How Employers Use Charity To Make Barely-Legal Political Contributions

Though corporations can create and sponsor a political action committee, they aren’t allowed to donate directly to PACs using funds from their general treasuries; that’s straight-up against the law. Nor are companies allowed to pay or reimburse employees for donating to particular PACs. But there is a loophole in the law that allows large companies like Boeing, Coca-Cola, and Walmart to encourage workers to donate to particular political groups, and that loophole is all about charitable matching.

It’s pretty common for companies to match their employees’ contributions to eligible nonprofits.  If an employee for Large Bank donates $500 to, say, their local food pantry, they can file with their employer to have Large Bank donate an additional, matching $500.  That’s generally good PR for companies, a satisfying benefit charitably-minded employees, and helpful to the nonprofits who get the extra cash.

What’s happening here, though, is different.  As Bloomberg reports, corporations barred by law from donating directly to PACs are instead having their employees donate, and using matching charitable gifts to motivate those employees to contribute.

Here’s how it works, using Bloomberg’s example of Walmart: Walmart can’t legally give to their PAC, but their employee Manager Bob can.

So at the urging of his employer, Manager Bob gives $100 to the PAC.  Walmart, by law, can’t reimburse Manager Bob or give him a bonus for that $100.  But they can say, “Because you gave $100 to our PAC, we are donating $200 on your behalf as a matching contribution to this nonprofit.”

For an employee who really wants to maximize his or her charitable giving, that’s not necessarily a bad deal.  It’s basically buy-one-get-one-free on donations.

Walmart is far from the only organization to provide matching charitable donations for PAC contributions.  According to Bloomberg, Boeing gives a 50% match ($0.50 to charity for every $1 the employee gives to the PAC) and companies like Hewlett-Packard and Coca-Cola match employee contributions 1:1.  However, in addition to providing a 2:1 match, Walmart also restricts the nonprofits that it will donate to.  They’ve got a grand total of one eligible nonprofit, in fact, and it’s Walmart’s own Associates in Critical Need Trust–a charity run by the company to help its own employees meet their living expenses.

In other words, if a Walmart employee gives to Walmart’s political action group, Walmart will donate money to Walmart’s charity for Walmart employees who don’t make enough money by working at Walmart to pay their bills.

Individual donations to PACs are limited to $5000 per year, so the road to millions comes from very high participation.  It appears to be working: according to OpenSecrets, the occupation of every single one of the large individual donors (people who give contributions greater than $200) to Walmart’s PAC is listed as “Wal-Mart Stores Inc,” and Bloomberg reports that hundreds of employees have donated.  And we are indeed talking millions; Walmart’s PAC has spent over $3 million on each of the last three election cycles.

PACs give money to support certain candidates during election seasons, and corporate-backed PACs tend to give to candidates who support laws and policies favorable to business interests.  Business interests and employee interests, of course, do not always exactly intersect.  In an e-mailed statement, five-year Walmart employee Barbara Gertz said:

“Today’s news is further proof that Walmart is determined to spend millions to support politicians who vote to cut food stamps and who oppose increasing the minimum wage, instead of focusing on creating good jobs in our communities.  It’s upsetting to hear that Walmart not only exploited the associates in critical need fund to push a political agenda that hurts ordinary Americans, but it also may have done so in violation of federal election laws. This is just the latest example of Walmart acting as though it’s above the law.”

The practice of matching nonprofit donations to political contributions is currently legal and has been since the late 1980s.  Former Federal Election Commission chairman Scott Thomas told Bloomberg he opposed it, saying that it is “too close to the line” of the rule that forbids companies from reimbursing employees for political donations.  The FEC has revisited the issue several times, and remained split over supporting the policy, but has not moved to forbid it.
Wal-Mart to HP Reap Worker Political Donations Through Charities [Bloomberg]