Federal Election Commission Main Page
June 8, 2001
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2001-07
George Aandahl, Treasurer
Nuclear Management Company
Political Action Committee
700 First Street
Hudson, WI 54016
Dear Mr. Aandahl:
This responds to your letters dated April 12 and 24,
and May 10 and 25, 2001, on behalf of the Nuclear Management
Company Political Action Committee ("NMCPAC"), requesting an
advisory opinion concerning the application of the Federal
Election Campaign Act of 1971, as amended ("the Act") and
Commission regulations to the affiliation of NMCPAC with the
separate segregated funds ("SSFs") of corporations that own
the Nuclear Management Company, LLC ("NMC").
Background and Questions
NMC was established in February 1999 as a joint venture
limited liability company comprised of several utility
corporations. It is organized under Wisconsin law. It
functions as a service company for the purposes of operating
a group of nuclear power plants and increasing the plants'
economic value. NMC is owned in five equal shares by its
members which are the following incorporated utilities ("the
owner companies"): Alliant Energy, Northern States Power
Company, Wisconsin Electric Power Company, Wisconsin Public
Service Corporation, and CMS Energy. NMC has not elected to
be treated as a corporation by the Internal Revenue Service.
You state that NMC is the successor to the previous
nuclear plant sectors of the individual owner companies. At
this time, the services of NMC are provided almost entirely
to the five owner companies. The owner companies each
retain ownership of both the physical assets of their
nuclear plant(s) and the electricity produced by them. The
owner companies reimburse NMC for its costs for the
operation of the plants and the management of nuclear
personnel. As the operating authority under the Nuclear
Regulatory Commission operating license for each plant is
transferred from the owner company to NMC, the non-union
personnel are also transferred to NMC and are formally
separated from their original employer.1 It is anticipated
that, over time, contracts will be negotiated with union
personnel such that some or all will eventually be employed
by NMC. NMC is actively seeking additional utilities to
join in the joint venture. As each new member is added, the
share of each current member will be reduced accordingly.
You state that NMCPAC has been formed to provide
employees an opportunity to focus political involvement on
nuclear energy-related issues. NMCPAC intends to solicit
contributions "only from its employee base." Each of the
five owner companies, or the parent of such a company, has
an SSF registered with the Commission. NMCPAC has not
received contributions from any of those SSFs and has not
received "material financial support" from either NMC, the
owner companies, or their SSFs.2 NMCPAC anticipates
receiving some direct assistance from NMC in the future in
the form of office supplies, promotional material, or
administrative assistance. NMCPAC filed its statement of
organization with the Commission on March 13, 2001.3
You ask a number of questions pertaining to the
question of the relationship between NMCPAC and the SSFs of
the owner companies and the impact of this relationship on
the payment of administrative support for NMCPAC and on the
requirements for NMCPAC's name. They are re-stated and re-
ordered as follows:
(1) Is NMCPAC affiliated with any or all of the SSFs of the
five owner companies?
(2) If NMCPAC is affiliated with the SSFs of all of the
owners, are contributions by NMCPAC to be attributed to each
of those SSFs at 20 percent of the amount of the
contribution?
(3) Will NMCPAC be required to amend its statement of
organization each time another company obtains a share of
NMC?
(4) If NMPAC is affiliated with any of the owner's SSFs, is
each affiliated corporation a connected organization of
NMCPAC?
(5) May NMC pay for NMCPAC's administrative support and
function as NMCPAC's connected organization?
(6) Is NMCPAC required to include the names of the owning
companies in the PAC name?
The responses to your questions will first address the
issue of affiliation and then the consequences of that
discussion.
Responses
Question 1 - Affiliation
The Act and Commission regulations provide that
committees, including separate segregated funds, that are
established, financed, maintained or controlled by the same
corporation, person, or group of persons, including any
parent, subsidiary, branch, division, department, or local
unit thereof, are affiliated. 2 U.S.C. 441a(a)(5); 11 CFR
100.5(g)(2), 110.3(a)(1)(ii). Contributions made to or by
such committees shall be considered to have been made to or
by a single committee. 2 U.S.C. 441a(a)(5);
11 CFR 100.5(g)(2), 110.3(a)(1). In addition, a corporation
may make communications to, and solicit, the restricted
class (i.e., executive and administrative personnel and
stockholders, and the families thereof) of its subsidiaries
or other affiliates for contributions to the corporation's
separate segregated fund. 2 U.S.C. 441b(b)(2)(A) and
(4)(A)(i); 11 CFR 114.3(a)(1) and 114.5(g)(1). The
Commission has long held that affiliates may include
entities other than corporations, such as partnerships and
limited liability companies. Advisory Opinions 2000-36, 1997-
13, 1994-11, and 1992-17; see also Advisory Opinion 1996-38.
Where an entity is not an acknowledged subsidiary of
another entity, as in 11 CFR 110.3(a)(2)(i),4 Commission
regulations provide for an examination of various factors in
the context of an overall relationship to determine whether
one company is an affiliate of another and, hence, whether
their respective SSFs are affiliated with each other. 11
CFR 100.5(g)(4)(i) and (ii)(A)-(J), and 110.3(a)(3)(i) and
(ii)(A)-(J).5
The relevant factors are: (A) whether a sponsoring
organization owns a controlling interest in voting stock or
securities of another sponsoring organization; (B) whether a
sponsoring organization or committee has the authority or
ability to direct or participate in the governance of
another sponsoring organization or committee through
provisions of constitutions, by-laws, contracts or other
rules, or through formal or informal practices or
procedures; (C) whether a sponsoring organization or
committee has the authority or ability to hire, appoint,
demote or otherwise control the officers, or other
decisionmaking employees of another sponsoring organization
or committee; (E) whether a sponsoring organization or
committee has common or overlapping officers or employees
with another sponsoring organization or committee which
indicates a formal or ongoing relationship between the
organizations or committees; (F) whether a sponsoring
organization or committee has any members, officers, or
employees who were members, officers, or employees of
another sponsoring organization or committee which indicates
a formal or ongoing relationship or the creation of a
successor entity; (G) whether a sponsoring organization or
committee provides funds or goods in a significant amount or
on an ongoing basis to another sponsoring organization or
committee; (H) whether a sponsoring organization or
committee causes or arranges for funds in a significant
amount or on an ongoing basis to be provided to another
sponsoring organization or committee; (I) whether a
sponsoring organization or committee had an active or
significant role in the formation of another sponsoring
organization or committee; and (J) whether the sponsoring
organizations or committees have similar patterns of
contributions or contributors which indicates a formal or
ongoing relationship between the sponsoring organizations or
committees. 11 CFR 110.3(a)(3)(ii)(A), (B), (C), (E), (F),
(G), (H), (I), and (J). The list of ten circumstantial
factors set out at 11 CFR 110.3(a)(3)(ii) is not an
exclusive list, and other factors may be considered. See
Advisory Opinion 1995-36.
The five corporations each own a twenty percent
interest in NMC, and you state that no single owner has a
controlling interest. The board of directors consists of
six persons: NMC's CEO and one person appointed by each
owner; those appointees are currently the CEOs of two of the
companies and high level executives in the three other
companies. See NMC Operating Agreement ("OA"), 5.4. The
board appoints NMC's officers and directs, manages, and
controls the business, affairs, and property of the company,
subject to certain requirements of supermajority (i.e.,
three-quarters) or unanimous votes by the member companies
for certain actions. See OA, 5.1 and 5.2. As indicated,
the NMC Operating Agreement provides, in Article 5, that
votes by the member (owner) companies are needed before the
board can take seven specific actions, but you explain that,
in practice, there is no significant difference between the
board and the members voting as members because each owner
company's representative director also exercises his
company's vote as a member, and there is no practical
difference between a board meeting and a members' meeting.6
Most actions by the board or by the members require a
majority vote of all directors (not just those present) or
all members (not just those present). Each director has
equal voting power on the board, and each member has equal
voting power. The consequence of these facts is that, with
the exception of those few actions requiring unanimity, no
one owner company can prevent an action by NMC. Although
each owner company, through its representative director, has
the ability to participate in the governance of NMC and
participates in hiring and the exercise of authority over
the officers of NMC, it appears that no company exerts
dominant authority or even substantially more authority than
any other company. See
11 CFR 110.3(a)(3)(ii)(A), (B), and (C).7
You indicate that, other than the owner company
representatives sitting on NMC's board, there are no
officers or employees employed by both NMC and any owner
company except for a CMS Energy vice president who is
presently a "loaned executive" at NMC and who, after July 1,
will be an officer of NMC, and not of CMS. (See footnote
1.) Of NMC's eleven board appointed officers, nine were
previously employed by the owner companies and almost all of
NMC's employees were previously employed by those companies.
Although the substantial numbers of former officers and
employees indicate a formal or ongoing relationship between
the owner companies and NMC, the former officers or
employees of no one company constitute the dominant part, or
constitute anywhere near a substantial plurality, of the
total of officers or total of employees of NMC. You also
note that NMC's original corporate counsel left NMC to work
for another joint venture involving one of the owner
companies which was his former employer. This officer,
however, was only one of the eleven board-appointed
officers, and you state that there is no plan relating to
rotation of either officers or employees between NMC and the
owner companies.8 See 11 CFR 110.3(a)(3)(ii)(E) and (F).
Pursuant to the business arrangements under which NMC
provides operational and management services, an extensive
amount of funds are exchanged between NMC and the owner
companies. However, these are part of a business
arrangement of payment for services, and it does not appear
that any owner provides the dominant or substantial
plurality of funds for NMC's operations. See 11 CFR
110.3(a)(3)(ii)(G) and (H). NMC was founded by four of the
five owners (all except CMS Energy), and although each
company thus had a significant role in its formation, the
number of founders reduces the importance of the factor in
this situation. See 11 CFR 110.3(a)(3)(ii)(I).
You state that there is currently no formal or ongoing
relationship between NMCPAC and the owner companies' SSFs
(other than the current listing of the Wisconsin Public
Service Corporation's SSF as an affiliated committee in the
statement of organization). You state that, as of July 1,
2001, there will be no overlap between the officers of
NMCPAC and the officers of the other PACs.9 See 11 CFR
110.3(a)(3)(ii)(E). You state that, although some of the
individuals involved in organizing NMCPAC had previous
experience with the owner companies' SSFs, NMCPAC was
organized without the active involvement of those SSFs. See
11 CFR 110.3(a)(3)(ii)(I).
You indicate that NMCPAC has received no "material
financial support" or administrative support from either the
owner companies or their SSFs and no owning company or SSF
has directed or encouraged the provision of funds by or to
NMCPAC. See 11 CFR 110.3(a)(3)(ii)(G) and (H). NMCPAC has
not made any contributions to date. You state that some
similarity in the recipients of contributions from NMCPAC
and the owners' SSFs is likely to occur because all the
companies are concerned with energy policy issues. See 11
CFR 110.3(a)(3)(ii)(J).
Although the relationship of each owner company to NMC
indicates that some situations described in the factors are
present, these factors must be examined in the context of
the overall relationship. As illustrated above, the context
is a joint venture where several companies have equal shares
and equal opportunity for financial and management control,
and no one company's role is anywhere near dominant. The
Commission has examined joint ventures where the issue is
the affiliation of the joint venture with the venture
owners. Where two companies have 50-50 ownership over a
joint venture, with equal control by each over the governing
bodies and top management so that the assent of each was
necessary for key venture operations, the Commission has
concluded that both owner companies were affiliated entities
of the joint venture for purposes of the Act. See Advisory
Opinions 1997-13, 1992-17, and 1987-34; see also Advisory
Opinion 1996-49 (where a joint venture was owned 50-25-25
and the Commission concluded that the SSF of the 50 percent
owner, but not the SSFs of the other two corporations, was
affiliated with the PAC of the joint venture.) In a joint
venture where one corporation held a 60 percent interest, as
well as the management and control of the venture, and the
other was a 40 percent holder and a limited partner, the
Commission concluded that the 60 percent owner, and not the
40 percent owner, was an affiliate of the joint venture.
Advisory Opinion 1994-11.10
Your request presents a very different situation from
those described above. Where the ownership, control, and
decisionmaking authority is divided and diffused as it is in
NMC, none of the owner companies can be characterized as
affiliated with NMC for purposes of the Act and regulations.
Moreover, the facts pertaining to the relationship of NMCPAC
to the SSFs of the owners companies, or to the owner
companies themselves, do not indicate affiliation among the
committees within the context presented. Thus, NMCPAC is
not affiliated with any of the SSFs of the owner companies.
Questions 2-6 - Consequences of Non-Affiliation
Question 2 - As indicated above, contributions by
affiliated committees are treated as contributions by one
committee and cannot exceed the limits of 2 U.S.C. 441a
when aggregated with each other. 2 U.S.C. 441a(a)(5); 11
CFR 110.3(a)(1). In advisory opinions addressing situations
involving PACs of joint ventures owned and controlled on a
50-50 basis by corporations, the Commission has determined
that half of each contribution made by the joint venture's
PAC should be apportioned to the SSF of one owner and half
to the SSF of the other owner. Advisory Opinions 1997-13,
1992-17, and 1987-34. In NMCPAC's situation, however, no
such aggregation, using any percentage, is necessary because
it is not affiliated with any of the owners' SSFs.
Question 3 - The Act and regulations require a
political committee to amend its statement of organization
any time a change occurs in the information presented on its
previous statements of organization (within 10 days of the
change), including the name of any affiliated committees. 2
U.S.C. 433(b) and (c); 11 CFR 102.2(a)(2) and (b). You
have indicated that, as each new owner is added to NMC, the
share of each current owner will be reduced accordingly.
Assuming that the structure and operations of NMC remain
essentially the same as has been described above, each
company in the expanded ownership group will have no greater
share of the ownership and management than an owner company
presently holds. Thus, it appears that the SSFs of any new
members in an expanded group would not be affiliated, and
they should not be added to NMCPAC's statement of
organization. Upon receipt of this opinion, however, NMCPAC
is required to amend its statement of organization to
delete the SSF of the Wisconsin Public Service Corporation
as an affiliated committee.
Questions 4 and 5 - Under 2 U.S.C. 441b(b)(2)(C), a
corporation may use its general treasury funds to pay for
the costs of establishing, administering, or soliciting
contributions to its SSF, without a resultant contribution
or expenditure. See also
2 U.S.C. 431(8)(B)(vi) and (9)(B)(v). The corporation is
considered to be the connected organization of its SSF. 2
U.S.C. 431(7) and 11 CFR 100.6(a). Applying these rules in
the context of affiliation, the Commission has concluded
that a corporation that is affiliated with another
corporation may pay the administration and solicitation
costs of the latter corporation's SSF. Advisory Opinions
1996-26 and 1983-19. Similarly, it has permitted
incorporated entities to pay such costs for the political
committees of its affiliated entities that are not
incorporated. The affiliated corporate entities are the
connected organizations of the political committee of the
unincorporated entity. Advisory Opinions 1997-13, 1996-49,
and 1992-17.
A multi-member LLC that does not have publicly traded
shares and does not elect to be treated as a corporation by
the Internal Revenue Service is treated as a partnership for
the purposes of the Act. 11 CFR 110.1(g)(2) and (3). The
Act does not extend to a partnership the ability granted to
a corporation at 2 U.S.C. 441b(b)(2)(C) to conduct itself
as a connected organization and avail itself of the
contribution and expenditure exemptions. Advisory Opinions
1991-1 and 1990-20. Nevertheless, the Commission has
treated joint venture partnerships differently as a result
of the partnership's ownership by, and affiliation with,
corporations. See Advisory Opinions 1996-49, 1994-11, and
1992-17; see also Advisory Opinion 1997-13. If a
partnership is owned entirely by corporations and affiliated
with at least one of them, it may perform the functions of a
connected organization for its PAC. Advisory Opinions 1997-
13, 1996-49, and 1994-11.
However, NMC is not affiliated with any of its owner
corporations for purposes of the Act and therefore does not
fall within the category of partnerships or LLCs able to pay
for the establishment, administration and solicitation costs
of a PAC created by its directors, officers, or employees
without a contribution or expenditure resulting. Moreover,
none of the owner companies may act as a connected
organization for NMCPAC and pay such costs. The payments of
such costs would be contributions to NMCPAC, and such costs
must be paid for with funds from permissible sources (i.e.,
not prohibited by 2 U.S.C. 441b, 441c, 441e, 441f, and
441g), and must comply with the limits of 2 U.S.C.
441a(a)(1)(C). Because NMC is an LLC that is treated as a
partnership under IRS regulations, any contributions it
makes would be attributed not just to NMC itself but also to
its members, the owner companies, in direct proportion to
their shares or by arrangement of the members. 11 CFR
110.1(g)(2), 110.1(e)(1) and (2). Because all the members
are corporations, NMC may not contribute to NMCPAC or use
any of its funds for the support of NMCPAC. Such funds will
have to come from permissible sources, such as individuals
who are not foreign nationals or Federal contractors.11
You state that NMCPAC anticipates receiving assistance
from NMC in the future, citing "office supplies, promotional
material, or administrative assistance" as examples. The
Commission has reviewed the provision of services and
materials to a non-connected political committee by a
corporate entity whose personnel (acting as individuals)
establish, organize, and direct the committee. In doing so,
it has explained how the corporate entity may provide such
support without being considered a connected organization
under 2 U.S.C.431(7) and 11 CFR 100.6, or, in the
alternative, without making a prohibited contribution. See
Advisory Opinions 2000-20, 1997-26, and
1997-15 (and opinions cited therein). Although it has been
established that NMC cannot act as a connected organization,
the guidance in those opinions as to services and materials
provided is relevant to NMC and NMCPAC, particularly in view
of NMC's inability to make contributions; NMC and NMCPAC may
wish to review those opinions.
Although you do not provide details or ask about
proposed future arrangements where NMCPAC would not be an
SSF, the Commission provides some general guidance. NMC may
provide legal and accounting services to the PAC without
charge so long as such services are rendered by a regular
employee of NMC and are provided solely to ensure compliance
with the Act. 2 U.S.C. 431(8)(B)(ix)(II), (9)(B)(vii)(II);
11 CFR 100.7(b)(14), 100.8(b)(15). By analogy to 11 CFR
114.9(c) and (d), NMCPAC may pay NMC the usual and normal
charge for the use of office facilities such as telephones
within a commercially reasonable time. See Advisory Opinion
1979-22. However, other goods or services provided by NMC
or its employees should be paid for in advance, such as
where NMC's ordinary course of business does not entail
providing such goods or services. See 2 U.S.C. 431(8)(A)
and 11 CFR 11 CFR 100.7(a)(1) (which define "contribution"
to include loans or advances); see also Advisory Opinions
1997-26 and 1997-15; 11 CFR 114.2(f) and 116.3.12
Question 6 - This question is premised on advice
given in previous opinions with respect to the inclusion of
an affiliated joint venturer's name in the PAC of the joint
venture. See Advisory Opinions 1997-13 and 1996-49. Based
on the above analysis, none of the owner companies' names
should be included in NMCPAC's name.
This response constitutes an advisory opinion
concerning the application of the Act, or regulations
prescribed by the Commission, to the specific transaction or
activity set forth in your request. See 2 U.S.C. 437f.
Sincerely,
(signed)
Danny L. McDonald
Chairman
Enclosures (AOs 2000-36, 2000-20, 1999-17, 1997-26, 1997-15,
1997-13, 1996-49,
1996-38, 1996-26, 1995-36, 1994-11, 1992-
17, 1991-1, 1990-20, 1987-34,
1984-36, 1983-19 and 1979-22)
_______________________________
1 This personnel transfer occurred on January 1, 2001, with
respect to four of the owner companies; it will occur on
July 1, 2001,with respect to the newest owner, CMS Energy.
2 You state that NMCPAC has received contributions from
individual employees and is refraining from making any
contributions pending the issuance of this advisory opinion.
Most organizational work has been done by executive or
administrative personnel on an uncompensated overtime basis,
and support has been limited to use of NMC's e-mail system
and occasional phone calls over NMC's phone system "for
which the incremental expense is essentially zero."
3 In its statement of organization, NMCPAC stated that it
was an SSF and that it was affiliated with the SSF of the
Wisconsin Public Service Corporation. You assert that the
declaration of affiliation "was made in response to advice"
from the FEC Information Division.
4 According to Commission regulations, committees
established by a single corporation and its subsidiaries are
affiliated per se. 11 CFR 110.3(a)(2)(i).
5 Specifically, the regulations, at 11 CFR 110.3(a)(3)(ii),
state in part:
The Commission will examine these factors in the
context of the overall relationship between
committees or sponsoring organizations to
determine whether the presence of any factor or
factors is evidence of one committee or
organization having been established, financed,
maintained or controlled by another committee or
sponsoring organization.
6 A supermajority vote of all the members is required for
issuing new interests in NMC, amending the operating
agreement in connection with the issuance of new interests,
and amending the articles of organization. A unanimous vote
of all the members is required to engage in any action to
contravene the operating agreement, to sell substantially
all of NMC's property, to dissolve the company, or to amend
the operating agreement other than with respect to the
issuance of new interests. There are also five actions
requiring a supermajority vote of all the directors; these
pertain to borrowing money, leasing NMC property, exceeding
the annual budget by a certain amount, confessing a legal
judgment, or assigning rights in NMC assets for other than
an NMC purpose. OA 5.2(a) and (b), 5.4(d). Moreover, a
supermajority vote of the members is required to elect any
additional directors other than the company representatives.
OA 5.4(a).
7 The Commission notes that none of the SSFs of the members
have indicated affiliation with any of the other members'
SSFs. The Commission therefore assumes that none of the
members (the connected organizations) are affiliated with
any of the others under the Act and regulations. If there
were such affiliations, any analysis would have to consider
the impact of the aggregated voting power of the affiliated
members.
8 You have stated that the unionized employees in the
plants operated by NMC are still employees of the member
company that owns the particular plant. Although this may,
in some way, suggest an overlap situation between NMC and
each of the companies, no one company's overlap with NMC
constitutes the dominant part or substantial plurality of
those working in NMC-operated plants.
9 The only insignificant and temporary overlap is that a
CMS Energy PAC board member serves on the NMCPAC board.
That person will leave CMS and its PAC board when the CMS
non-union nuclear employees officially become NMC employees
on July 1. You state that this person will not participate
in any votes regarding proposed contributions by NMCPAC
until after the transition.
10 See also Advisory Opinion 1984-36 which involved a joint
venture owned 60-40. In that opinion, the Commission
concluded that the parent of the managing partner
corporation that owned a 40% interest, but appointed only
four of the nine members of the joint venture's board (while
the other owner corporation appointed five), was not
affiliated with the joint venture partnership, and therefore
could not solicit the partnership's executive and
administrative personnel for contributions to its SSF.
11 In view of the fact that NMCPAC is not an SSF and is not
affiliated with an SSF, the persons who may be solicited for
contributions to NMCPAC is not limited by 2 U.S.C.
441b(b)(4)(A) or (B). NMC, however, may not pay for any
solicitation costs.
12 You refer to the minimal support that has been provided
by NMC employees in the form of e-mails and occasional phone
calls (see footnote 2). Although the "incremental expense"
of such use is not the standard for calculating the expense
of e-mail use or phone use (see, e.g., Advisory Opinions
1999-17 and 1997-15), the expense may still be minimal. In
view of this probability and NMC's past uncertainty as to
the nature of its relationship with NMCPAC under the Act,
the Commission will not require NMCPAC to pay NMC for the
expenses already incurred. See, by analogy, 11 CFR 114.9(a)
(which addresses occasional, isolated, or incidental use by
an employee of corporate facilities for individual volunteer
activity in connection with a Federal election).