accounting methods, Bitcoin’s auditability is more like cash contributions than like contributions mediated by banks.
- Spending Bitcoin
- We won’t directly spend Bitcoins for solicitation, advertising, polling, transfers, loans, refunds, candidate appearances, or political contributions (including transfers to other PACs). Instead, we’ll liquidate them to US dollars first.
- We will spend Bitcoins for administrative/overhead expenses (including normal transaction fees to anonymous Bitcoin miners), salary, travel, campaign materials, and campaign event expenses (not including payments to candidates).
- We will accept merchants’ Bitcoin-specific discounts (if they’re offered equally to non-political clients).
Why different treatment for some types of spending and contributions?
A 501(c)4 is only supposed to do “issue advocacy” (e.g. “Yes on Proposition X” type campaigns, lobbying, etc). In doing so, they are allowed to accept totally anonymous money. By contrast, PACs affect political elections, and anyone doing so is required to only use money from openly disclosed, non-foreign sources.
There’s currently a giant loophole in that system which lets 501(c)4s effectively bypass that restriction and give up to half of their assets to a SuperPAC, which can then use the money to run political ads — even though the ultimate contributors aren’t reported and might not even be legally allowed to influence US elections. (The IRS is currently considering closing this loophole.) Because 501(c)4 contributions may ultimately originate from a totally anonymous third party or a foreign national, especially in the case of Bitcoin, we believe that a PAC shouldn’t accept any Bitcoin contributions from a 501(c)4.
We feel that it should be fine for a PAC to use Bitcoin to buy food, pay salaries, and other relatively less sensitive items — but that money spent on advertising, political contributions, etc., should go through better regulated, traditional banking channels, which are easier to audit when necessary.