As the country drives deeper into the presidential election cycle, more candidates are throwing in the towel. But what happens to the money they’ve raised when they call it quits?
Nikki Haley Exits the Race – Where Will Her Donations Go?
This week, news broke of Nikki Haley’s decision to step out of the presidential race. Leaving former President Donald Trump alone to presumably accept the GOP nomination, Haley said she has “no regrets” about how she handled her campaign.
Haley Drew Supporters With Deep Pockets
During her run, Haley often made headlines for garnering the support of major wealthy donors. Her fundraising efforts kept her afloat longer than any other Republican candidate aside from Donald Trump.
Funds Raised Gave Haley an Advantage
In February alone, Haley raised a staggering $12 million, a number that convinced many experts that the lone female candidate in the race would have the backing she needed to continue her fight against Trump.
What Happens Now?
But after disappointing results on Super Tuesday, Haley suspended her campaign. Her departure has prompted the question: what happens to the money she raised before she dropped out?
A Multi-Part Answer
As it turns out, the answer is somewhat complicated. There are a number of ways that political donations can be dispersed after a campaign ends. There are also very specific rules about how those funds cannot be used.
Personal Use is Strictly Forbidden
Most importantly, under no circumstances is a candidate allowed to keep campaign donations for personal use. The laws governing proper use of campaign funds specifically prohibit donations from being spent on a candidate’s personal expenses.
Santos: A Case Study
Late last year, a historic decision was made to expel Representative George Santos from Congress, in part because of his alleged misuse of campaign funds. Santos pleaded not guilty in federal court to the charges against him.
What About Refunds?
Refunds of campaign donations are allowed, and are not uncommon. When Jeb Bush suspended his presidential bid in 2016, his Super PAC had around $12 million leftover that they promised to send back to their donors.
Time Limits for Donation Refunds
Any refunds that will be going back to donors are required to be handled within 60 days of the end of a campaign. Money due back to a donor can also be sent elsewhere if the donor authorizes that.
The Role of Campaign Debt
Often, a candidate takes on a significant amount of debt to run their campaign. This was seen this election cycle when it was announced that Mike Pence had amassed over half a million dollars in debts.
Paying off Debts with Donations
Leftover campaign donations can be used to pay off debt incurred with the purpose of advancing the candidate’s run, and this is typically considered the most pragmatic use of these funds.
Supporting Other Candidates
In some cases, candidates who suspend their campaigns might choose to redirect some or all of their remaining donations to political committees or other candidates who remain in the race. This is common when candidates drop out and then endorse former opponents.
Federal Donation Limits
There are federal limits regulating how much money can be donated to another campaign, however. No more than $2,000 is allowed to be used to support another federal candidate.
Party Loyalty
Funds can be sent to party committees at any level, and there are no limits on how much money can be used for that purpose. For example, if Nikki Haley chose to donate excess funds to the Republican National Committee, she could send as much as she wanted, and they could use that donation to focus on supporting their nominee.
Are Campaign Donations Tax-Deductible?
Some individuals, especially average citizens who donate money to their preferred candidates, wonder whether their donations are tax-deductible.
While most charitable donations can be used as a tax deduction, political campaign contributions are not considered charitable and, therefore, do not make donors eligible for a break at tax time.
Funds with a Purpose
Often, campaign donations are specifically earmarked for the general election. Those funds are required to be refunded to donors if the candidate drops out before nominees are officially chosen for the general election.
When a Running Mate Takes Over
If Nikki Haley had been the party’s nominee already and had chosen a running mate and then dropped out, her running mate (if chosen as the replacement nominee) would be entitled to use her campaign funds for their campaign.
Biden and Harris: A Scenario
This means that if President Biden decides at any point to drop out of the election and Vice President Kamala Harris chooses to run herself, she could use Biden’s campaign funds for her efforts, provided she became the nominee.
Know Where Your Donations Go
Given the millions of dollars that have been raised throughout this election, there is a good chance that there will be something leftover when candidates inevitably fall out of the race. Knowing where that money could go is an important part of being an informed donor.
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The post Haley Out of the Race: But Where Do the Billions Go When Candidates Don’t Make the Cut? first appeared on From Frugal to Free.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
