Republicans Just Found a Loophole to Answer Their Abysmal Fundraising

After a bruising few months of humiliating reports, Donald Trump’s re-election team has finally produced a round of positive fundraising headlines, showing, they said, that the campaign and Republican National Committee’s abysmal donor woes were in the rearview.

Republicans had finally turned the corner, and they were back in the driver’s seat.

But a closer look at the numbers behind those numbers suggests that, once again, the boasts may be premature—if not misplaced entirely.

Filings this week showed that while Trump’s numbers do appear to have ticked up last month, his political apparatus needed to spend a stunning amount of money to get there. It’s a long-running and important—but little-noticed—negative trendline for Trump, as outsized operational costs have been gobbling up a large share of the money raised, a vicious cycle that can become increasingly hard to break.

The RNC’s Fundraising Hole Is Even Deeper Than It Looks

On top of that, the high-dollar Trump-RNC joint fundraising machine that launched last month appears to have failed to deliver on its main mission, at least in its early stages. That committee is the cash-strapped RNC’s big, belated hope to finally start accumulating the money it has desperately needed to properly fund, staff, and win a costly and crucial election cycle nationwide.

That committee—called “Trump 47 Victory”—pulled in nearly $24 million in megadonor dollars last month. About $10.5 million went to the RNC, with the overwhelming majority going to three accounts that are generally unusable for political activity.

Just $1.5 million made its way to the RNC’s election account, or about 6 percent of the total raised. The dozens of state GOP parties who also participate in Trump 47—a number of which face financial crises themselves—did not see a dime.

Compare that to the Biden-DNC’s version—“Biden Victory”—which has been up and running for years. Over the last three months, that committee transferred $27 million to the DNC while farming $13.8 million out to state Democratic parties.

Combined, the Trump-RNC joint committees reported raising about $90 million over the first three months of 2024. (The RNC added another roughly $19 million in January and February.) Together, the joint committees hold $26.5 million on hand.

Over the same period, the Biden-DNC joint efforts raised just under $130 million, with $60.5 million on hand.

Normally, this should be bad news. After all, the RNC alarms have been sounding for months, its dire financial straits rendered all the more precarious because of the unique drag exerted on the party by its top fundraising draw—the increasingly gargantuan legal costs that Trump has passed on to his donors.

All of that is the bad news for Trump and Republicans. Days after these latest filings came in, however, Trump and the RNC may have gotten a huge financial boost. And it came from a seemingly unlikely place: the agency that regulates campaign finance laws.

On Thursday, the Federal Election Commission released a decision that may have profound consequences for the GOP’s acute fundraising problems, with long-term implications extending to both parties. The most immediate impact of the ruling—which came from the FEC’s three GOP commissioners, not only blocking Democratic dissent, but contradicting the independent Office of General Counsel—may be the financial lifeline extended to the RNC just when it was needed most.

Specifically, the ruling blessed the National Republican Senatorial Committee’s use of millions of dollars in its “legal” (or “recount”) account to underwrite what were just functionally campaign ads. The three GOP commissioners ruled in the GOP’s favor, even though the Office of General Counsel had concluded that the ads—which did not mention anything about legal issues or recounts—appeared impermissible under the law.

Brett Kappel, campaign finance attorney with Harmon Curran, told The Daily Beast that, for the GOP, the decision couldn’t have come at a better time.

“The Republican Party will no doubt be pleased by the holding of the three Republicans that Donald Trump appointed to the FEC,” Kappel said.

Kappel explained that, in the decision, the FEC Republicans ruled that money in a national party’s legal proceedings account can be used to fund any type of overt campaign ad as long as the ads raised funds that went back into the legal proceedings account. The content of those ads doesn’t matter—they do not need to focus on legal or recount matters, but could feature any candidate or issue.

Kappel also noted another, more specific potential effect.

“This means the RNC can run Trump ads that raise money for the legal proceedings account and then use those funds to pay Trump’s personal legal fees,” he said.

The ruling came in response to a complaint from two nonprofit watchdogs, Campaign Legal Center and End Citizens United, which questioned the legality of millions of dollars in ad buys that the NRSC made from its “legal” account during the 2022 midterms.

All legal experts interviewed for this article pointed out that the law governing these funds limits the spending “solely” to activities that carry out their specific functions, with one exception—the legal account.

Brendan Fischer, a campaign finance law specialist and deputy director of Documented, told The Daily Beast that the decision “opened a huge loophole.”

“These segregated accounts were created with much higher contribution limits and the understanding that they’d only be used for very narrow purposes,” Fischer said. “These accounts are funded by mega donors writing six-figure checks. The party committees aren’t really chasing small-dollar donors with these ads. They are spending big money on campaign ads pretending to solicit small dollar donations.”

After the FEC’s action, he said, parties can now use those megadonor-funded accounts to pay for campaign ads, “as long as they throw in a request for donations to that account.” Fischer observed that the ads may not even need to include an express solicitation, but that “the FEC might say it is enough to throw in a QR code that directs donors to give to the account.”

Trump Forced to Skip Big-Money House GOP Fundraiser Thanks to NY Trial

Upon reviewing the RNC’s meager fundraising cut, Stuart Stevens, a former top GOP strategist who is now a prominent Trump critic, echoed what political analysts have been telling The Daily Beast and other outlets in recent months—down-ballot Republicans and state committees are going to pay the price.

“They’re gonna lose race after race after race because Trump is sucking up all the money,” Stevens said. “There’s not one honest state party chairman who isn’t furious about this. There’s not one executive director of a state party that doesn’t believe that they’re being cheated, but they’re all just going to be quiet about it.”

Still, Republican operatives weren’t shocked. Matt Gorman, a veteran GOP strategist who previously worked at the NRCC, and on Jeb Bush and Mitt Romney’s presidential campaigns, told The Daily Beast that the RNC’s asymmetrical distribution of these funds—nearly 90 percent going into non-election accounts—didn’t strike him as particularly atypical.

“I’m not terribly surprised,” Gorman said, pointing out that the segregated funds have important practical applications for the national parties, like staffing up for the costly conventions, providing real estate infrastructure for offices, and funding recounts and election litigation. But Gorman also noted that the national parties take advantage of statutory flexibility.

“With the laws the way they are now, building funds and legal funds are a robust way to—you can build staff, you can get infrastructure,” Gorman said. “It’s far more common than you think among committees.”

That utility appears narrowly limited, however. The law stipulates that building and convention outlays must “solely” address costs specifically for those issues—“solely to defray expenses incurred with respect to a presidential nominating convention” and “solely to defray expenses incurred with respect to the construction, purchase, renovation, operation, and furnishing of one or more headquarters buildings of the party,” and to repay associated debts.

It’s just that, the FEC’s decade-long silence on how these laws are applied in the real world of elections left these seemingly concrete rules theoretically open to creative interpretation.

That’s where the GOP commissioners came in this week.

The FEC ruling concerns a specific type of political money that has become increasingly important to the national parties in recent years—particularly so this cycle, specifically for the cash-strapped RNC.

Lara Trump’s RNC Robocalls Push Claims of ‘Massive Fraud’ in 2020 Election

According to campaign finance experts, the FEC just opened the door to a huge pot of what was widely thought of as untouchable money, which the RNC can now use to underwrite campaign advertising and, potentially, to help fund Trump’s lawyers.

National parties like the RNC and DNC have several bank accounts. In addition to the main accounts that fund election activity, they maintain segregated funds for specially designated functions—one for conventions, one for buildings, and another for legal or recount expenses. Those accounts can also accept donations, but they are subject to separate rules—and while many of those regulations are still not set in stone, one of them, it seemed, was crystal clear: That money cannot be spent on political activity.

That specific fact had a corollary: Those three auxiliary accounts, sometimes called “Cromnibus” accounts, can accept three times as much donor money as the general account. Those accounts have padded the RNC’s numbers for months now, but because that cash cannot be used in elections, it was essentially fundraising fluff, without much of a real-world political impact.

Last month, a Daily Beast analysis found that, of the roughly $22.3 million that the RNC had raised to date this year, about 36 percent of it—$8 million—sat in these accounts. (At the same point in 2020, those accounts held less than 10 percent of the RNC’s $77 million on hand.) Close to 90 percent of Trump 47’s transfers to the RNC went to the three Cromnibus funds.

But on Thursday, the FEC decision may have opened up all of that money to use in elections, potentially freeing the RNC to use those sequestered funds in all sorts of political ways.

While this ruling applied to the legal account, the broader issue was a long time coming.

Tom Moore, former counsel for Democratic FEC commissioner Ellen Weintraub and now a senior fellow at the Center for American Progress, told The Daily Beast that this question had been simmering unresolved for a decade.

“This issue has been lurking for years, and this is the first case to drag it into public view,” Moore said.

Kappel, the Harmon Curran attorney, explained that the FEC hadn’t offered any guidance on the use of funds in segregated accounts since the law that created them was passed in 2014. And that leaves other questions open, such as whether the funds in building and convention accounts could come into play.

“There are essentially no rules for these accounts, so the parties can theoretically transfer funds between them,” Kappel said. “You can imagine they could even transfer from these accounts into the general account.”

Moore concurred. “Yes, in theory, money could flow in and out of any of those accounts and then straight out of the legal account.”

That would free up millions more that the RNC is sitting on.

Ironically, the loose language that the NRSC’s lawyers took advantage of was originally inserted by prominent Democratic political lawyer Marc Elias, the mastermind behind the 2014 law. While none of the Democratic commissioners voted with the GOP, only two of them—Weintraub and Shana Broussard—joined a written dissent. The third, former private practice political attorney Dara Lindenbaum, was silent on the question.

In their conclusion, the two Democrats raised an alarm, writing that the “sad consequence” of this ruling “is that more political actors will feel emboldened to disregard the explicit restrictions on the use of legal proceedings accounts that Congress expressly enacted.”

But while the decision offers immediate relief to the GOP, the Democrats—who historically outperform Republican fundraising year over year—may capitalize the most, especially in the long run.

“The NRSC pushed the legal envelope here, but I’d expect the Democrats to abuse this new loophole too,” Fischer said.

And if the RNC uses a large portion of its legal account to cover Trump’s legal fees this cycle, Fischer said, “the Dems might be better positioned to spend their big money accounts on campaign ads.”

Jake Lahut contributed to this report.

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