PRESENTED BY: Jan Witold Baran [email protected] November 14, 2012 Political Committees and Corporate PACs The National Association of Business Political.

PRESENTED BY:

Jan Witold Baran

[email protected]

November 14, 2012

Political Committees and Corporate PACs

The National Association of Business Political Action Committees

2012 NABPAC POST-ELECTION CONFERENCE

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)

November 14 , 2012 2

DIFFERENT PERSONS ARE REGULATED DIFFERENTLY

- Individual- Candidate- Labor organization- Corporation- Partnership- Limited liability corporation- Political party- Political committee

November 14 , 2012 3

PERSONS ARE SUBJECT TO SPECIAL RULES IF THEY ARE:

- Foreign national- Federal contractor- Federally chartered institution- Media entity

November 14 , 2012 4

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)

November 14 , 2012 5

TYPES OF POLITICAL COMMITTEES

- Candidate committee1. Principal campaign committee2. Authorized committee, e.g. joint fundraising committee

- Non-connected committee. These are self-financed committees not sponsored (“connected”) by

any corporation or union- Independent Expenditure Only Committee a/k/a Super PAC

- Registers and reports to FEC- Accepts unlimited donations

- Hybrid PAC a/k/a Super Dooper PAC1. Maintains IEOC account2. Maintains separate account as though a non-connected committee to

make contribution- Separate segregated funds

November 14 , 2012 6

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.

November 14 , 2012 7

SEPARATE SEGREGATED FUNDSTHE STATUTE

• 2 U.S.C. §441b • Scope of prohibition• Exceptions• Separate Segregated Fund (SSF)• SSF v. Political Committee

November 14 , 2012 8

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.

November 14 , 2012 9

§ 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.

November 14 , 2012 10

§ 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.

November 14 , 2012 11

§ 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.

November 14 , 2012 12

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

November 14 , 2012 13

SEPARATE SEGREGATED FUNDS

• Corporation may pay costs to:– establish– administer– solicit voluntary contributions to SSF

November 14 , 2012 14

WHO MAY HAVE SSF

• Corporation, union, incorporated association, LLC taxed as corporation, cooperative

November 14 , 2012 15

WHO MAY NOT HAVE SSF

• Partnership, LLC taxed as partnership, individual, sole proprietorship (unincorporated)

November 14 , 2012 16

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

November 14 , 2012 17

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

November 14 , 2012 18

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

November 14 , 2012 19

ONE-THIRD RULE

• Corporation may not “swap” corporate money for individual contribution. However, a corporation may provide gifts or prizes if it observes the one-third 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

November 14 , 2012 20

OTHER ADMINISTRATIVE CHORES

• Keep records• File reports with FEC• Comply with contribution limits• No contributions from corporations,

foreign nationals or state PACs• No loans from prohibited sources

November 14 , 2012 21

SOLICITING CONTRIBUTIONS TO PAC/SSF

• The Restricted Class– Executive or administrative Personnel– Stockholders

November 14 , 2012 22

EXECUTIVE OR ADMINISTRATIVE PERSONNEL

• Salaried employees who have,• Policymaking, managerial, professional or supervisory

responsibilities

but are NOTforemen or line supervisors

• Executives of affiliated entities are in restricted class• FLSA may be used as guidance

November 14 , 2012 23

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.

November 14 , 2012 24

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

November 14 , 2012 25

WHAT IS A SOLICITATION?

• 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

November 14 , 2012 26

METHODS OF SOLICITING

• Personal or written• Payroll deduction• ACH & account withdrawals• Dues statements for associations• Reciprocal union rights • Twice-yearly solicitation of non-executive

employees

November 14 , 2012 27

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

November 14 , 2012 28

QUESTIONS?

November 14 , 2012 29