The National Association of Business Political Action Committees
2012 NABPAC POST-ELECTION CONFERENCE
Political Committees and
Corporate PACs
PRESENTED BY:
Jan Witold Baran
jbaran@wileyrein.com
November 14, 2012
FECA REGULATES PERSONS
A “person” includes an individual,
partnership, committee, association,
corporation, labor organization, or any
other organization or group of persons
but not the Federal Government.
§431(11)
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DIFFERENT PERSONS ARE
REGULATED DIFFERENTLY
-
Individual
Candidate
Labor organization
Corporation
Partnership
Limited liability corporation
Political party
Political committee
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PERSONS ARE SUBJECT TO
SPECIAL RULES IF THEY ARE:
-
Foreign national
Federal contractor
Federally chartered institution
Media entity
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POLITICAL COMMITTEE
(A) Any committee, club, association, or other group of persons
which receives contributions aggregating in excess of $1000
during a calendar year or which makes expenditures
aggregating in excess of $1000 during a calendar year;
or
(B) Any separate segregated fund;
or
(C ) any local committee of a political party that raises or spends
over either $5000 or $1000 for specified activities
§431(4)
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TYPES OF POLITICAL COMMITTEES
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Candidate committee
1. Principal campaign committee
2. Authorized committee, e.g. joint fundraising committee
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Non-connected committee.
These are self-financed committees not sponsored (“connected”) by any
corporation or union
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Independent Expenditure Only Committee a/k/a Super PAC
-
-
Registers and reports to FEC
Accepts unlimited donations
Hybrid PAC a/k/a Super Dooper PAC
1. Maintains IEOC account
2. Maintains separate account as though a non-connected committee to
make contribution
-
Separate segregated funds
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SUPER PACS &HYBRID PACs
- May accept unlimited donations unless
donor is a foreign national, federal
government contractor or an entity
chartered by the federal government
- Such funds may only be used for
independent expenditures and not for
contributions to candidates.
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SEPARATE SEGREGATED FUNDS
THE STATUTE
•
•
•
•
•
2 U.S.C. §441b
Scope of prohibition
Exceptions
Separate Segregated Fund (SSF)
SSF v. Political Committee
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2 U.S.C. § 441b
•
§441b. Contributions or expenditures by national banks, corporations, or labor
organizations
(a) It is unlawful for any national bank, or any corporation organized by authority of
any law of Congress, to make a contribution or expenditure in connection with any
election to any political office, or in connection with any primary election or
political convention or caucus held to select candidates for any political office, or for
any corporation whatever, or any labor organization, to make a contribution or
expenditure in connection with any election at which presidential and vice
presidential electors or a Senator or Representative in, or a Delegate or Resident
Commissioner to, Congress are to be voted for, or in connection with any primary
election or political convention or caucus held to select candidates for any of the
foregoing offices, or for any candidate, political committee, or other person
knowingly to accept or receive any contribution prohibited by this section, or any
officer or any director of any corporation or any national bank or any officer of any
labor organization to consent to any contribution or expenditure by the corporation,
national bank, or labor organization, as the case may be, prohibited by this section.
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§ 441b Continued
(b) (1) For the purposes of this section the term
“labor organization’ means any organization of any
kind, or any agency or employee representation
committee or plan, in which employees participate
and which exists for the purpose, in whole or in
part, of dealing with employers concerning
grievances, labor disputes, wages, rates of pay,
hours of employment, or conditions of work.
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§ 441b Continued
(2) For purposes of this section and section 791(h) of title 15,
the term “contribution or expenditure” includes a contribution
or expenditure, as those terms are defined in section 301 (2
U.S.C. § 431), and also includes any direct or indirect payment,
distribution, loan, advance, deposit, or gift of money, or any
services, or anything of value (except a loan of money by a
national or State bank made in accordance with the applicable
banking laws and regulations and in the ordinary course of
business) to any candidate, campaign committee, or political
party or organization, in connection with any election to any of
the offices referred to in this section or for any applicable
electioneering communication.
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§ 441b Continued
But shall not include
(A) communications by a corporation to its stockholders and executive
or administrative personnel and their families or by a labor organization
to its members and their families on any subject;
(B) nonpartisan registration and get-out-the-vote campaigns by a
corporation aimed at its stockholders and executive or administrative
personnel and their families, or by a labor organization aimed at its
members and their families; and
(C) the establishment, administration, and solicitation of contributions
to a separate segregated fund to be utilized for political purposes by a
corporation, labor organization, membership organization, cooperative,
or corporation without capital stock.
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POST-CITIZENS UNITED v. FEC
• § 441b ban on independent expenditures by corporations and
unions violates First Amendment
• §441b ban on electioneering communications violates First
Amendment
• §441b ban on contributions to candidates and national political
party committees still applies
• Super PACs now permitted but ban on corporate contributions
does not apply
• SSF still only legal way for a corporation to contribute to
candidates, leadership PACs, and national party committees
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SEPARATE SEGREGATED FUNDS
• Corporation may pay costs to:
– establish
– administer
– solicit voluntary contributions to SSF
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WHO MAY HAVE SSF
• Corporation, union, incorporated
association, LLC taxed as corporation,
cooperative
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WHO MAY NOT HAVE SSF
• Partnership, LLC taxed as partnership,
individual, sole proprietorship
(unincorporated)
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ESTABLISHING A PAC/SSF
• Organization: treasurer, depository, name, assistant
treasurer
• Bylaws
• Registration – FEC Form 1; within 10 days
(lobbyist/registrant PAC?)
• Amendments to Form 1: within 10 days of any
change
• Federal PAC v. State PAC
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ADMINISTERING A PAC/SSF
• Administrative costs include
– PAC fundraising expenses
– expenses to attend other fund raisers
(Freddie Mac MUR)
– personnel, offices and facilities to run PAC
– insurance, legal and accounting
• Administrative cost does not include
– PAC income tax
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CHARITABLE MATCHING
PROGRAM
• Corporation may match a PAC donation with
a gift to a charity designated by the PAC
contributor, if the contributor does not
receive any financial, tax or other benefit
• AO 2003-33 (Anheuser-Busch)
• Only maximum of 1:1 PAC match
• Gift to charity not deductible to company
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ONE-THIRD RULE
• Corporation may not “swap” corporate money for
individual contribution. However, a corporation
may provide gifts or prizes if it observes the onethird rule, i.e., value of gifts or prizes does not
exceed one-third the amount of the contribution(s).
• Advisory Opinion 1999-31 (Oshkosh)
• Fundraising costs and charitable matching not
subject to one-third rule
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OTHER ADMINISTRATIVE CHORES
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•
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Keep records
File reports with FEC
Comply with contribution limits
No contributions from corporations,
foreign nationals or state PACs
• No loans from prohibited sources
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SOLICITING CONTRIBUTIONS
TO PAC/SSF
• The Restricted Class
– Executive or administrative Personnel
– Stockholders
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EXECUTIVE OR ADMINISTRATIVE
PERSONNEL
• Salaried employees who have,
• Policymaking, managerial, professional or supervisory
responsibilities
but are NOT
foremen or line supervisors
• Executives of affiliated entities are in restricted class
• FLSA may be used as guidance
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STOCKHOLDERS
• Definition of stockholder is a person who has:
– Vested beneficial interest
– Power to direct voting stock
– Right to receive dividends
• Non-executive employees who are stockholders are
in the restricted class.
• Anyone not in the restricted class, including other
PACs, may not be solicited.
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SOLICITATION REQUIREMENTS
• Voluntariness: no threats or job reprisals
• Solicitation notices must be given in
writing or orally
– FEC: voluntary, political purposes, right to
refuse to contribute and guideline notices
– IRS: contributions not deductible as
charitable contributions
– IRS wants its notice first or to stand alone
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WHAT IS A SOLICITATION?
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Request for funds
Description of PAC fundraising activity
Commending those who participate
Fundraising booth
General PAC info OK
3% of audience not in restricted class is
incidental solicitation
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METHODS OF SOLICITING
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Personal or written
Payroll deduction
ACH & account withdrawals
Dues statements for associations
Reciprocal union rights
Twice-yearly solicitation of non-executive
employees
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AFFILIATION
• Affiliated entities expand scope of solicitable class
• Affiliated PACs must abide by unified contribution
limits
• Affiliation per se v. criteria
• Ambiguous relationships, among partnerships,
corporations, LLCs, joint ventures even cooperatives
and trade associations
• Mergers and spin-offs
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QUESTIONS?
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