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Legal Update

Legal Limits to Donations in Favor of Political Campaigns

3 June 2014
Tauil & Chequer Legal Update

It is election year in Brazil, and in such years it is very common that candidates and political parties seek donations from private companies in order to finance their campaigns.

Presently, it is not illegal to make a donation in favor of a certain candidate or political party. However, it is important to pay careful attention to the rules set forth in the Brazilian Election Law (Law No. 9,504/97) and to the resolutions issued by the Superior Electoral Court, so as to avoid potential penalties on the company and/or its officers.

Donations in favor of political campaigns may be made up to the date of the election, either by individuals or legal entities, in cash or something valued as cash, in checks and even in credit or debit cards. Resolution No. 23,406/2014 of the Superior Electoral Court, that sets forth the rules in relation to resource collection in the political campaigns for 2014, allows the collection of resources even by the internet.

Nevertheless, it is very important to mention that any and all collection of resources in favor of political campaigns may only be accomplished by means of the issuance of an “electoral receipt”, to be issued simultaneously with the receiving of the donated amount by the candidate or political party.

Also, donations and other contributions from private companies to political campaigns must respect the limit of two percent (2%) of the annual gross income of the company in the year before the election, set forth in the Brazilian Election Law.

The limit shall be calculated based on the gross income of the company in the year before the election (as informed to the Federal Revenue by means of the income tax return). The donated amount must be in due compliance with the information provided to the Federal Revenue. Should any excess be identified, the Electoral Justice shall be informed.

Given that it would be impossible to verify the donation limit amount for such companies, Resolution No. 23,406 of the Superior Electoral Court prohibited donations by companies that began or resumed their activities in 2014.

Therefore, in the 2014 elections, the legal entity may perform donations in favor of a certain candidate or political party, as long as such donations are not superior to 2% of the gross income of the company in the year before the election.

In case this limit is not respected, the company and its officers shall be subject to the penalties set forth in the Brazilian Election Law: (i) penalty of five to ten times the amount in excess; and (ii) the prohibition to participate in public bids and enter into agreements with public agencies for 5 years. The company’s officers that were responsible for the illegal donations, on the other hand, shall be held ineligible for the following 8 years.

The Superior Electoral Court is not the only entity that seeks to regulate the donations in favor of political campaigns. The National Congress is currently discussing a Bill of Law that prohibits completely donations performed in favor of political campaigns by private companies. Besides, the Supreme Federal Court is currently examining a lawsuit, filed by the Brazilian Bar Association, which intends to state as unconstitutional any donations made by private companies in favor of political campaigns, i.e., to put an end to such donations.

In the session held in April 2014, most Supreme Court Judges voted favorably to the unconstitutionality. The final decision is pending on the vote of Judge Gilmar Mendes, who required the opportunity of further examining the case, in order to provide the Court with a better decision.

Therefore, in view of the situation described above, it is advisable that any donation in favor of a political campaign be thoroughly analyzed, so as to avoid future problems.

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