Federal Election Commission Main Page
August 25, 2003
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2003-19
Judith L. Corley, Esq.
Brian G. Svoboda, Esq.
Perkins Coie LLP
607 Fourteenth Street, N.W.
Washington, D.C. 20005-2011
Dear Ms. Corley and Mr. Svoboda:
This responds to your letter dated June 24, 2003, requesting
an advisory opinion on behalf of the Democratic Congressional
Campaign Committee, Inc. ("DCCC"), concerning the application of
the Federal Election Campaign Act of 1971, as amended, and the
Bipartisan Campaign Reform Act of 2002 ("BCRA")(collectively,
"the Act"), and Commission regulations to the DCCC's proposed
sale of used office equipment and furniture.
Background
The DCCC is a "national congressional campaign committee"
under the Act. See
2 U.S.C. 441i(a); 11 CFR 110.2(c)(2); 11 CFR 300.10(a). In
2002, the DCCC agreed to participate in the renovations of the
Democratic Party headquarters building that began shortly after
the 2002 general election. You state that, as a result of the
renovations, the DCCC anticipates that much of its office
equipment and furniture will be incompatible with the new space
and with future plans. The DCCC would like to sell these items
in arm's length transactions "at a price most closely
approximating fair market value." You state that a fair market
price will be easily determinable because similar used items are
routinely bought and sold. The DCCC intends to make the used
furniture and equipment available for sale to a wide array of
potential purchasers, which may include corporations, labor
organizations or other sources prohibited from making
contributions or donations to national party committees under the
Act.
Question Presented
Under BCRA, may the DCCC accept proceeds from the sale of
used office equipment and furniture, without regard to the source
or amount of those proceeds?
Legal Analysis and Conclusion
Yes, it may, under certain conditions. Before BCRA,
national party committees were able to raise and spend non-
Federal funds (i.e., funds not subject to the limitations,
prohibitions and reporting requirements of the Act) using
separate non-Federal accounts. Under BCRA, however, national
party committees may not "solicit, receive, or direct to another
person a contribution, donation, or transfer of funds or any
other thing of value, or spend any funds, that are not subject to
the limitations, prohibitions and reporting requirements of this
Act." 2 U.S.C. 441i(a); 11 CFR 300.10(a). As a national
congressional campaign committee, the DCCC is considered a
"national committee" of a political party for the purposes of
section 441i(a) of the Act. 11 CFR 300.10(a). As such, the DCCC
is prohibited from receiving any contributions or donations that
are not subject to the limitations, prohibitions, and reporting
requirements of the Act. 2 U.S.C. 441i(a). The term
"contribution" is defined in the Act to include "any gift, loan,
advance, or deposit of money or anything of value made by any
person for the purpose of influencing any election for Federal
office." 2 U.S.C. 431(8)(A). In the specific context of
contributions by corporations or labor organizations, the term
"contribution" is also defined to include "any direct or indirect
payment, distribution, loan, advance, deposit, or gift of money.
to any candidate, campaign committee, or political party or
organization, in connection with any election to" Federal office.
2 U.S.C. 441b(b)(2). A "donation" means "a payment, gift,
subscription, loan, advance, deposit, or anything of value given
to a person, but does not include contributions." 11 CFR
300.2(e).
The Commission recently addressed transactions involving
political committee assets under BCRA. In Advisory Opinion 2002-
14, the Commission concluded, in pertinent part, that payments
received by a national party committee for the leasing of its
mailing list would not be viewed as a "contribution, donation or
transfer of any funds or any other thing of value . . . subject
to the Act's limits and prohibitions" based on how the list was
developed and used, and on the nature of the lease transaction at
issue in that opinion. Specifically, the Commission concluded
that the national party committee could lease its mailing list to
persons, including corporations and labor organizations, where:
1) the list had been developed by the committee in the course of
its political activities over a period of time and primarily for
its own political or campaign purposes rather than for sale or
lease to others; 2) the leasing of the list constituted only a
small percentage of the committee's use of the list; 3) the list,
or the leased portion thereof, had an ascertainable fair market
value; and 4) the list was leased at the usual and normal charge
in a bona fide, arm's length transaction and was used in a
commercially reasonable manner consistent with an arm's length
agreement. The Commission further concluded that the rental
payments would be considered Federal funds usable for any purpose
permitted under the Act and the regulations and should be
reported in the Committee's reports as "Other Receipts."1
The office equipment and furniture that the DCCC proposes to
sell was purchased for use in everyday business operations, and
not as a means of raising funds. Moreover, used office equipment
and furniture generally has an ascertainable market value. The
Commission also notes that this transaction, like the sale of a
campaign's unusable van sanctioned in Advisory Opinion 1986-14,
would result in the isolated disposal of unwanted and depreciated
committee assets, and is thus not inherently susceptible to use
for political fundraising. Therefore the Commission concludes
that the proceeds from the sale of the used office equipment and
furniture will not be considered a "contribution, donation, or
transfer of funds or any other thing of value" subject to the
Act's limitations and prohibitions if the DCCC sells these assets
at a price that does not exceed the usual and normal charge for
used office equipment and furniture at the time of the sale. See
11 CFR 100.52(d).
To ensure that the assets are sold for the usual and normal
charge, the sale of the assets must not be advertised in any
contribution solicitation. Cf. Advisory Opinion 1986-14.
Payments received from transactions meeting these conditions will
not be subject to the Act's contribution limits, and may come
from corporations, labor organizations or other sources that are
prohibited from making contributions or donations to the DCCC.
The payments will be considered to be Federal funds usable by the
DCCC for Federal election purposes and for any other purposes
permitted under the Act and the Commission's regulations. Such
payments would be reported in the category of "Other Receipts."
See Advisory Opinion 2002-14.
The Commission expresses no opinion regarding any tax
ramifications of the proposed activities because those issues are
not within its jurisdiction.
This response constitutes an advisory opinion concerning the
application of the Act and Commission regulations to the specific
transaction or activity set forth in your request. See
2 U.S.C. 437f. The Commission emphasizes that, if there is a
change in any of the facts or assumptions presented, and such
facts or assumptions are material to a conclusion presented in
this advisory opinion, then the requestor may not rely on that
conclusion as support for its proposed activity.
The Commission notes that this advisory opinion analyzes the
Act, as amended by BCRA, and Commission regulations, including
those promulgated to implement the BCRA amendments, as they
pertain to your proposed activities. On May 2, 2003, a three-
judge panel of the United States District Court for the District
of Columbia ruled that a number of BCRA provisions are
unconstitutional and issued an order enjoining the enforcement,
execution, or other application of those provisions. McConnell
v. FEC, 251 F.Supp. 2d 176 (D.D.C. 2003); prob. juris. noted, 123
S.Ct. 2268 (U.S. 2003). Subsequently, the District Court stayed
its order and injunction in McConnell v. FEC, 253 F.Supp. 2d 18
(D.D.C. 2003). The Commission has determined that your request
for advice is not affected by the District Court's ruling. The
Commission cautions that the legal analysis in this advisory
opinion may be affected by the eventual decision of the Supreme
Court.
Sincerely,
(signed)
Bradley A. Smith
Vice-Chairman
Enclosures (AOs 2002-14, 1992-24, 1990-26, 1989-4, and 1986-14)
ADVISORY OPINION 2003-19
CONCURRING OPINION OF
COMMISSIONER SCOTT E. THOMAS
In Advisory Opinion 2003-19 the Commission approved the
proposed disposition of assets by the Democratic Congressional
Campaign Committee (DCCC). Two issues warrant further comment.
First, given the use of an `arm's length transaction' test in
other recent advisory opinions involving committee disposition of
assets, how does the concept apply, here and in those opinions?
Second, given that the assets in question probably were purchased
in part with `soft money,' should the DCCC be able to apply the
entire amount of sale proceeds to its federal election efforts?
Application of an `arm's length transaction' analysis
Recently, in Advisory Opinion 2002-14 involving the
Libertarian Party's rental of lists, the Commission concluded,
"[T]he list must be leased at the usual and normal charge in a
bona fide, arm's length transaction." Further, in Advisory
Opinion 2003-16 involving national parties' provision of
supporter lists to a bank undertaking a credit card affinity
program, the Commission wrote: "[T]he list must be used in a
commercially reasonable manner consistent with a bona fide arms-
length agreement. See Advisory Opinion 2002-14." Such `arm's
length' assurances help prevent the making of disguised
contributions in the form of `sweetheart' deals.
Technically, the `arm's length transaction' issue is not in
play in the DCCC situation. The DCCC indicated in its request
that the sales would be "in arm's length transactions." Request
of June 24, 2003, p. 2. Nonetheless, for purposes of clear
guidance to the regulated community, the Commission should try to
explain whether and how the concept applies as a matter of law.
In my view, the concept does apply, even to the DCCC's sale of
used assets; but the concept should not be applied in a manner
requiring parties to the sale themselves to be separately
controlled, disinterested persons or entities.
The `arm's length transaction' doctrine has two practical
applications in the context of a political committee selling or
renting assets, as I see it. First, if the parties to a
transaction are not separately controlled and disinterested, the
Commission should be able to operate with a rebuttable
presumption that the "usual and normal charge," 11 CFR
100.52(d), is not being applied. This would allow the Commission
to find reason to believe a violation had occurred in appropriate
circumstances in an enforcement proceeding. See 2 U.S.C.
437g(a)(2). With a rebuttable presumption, of course, a clear
showing by the parties to such a transaction that "usual and
normal charge" was paid would overcome the presumption.
The second application of the `arm's length transaction'
doctrine is in the definition of "usual and normal charge"
itself. In essence, the Commission should evaluate whether
parties have used the "usual and normal charge" based on whether
the amount is what a willing buyer would pay a willing seller in
the commercial marketplace if each were separately controlled,
disinterested persons or entities. In other words, the parties
to the transaction do not have to be separately controlled and
disinterested; they must nonetheless assure that the amount paid
in the transaction is what separately controlled, disinterested
persons would pay.
The approach I suggest still would leave a host of difficult
issues in particular situations, such as how to value the
consideration exchanged by the parties and whether there truly is
a "usual" and "normal" charge. Given the frequency with which
political committees sell or rent assets, and the complications
arising from having to assure all transactions are with
separately controlled, disinterested persons, the regulated
community ought to have assurance at least on whether
transactions with the latter are per se impermissible.
Receiving proceeds for assets purchased in part with `soft money'
When the DCCC request came to the Commission, I first noted
that the assets involved probably were purchased in part with
`soft money.' Thus, I thought the primary issue was going to be
whether that would require part of the sales proceeds to be
treated as `soft money.' To be fair, the Commission faced this
issue in the Libertarian Party advisory opinion as well, but gave
no hint of the matter. The DCCC request offers a chance to give
some guidance on the point.
In the post-BCRA (Bipartisan Campaign Reform Act) world,
whereby national party committees are not allowed to have `soft
money' accounts, there will come a time where virtually all party
assets can be traced to purchases using federally permissible
funds only. Given the need for reasonable transition rules, and
given the fact that Congress only expressed a desire to have
national parties dispose of "funds" not federally permissible by
a date certain, Sec. 402(b)(2) of BCRA, the Commission can
operate with a legal fiction that all assets of national party
committees as of that date certain can be sold without regard to
`soft money' origins. This legal fiction underlies the
Commission's conclusion that the DCCC may use all the proceeds of
its assets sales for federal election purposes.
I would add a caution, though, for other types of committees
that, post-BCRA, still can purchase assets legally with a
combination of `soft money' and federally permissible funds.
State parties, for example, when disposing of assets purchased in
part with `soft money' should not read Advisory Opinion 2003-19
as a license to place the full proceeds in a federal account. In
my view, such committees must apportion the sale proceeds
appropriately under the commission's allocation regulations so
that the amount going to the federal account does not consist of
any `soft money.' This conforms with my understanding of the
longstanding application of the law in such situations.
August 22, 2003 / s /
_____________________
______________________________
Date Commissioner
_______________________________
1 The conclusion in Advisory Opinion 2002-14 is generally in
accord with the pre-BCRA treatment of proceeds resulting from the
sale of certain committee assets under similar circumstances.
See e.g., Advisory Opinions 1992-24, 1990-26, 1989-4, and 1986-
14. The conclusion is also consistent with the purpose of the
section 441i(a) ban on a national party's receipt of non-Federal
funds because, even before BCRA, such proceeds were never viewed
as non-Federal funds required to be deposited in a separate
account or prohibited from being used to finance Federal
elections.