Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
January 23, 2006
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2005-20
Ms. Kathryn E. Donovan
Pillsbury Winthrop Shaw Pittman LLP
400 Capitol Mall
Suite 1700
Sacramento, CA 95814-4419
Dear Ms. Donovan:
We are responding to your advisory opinion request
concerning the application of the Federal Election Campaign
Act of 1971, as amended (the "Act"), and Commission
regulations to the use of Pillsbury Winthrop Shaw Pittman
LLP's ("PWSP") automated electronic payroll system by PWSP
partners to make contributions from a partner's income
distribution to PWSP's political action committee, PWSP PAC
(the "PAC"). The Commission concludes that under the facts
and circumstances presented, PWSP's partners may use PWSP's
automated electronic payroll system to make voluntary
contributions to PWSP PAC. PWSP PAC must pay in advance the
costs associated with the use of PWSP's automated electronic
payroll system for contributions to the PAC.
Background
The facts presented in this advisory opinion are based
on your letter received on November 23, 2005.
PWSP is a law firm organized as a limited liability
partnership. PWSP has more than 900 attorneys, of whom
approximately 323 are partners.1 From time to time, PWSP
may perform legal services for Federal government agencies,
and therefore it qualifies as a Federal contractor. Because
of the difficulty in ascertaining PWSP's Federal contractor
status at any given time, PWSP asks the Commission to assume
that PWSP is a Federal contractor at all times. The PAC is
the nonconnected multicandidate political committee
sponsored by PWSP.
PWSP's partners receive monthly distributions of
income, with the exception of two distributions in December.
PWSP's Executive Committee determines the amount of each
partner's monthly income distribution based on the level of
anticipated or realized profits and the partner's interest
therein under PWSP's partnership agreement. Most PWSP
partners elect to receive their net compensation
electronically via PWSP's automated payroll system by
designating one or more accounts to receive an electronic
transfer of all or part of their income distribution from
PWSP's payroll account.
Each month, PWSP's entire payroll is electronically
transferred in a lump sum from its operating account in one
bank to its payroll account in another bank for distribution
to PWSP partners and other PWSP employees. PWSP then
instructs the payroll account bank as to the amount each
partner is to receive, taking into account such deductions
as health benefits and 401(k) contributions.
Partners who have elected to receive their compensation
through PWSP's automated electronic payroll system must
designate at least one bank account into which their net
compensation, or a portion thereof, will be electronically
transferred directly from PWSP's payroll account. In
addition to designating a portion of their net compensation
for transfer into one or more personal banking accounts,
PWSP partners may also authorize electronic transfers of a
portion of their income distribution directly to any other
accounts they choose, including those of charitable
organizations. Because such transfers come from funds that
are part of a PWSP partner's income distribution, these
charitable donations and other payments are made by the
individual partner and not by PWSP. Each PWSP partner alone
determines how his or her net compensation is to be
disbursed from PWSP's payroll account, and each partner may
at any time prior to disbursement modify or revoke any such
account designations.
In 2006, the PAC plans to solicit voluntary
contributions from PWSP's partners. No foreign nationals
will be solicited and no contributions from foreign
nationals will be accepted. The PAC currently only accepts
contributions from PWSP partners made by personal check.
PWSP would now like to provide those partners who use PWSP's
automated electronic payroll system with the option of
making contributions to the PAC by designating the PAC as a
recipient of a portion of the partner's income distribution.2
Such contributions to the PAC would not exceed $5,000 in a
calendar year for each PWSP partner and the PAC would pay
for the costs associated with contributions to the PAC made
through PWSP's automated electronic payroll system.
Although the PAC would be able to pay PWSP in advance for
these costs, PWSP seeks guidance from the Commission as to
whether the PAC may reimburse PWSP for such costs within a
commercially reasonable time.
Question Presented
May PWSP's partners use PWSP's automated electronic
payroll system to make voluntary contributions to PWSP PAC?
Legal Analysis and Conclusions
The Commission concludes that under the facts and
circumstances presented, PWSP partners may use PWSP's
automated electronic payroll system to make voluntary
contributions to PWSP PAC, so long as the PAC pays in
advance any costs associated with the use of PWSP's
automated electronic payroll system for these contributions.
The Act and Commission regulations generally prohibit
partnerships that are Federal contractors from making
contributions or expenditures in connection with Federal
elections. See 2 U.S.C. 441c(a); 11 CFR 115.4(a). Although
the assets of a partnership that is a Federal contractor may
not be used to make contributions to a political committee,
Commission regulations specifically allow individual
partners of such a partnership to make contributions in
their own names from their own personal assets. 11 CFR
115.4(b).
PWSP partners who use PWSP's automated electronic
payroll system exercise complete control over the funds that
represent their net compensation in PWSP's payroll account
by designating recipients for such funds in PWSP's payroll
system. Each PWSP partner may modify or revoke these
designations at any time prior to disbursement.
Significantly, PWSP has no control over the partner's choice
of the recipient of any disbursement from PWSP's payroll
account and at the moment a disbursement takes place from
PWSP's payroll account, the funds being disbursed are the
personal assets of the partner.3 Thus, when a PWSP partner
designates a recipient account in PWSP's automated
electronic payroll system, it is the functional equivalent
of that partner writing a personal check. Accordingly, the
Commission concludes that PWSP's partners may use PWSP's
automated electronic payroll system to make voluntary
contributions to the PAC.
Because the Federal contractor prohibition extends to
the use of partnership funds for the PAC's establishment,
administration, and solicitation costs, PWSP may not pay for
any costs related to the use of PWSP's automated electronic
payroll system for contributions by PWSP's partners to the
PAC.4
The Commission has allowed partnerships that were
otherwise prohibited from making contributions to
nonconnected political committees to pay for committee costs
associated with a committee's use of goods and services that
the partnership offers in the usual course of business,
subject to reimbursement by the committee within a
commercially reasonable time. See, e.g., Advisory Opinion
2001-7. However, this allowance does not extend to goods
and services that are not offered by a partnership in the
ordinary course of its business. See id. (usual and normal
charge for cost of services offered to clients in the
ordinary course of business such as copying, postage, and
telephone use, may be reimbursed by a political committee
within a commercially reasonable time). Because use of
PWSP's automated electronic payroll system is not a service
that PWSP offers to its clients in the ordinary course of
business, the PAC must pay PWSP the related costs in advance
to avoid an impermissible contribution by PWSP to the PAC.5
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.
Sincerely,
(signed)
Michael E. Toner
Chairman
Enclosures (Advisory Opinions 2001-7, 1991-1, and 1984-10)
_______________________________
1 PWSP was formed as the result of an April 4, 2005, merger
between the law firms of Pillsbury Winthrop LLP and Shaw
Pittman LLP. The PAC was formerly known as Pillsbury
Winthrop LLP PAC. PWSP indicates that it intends to
terminate the Shaw Pittman political action committee in the
near future and transfer its remaining funds to the PAC.
2 A small number of PWSP partners do not use PWSP's
automated electronic payroll system and continue to receive
their income distributions by check. These partners would
continue to be able to contribute to the PAC only by
personal check. Similarly, for the few PWSP partners that
are professional corporations, the employee of each such
corporation would be asked to make a voluntary contribution
to the PAC by personal check.
3 This differs from the circumstances in Advisory Opinion
1984-10, in which the Commission concluded that it was
impermissible for a partnership to make partner-designated
candidate contributions from the partnership's general
operating account, even though an equivalent sum would then
be deducted from the partner's subsequent quarterly income
distribution. See also Advisory Opinion 1991-1.
4 The Act does not extend to a partnership the ability
granted to corporations to set up a separate segregated fund
and conduct itself as a connected organization. Thus, a
partnership's payments for a political committee's
administrative costs would be contributions to the
committee. See Advisory Opinion 1991-1. However, absent
the Federal contractor prohibition, partnerships generally
are allowed to make contributions to political committees
subject to the limitations contained in 2 U.S.C. 441a and 11
CFR 110.1(b), (c) and (d). See 11 CFR 110.1(e).
5 The Commission considered, but could not reach a consensus
on, whether the PAC may reimburse PWSP - instead of pre-
paying the payroll costs - within a commercially reasonable
time for these costs.