May 23, 2011 / 3:26 PM / 9 years ago

Factbox: Guide to enigmatic world of campaign financing

(Reuters) - President Barack Obama has begun wooing select crowds of influential campaign donors for his 2012 re-election, while Republican candidates are holding events in halls across the nation to pull in their first millions.

But outside of the candidates’ own efforts lies a whole satellite system of fund-raising — a dizzying array of surrogates, parties and interest groups, subject to complicated and controversial campaign finance rules. It may all add up to a record-breaking $1 billion campaign for Obama.

Here is a quick guide to how the American campaign money machine works:

HARD MONEY - Money given directly to a candidate for his or her campaign, under Federal Election Commission limits.

INDIVIDUAL CONTRIBUTION LIMITS: An individual can contribute $2,500 to each candidate per election — which means one person can give $2,500 for a primary election and an additional $2,500 for the general election, even if a candidate — like Obama this time — does not have a primary opponent.

An individual can also give $30,800 to the national party committee each year, an amount that is adjusted for inflation over time.

SOFT MONEY - Contribution to political party organizations not recorded as going to a particular candidate, and thus not subject to the same regulation as “hard money.” Soft money can be used, for example, to pay for “issue ads” that favor one candidate over another.

POLITICAL ACTION COMMITTEE - A PAC raises and spends limited “hard” money contributions to elect or defeat candidates or achieve legislative goals. Under federal election law, an organization becomes a PAC by receiving contributions or making expenditures of more than $1,000 for the purpose of influencing a U.S. election.

There are two types of PACs registered with the Federal Election Commission — separate segregated funds, which can only solicit contributions from people associated with the sponsoring organization, and nonconnected committees, which are free to solicit contributions from the general public.

Leadership PAC - Politicians form leadership PACS to, among other things, raise money to help fund other candidates’ campaigns. They do this because they hope to achieve leadership positions in Congress or a higher office.

Super PAC - A group allowed to raise unlimited funds from individuals and corporations, but which cannot coordinate with candidates or campaigns. They do have to disclose donors. One current controversy is whether officeholders and candidates can help a Super PAC raise funds by telling donors who want to give more than allowed under federal rules to send money to the PAC.

527 ORGANIZATIONS - Nonprofit groups that can spend money on political campaigns but are regulated by tax authorities, not the FEC, because they do not spend money specifically to advocate the election or defeat of any candidate.

One famous 527 was the “Swift Boat Veterans for Truth,” which was formed in 2004 to oppose John Kerry’s campaign for the presidency by maintaining that the senator, who had been regarded as a Vietnam War hero, had distorted facts about his actions during the war.

Another well-known 527 was MoveOn.org, a liberal public policy group formed in 1998 in response to the impeachment of Democratic President Bill Clinton. MoveOn, which is no longer a 527, raised millions for Democratic candidates, including Obama when he won the presidency in 2008.

PUBLIC FINANCING - The public financing system was created to limit the influence of private money on election campaigns by offering government matching funds for political contributions, up to a limit of $250 per contribution.

For years, almost all presidential candidates who could qualify accepted matching funds. However, because taking the funds subjects candidates to strict fundraising limits, the number has dropped. No major candidate is expected to do so for 2012.

Obama had pledged to seek public financing for the general election in 2008, but reversed himself to avoid fundraising limits and raised a record $750 million. His Republican opponent, John McCain, took the public money and found himself short on cash.

BUNDLERS - “Bundlers” are donors who can gather contributions from many individuals in an organization or community, which are put together and given to a campaign.

CITIZENS UNITED - A precedent-breaking 2010 ruling by the U.S. Supreme Court that overturned rules limiting campaign spending by corporations, unions and other groups. The decision was based on the argument that such groups have free speech rights like those granted to individuals by the U.S. Constitution and that restricting the amount of money they can spend on campaigns infringed upon those rights.

The Center for Responsive Politics estimates there have been at least $140 million in anonymous donations since the ruling for “electioneering communications,” or advertisements that don’t directly advocate for a candidate, but run near to an election and generate a clear message.

Editing by Mary Milliken, Alistair Bell and Jackie Frank

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